Document:

<PAGE>
                                                                    EXHIBIT 10dd

                              SEPARATION AGREEMENT

                  This Agreement ("Agreement"), dated as of March 11, 2002, by
and between Kmart Corporation (the "Company"), and Charles C. Conaway (the
"Executive").

                                   WITNESSETH:

                  WHEREAS, the Executive is the Chief Executive Officer and a
director of the Company; and

                  WHEREAS, the Executive and the Company have previously entered
into that certain Employment Agreement, dated as of May 30, 2000, as amended
(the "2000 Employment Agreement") and the Amended and Restated Employment
Agreement, dated as of January 21, 2002 (the "2002 Employment Agreement");

                  WHEREAS, in recognition of the fact that court approval of the
2002 Employment Agreement will not be obtained by March 24, 2002, the Company
has agreed to rescind the 2002 Employment Agreement with the Executive's
consent, such rescission to be effective upon execution of this Agreement, and
the Company has agreed to withdraw its pending request for court approval of
such agreement not later than March 20, 2002;

                  WHEREAS, the Company acknowledges and agrees that, under the
2000 Employment Agreement, the Executive has the right to terminate his
employment in a "Constructive Termination" (as such term is defined under the
2000 Employment Agreement);

                  WHEREAS, the Executive has advised the Company that he intends
to give proper written notice of his election to terminate his employment by
reason of a Constructive Termination under the 2000 Employment Agreement;

                  WHEREAS, the Company has agreed to waive its right to have the
Executive work until the end of the Constructive Termination notice period, and
any related cure rights, and any related cure rights, and, accordingly, will
terminate the Executive's employment without Cause effective as of the close of
business on March 11, 2002; and

                  WHEREAS, the Executive and the Company have mutually agreed to
enter into this Agreement in order to fully set forth all of their respective
rights and obligations upon and following the Executive's termination of
employment from the Company.

<PAGE>

                  NOW, THEREFORE, in consideration of the premises and of the
releases, representations, covenants and obligations contained herein, the
parties hereto agree as follows:

                  1. Termination of Executive's Employment. The Executive's
employment with the Company and all of its subsidiaries and affiliates shall
terminate as of the close of business on March 11, 2002 (the "Termination
Date"). The Executive shall resign as a member of the Board of Directors of the
Company (the "Board") as of the Termination Date. The Executive agrees to
execute any and all documents and take any and all actions as may be reasonably
requested by the Company to effectuate any of the foregoing.

                  2. Severance Payments. Subject to Section 5(a) below, the
Company agrees:

                            (a) to pay the Executive his base salary through the
Termination Date and reimburse the Executive for any reasonable unreimbursed
expenses in accordance with Company policy, which amounts shall be payable as
soon as practicable following the Termination Date; and

                            (b) on the Termination Date, pursuant to the Order
of the Bankruptcy Court, dated January 25, 2002, approving the Motion for Order
filed January 22, 2002 with the United States Bankruptcy Court for the Northern
District of Illinois (the "Bankruptcy Court") requesting authorization, inter
alia, to continue to pay severance benefits in accordance with Paragraph 36
thereof (the "Wage Motion"), to pay the Executive, in one lump sum, by wire
transfer of immediately available Federal funds to an account designated by the
Executive, severance in an aggregate amount of $4,039,708.93; provided, that
such payment shall be subject to all applicable federal, state and local
withholding taxes, in accordance with the Company's ordinary payroll practices.

                  3. Loan Forgiveness. The Company hereby acknowledges that, in
accordance with the terms of that certain Promissory Note, dated May 30, 2001
(the "Promissory Note"), as a result of the Executive's termination of
employment with the Company, the outstanding principal and accrued interest has
been forgiven as of the Termination Date, and contemporaneously with the
execution of this Agreement and delivery by the Executive of the Release
referred to in Section 5(a) hereof, the Company shall return the Promissory Note
to the Executive marked "Cancelled".

                  4. Additional Obligations of the Company. In consideration of
the Executive's execution and compliance with the terms and conditions of this
Agreement, and subject to Section 5 below, the Company agrees:

                            (a) in connection with the forgiveness of the Loan,
to pay to the Executive an amount equal to $3,885,003 in respect of the
additional payment to cover all applicable federal, state and local income and
excise taxes payable by the Executive on

                                       2
<PAGE>

account of the forgiveness of the Loan and the payment described in this Section
4(a), which amount shall be payable promptly following the expiration of the
Revocation Period, in one lump sum by wire transfer of immediately available
Federal funds to an account designated by the Executive.

                            (b) to continue, until March 11, 2003, the
participation of the Executive in all medical, dental, hospitalization and life
insurance coverage and in other employee welfare benefit plans or programs in
which he was participating on the Termination Date; provided that the Company's
obligations under this Section 4(a) shall terminate as of the date the Executive
receives similar coverage and benefits (and the Executive shall be obligated
promptly to inform the Company of his receipt of such coverage and benefits);

                            (c) to continue, until September 11, 2002, to
provide to the Executive, or reimburse the Executive for, such personal and
residential security measures as are in place with respect to the Executive as
of the Termination Date;

                            (d) to reimburse the Executive up to a maximum of
$75,000 for legal expenses incurred by him with respect to the negotiation and
preparation of the 2002 Employment Agreement and this Agreement;

                            (e) to provide the Executive with the use of the
Company's standard senior executive professional outplacement assistance for a
period of six months following the Termination Date; and

                            (f) until September 11, 2002 or, if sooner, until he
is again employed on a full-time basis, to make available to the Executive, at
times and locations reasonably acceptable to the Company, appropriate Company
personnel to provide the Executive administrative support services relating to
phone, calendar, correspondence, travel arrangements and email.

The Company acknowledges and agrees that nothing in this Agreement shall
adversely affect the Executive's rights with respect to his vested benefits
under any tax-qualified retirement plan of the Company.

                  5. Executive Releases. The two releases described below may be
referred to herein individually as a "Release" and collectively as the
"Releases."

                            (a) Contemporaneously with the execution of this
Agreement and as a condition to receiving and/or retaining the payments and
benefits provided for under Sections 2 and 3 hereof, the Executive shall execute
the Covenant Not To Sue and Release of Liability in the form attached hereto as
Exhibit A.

                            (b) As a condition to receiving and/or retaining the
payments and benefits provided for under Section 4 hereof, (a) the Executive
shall have executed, on or following the date on which an order of the U.S.
Bankruptcy Court approving this Agreement becomes a final order, the Covenant
Not To Sue and Full and Complete

                                       3
<PAGE>

Release of Liability attached hereto as Exhibit B ("Release B") and (b) seven
days shall have passed following such date (the "Revocation Period") without
Release B having been revoked.

                  6. Indemnification.

                            (a) The Company agrees that if the Executive has
been or is made a party, or has been or is threatened to be made a party, to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), other than a Proceeding brought on behalf of the
Previous Employer (as defined in the 2000 Employment Agreement) relating to the
Executive's employment agreement with the Previous Employer, by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is the Executive's alleged action in
an official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Company to
the fullest extent legally permitted or authorized by the Company's certificate
of incorporation or bylaws or resolutions of the Company's Board of Directors
or, if greater, by the laws of the State of Michigan against all cost, expense,
liability and loss (including, without limitation, attorney's fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by the Executive in connection
therewith, and such indemnification shall continue as to the Executive even if
he has ceased to be a director, officer, member, employee or agent of the
Company or other entity and shall inure to the benefit of the Executive's heirs,
executors and administrators. The Company shall advance to the Executive all
reasonable costs and expenses incurred by him in connection with a Proceeding
within 20 days after receipt by the Company of a written request for such
advance. Such request shall include an undertaking by the Executive to repay the
amount of such advance if it shall ultimately be determined that he is not
entitled to be indemnified against such costs and expenses.

                            (b) Neither the failure of the Company (including
its board of directors, independent legal counsel or stockholders) to have made
a determination prior to the commencement of any Proceeding concerning payment
of amounts claimed by the Executive under Section 6(a) above that
indemnification of the Executive is proper because he has met the applicable
standard of conduct, nor a determination by the Company (including its board of
directors, independent legal counsel or stockholders) that the Executive has not
met such applicable standard of conduct, shall create a presumption that the
Executive has not met the applicable standard of conduct.

                            (c) The Company agrees to continue and maintain a
directors and officers' liability insurance policy covering the Executive to the
extent the Company provides such coverage for its other executive officers or
former officers. Without limiting the generality of the foregoing, the Company
agrees that the Executive shall be afforded the benefit of any greater
protections (with respect to, for example, funding

                                       4
<PAGE>

arrangements and the maintenance of post-termination coverage) as may be
implemented from time to time with respect to the Company's officers and/or
directors.

                  7. Executive Cooperation.

                            (a) For no additional compensation, the Executive
agrees to reasonably cooperate with the Company and any of its subsidiaries and
affiliates on such matters as are reasonably requested of the Executive with
respect to any management transition matters or any legal or administrative
proceeding, governmental investigation or similar matters involving the Company
or any of its subsidiaries or affiliates. Such cooperation shall include all
reasonable assistance that the Company or any of its subsidiaries or affiliates
determine is necessary, including, but not limited to, meeting or consulting
with the Company, its subsidiaries and affiliates and their counsel and their
designees, reviewing documents, analyzing facts and appearing or testifying as a
witness or interviewee or otherwise. The Executive agrees that he will provide
such assistance and cooperation in the manner and at the locations as shall be
reasonably requested by the Company; provided, however, that the Company shall
use its best efforts to request such assistance at reasonable times so as not to
interfere with his obligations resulting from employment activities following
his termination of employment from the Company. The Executive shall be entitled
to reimbursement, upon receipt by the Company of suitable documentation, for
reasonable and necessary travel and other expenses which the Executive may incur
at the specific request of the Company and as approved by the Company in
advance.

                            (b) In the event that counsel for the Company
reasonably determines that the Company's and the Executive's interests in any
proceeding, investigation or similar matter described in Section 7(a) are
potentially diverse such that it would not be appropriate for counsel for the
Company to also represent the Executive because of applicable conflict of
interest rules, the Executive shall be entitled to retain separate counsel and
the Company shall reimburse the Executive (on an after-tax basis) for all
reasonable attorney's fees and expenses incurred by the Executive with respect
to such proceeding, investigation or similar matter.

                  8. Press Release. The Company shall consult with the Executive
prior to issuing a press release concerning the termination of the Executive's
services to the Company. The Executive shall not issue a press release
concerning the termination of his services to the Company without the content
thereof being approved by the Company.

                  9. Restrictive Covenants.

                            (a) Non-Compete. By and in consideration of the
substantial compensation and benefits to be provided by the Company hereunder,
and further in consideration of the Executive's exposure to the proprietary
information of the Company, the Executive agrees that he shall not, for a period
of at least 12 months following the Termination Date, directly or indirectly
own, manage, operate, join, control, be employed by, or participate in the
ownership, management, operation or control of or be connected

                                       5
<PAGE>

in any manner, including, but not limited to, holding the positions of officer,
director, shareholder, consultant, independent contractor, employee, partner, or
investor, with any Competing Enterprise; provided, however, that the Executive
may invest in stocks, bonds, or other securities of any corporation or other
entity (but without participating in the business thereof) if such stocks,
bonds, or other securities are listed for trading on a national securities
exchange or Nasdaq National Market and the Executive's investment does not
exceed 1% of the issued and outstanding shares of capital stock, or in the case
of bonds or other securities, 1% of the aggregate principal amount thereof
issued and outstanding. "Competing Enterprise" shall mean and be limited to the
following entities, including successors thereto: Albertson's Inc., American
Retail Group, Inc., American Stores Company, Carrefour sa, Kohl's Corporation,
The May Department Store Company, Montgomery Ward & Co., Inc., J.C. Penny
Company, Royal Ahold, Safeway, Inc., Sears, Roebuck and Co., Service Merchandise
Company, ShopKo Stores, Inc., Supervalue Inc., Target Corp., The Home Depot,
Inc., Toys R Us Inc., TJX Companies, Inc., and Wal-Mart Stores, Inc.

                            (b) Nonsolicitation. By and in consideration of the
substantial compensation and benefits to be provided by the Company hereunder,
and further in consideration of the Executive's exposure to the proprietary
information of the Company, the Executive agrees that he shall not, for a period
of at least 12 months following the Termination Date, without the express prior
written approval of the Company, (i) directly or indirectly, in one or a series
of transactions, recruit, solicit or otherwise induce or influence any
proprietor, partner, stockholder, lender, director, officer, employee, sales
agent, joint venturer, investor, lessor, supplier, customer, agent,
representative or any other person which has a business relationship with the
Company, or had a business relationship with the Company within the 24-month
period preceding the date of the incident in question, to discontinue, reduce or
modify such employment, agency or business relationship with the Company, or
(ii) employ or seek to employ or cause any Competing Enterprise to employ or
seek to employ any person or agent who is then (or was at any time within six
months prior to the date the Executive or the Competing Enterprise employs or
seeks to employ such person) employed or retained by the Company.

                            (c) Confidential Information. Commencing on the
Termination Date, Executive agrees that he will not divulge to anyone (other
than the Company or any persons employed or designated by the Company) any
knowledge or information of any type whatsoever whether of a confidential nature
or otherwise relating to the business of the Company or any of its subsidiaries
or affiliates, as well as any information of a confidential nature obtained from
customers, clients or other third parties, including, without limitation, all
types of trade secrets (unless readily ascertainable from public or published
information or trade sources) and confidential commercial information, and the
Executive further agrees not to disclose, publish or make use of any such
knowledge or information without the prior written consent of the Company.

                            (d) Non-Disparagement. The Executive agrees that he
will not, at any time in the future, in any way disparage the Company, or any of
its subsidiaries or

                                       6
<PAGE>

affiliates, or any of their respective current and former officers, directors or
employees, verbally or in writing, or make any statements to the press or to
third parties that may be derogatory or detrimental to the good name or business
reputation of any such entity or person. Likewise, the Company will direct its
directors and senior executive officers to not, at any time in the future for so
long as such director or senior executive officer continues to be associated
with the Company in such capacity, in any way disparage the Executive, verbally
or in writing, or make any statements to the press or to third parties that may
be derogatory or detrimental to the Executive's good name or business
reputation. Nothing in this Section 9(d) shall preclude the parties from
responding truthfully to inquiries made in connection with any legal or
governmental proceeding pursuant to subpoena or other legal process or from
responding truthfully to any public statement made by the other party hereto.
Without intending to limit the remedies available to the parties hereto, in the
event that either party breaches the provisions of this Section 9(d), nothing in
this Section 9(d) shall be construed to limit the non-breaching party's ability
to respond to statements made by the breaching party.

                            (e) The Executive agrees that any breach of the
terms of this Section 9 would result in irreparable injury and damage to the
Company for which the Company would have no adequate remedy at law; the
Executive therefore also agrees that in the event of said breach or any
reasonable threat of breach, the Company shall be entitled to an immediate
injunction and restraining order to prevent such breach and/or threatened breach
and/or continued breach by the Executive and/or any and all persons and/or
entities acting for and/or with the Executive. The terms of this Section 9 shall
not prevent the Company from pursuing any other available remedies for any
breach or threatened breach hereof, including, but not limited to, remedies
available under this Agreement and the recovery of damages. The Executive and
the Company further agree that the provisions of the covenant not to compete are
reasonable. Should a court or arbitrator determine, however, that any provision
of the covenant not to compete is unreasonable, either in period of time,
geographical area, or otherwise, the parties hereto agree that the covenant
shall be interpreted and enforced to the maximum extent which such court or
arbitrator deems reasonable.

                            (f) The existence of any claim or cause of action by
the Executive against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
the covenants and agreements of this Section 9.

                  10. Consultation with Counsel. The Company has advised the
Executive to consult with an attorney of his choosing prior to signing this
Agreement. The Executive represents that he understands and agrees that the
Executive has the right and has been given the opportunity to review this
Agreement and, specifically, the Releases, with an attorney. The Executive
further represents that he understands and agrees that the Company is under no
obligation to offer the Executive this Agreement, and that the Executive is
under no obligation to consent to the Releases, and that the Executive has
entered into this Agreement freely and voluntarily.

                                       7
<PAGE>

                  11. Enforcement. It is the desire and intent of the parties
that the provisions of this Agreement and the Releases shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. In the event that any one or more
of the provisions of this Agreement or the Releases shall be held to be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remainder of this Agreement and/or the Release shall not in any way be affected
or impaired thereby. Moreover, if any one or more of the provisions contained in
this Agreement or the Releases is held to be excessively broad as to duration,
scope, activity or subject, such provisions shall be construed by limiting and
reducing them so as to be enforceable to the maximum extent compatible with
applicable law.

                  12. Entire Agreement. Subject to Section 17, this Agreement
sets forth the entire agreement and understanding of the parties with respect to
the subject matter contained herein and supersedes all prior agreements,
arrangements and understandings, written or oral, between the parties including,
but not limited to, the 2000 Employment Agreement, the 2002 Employment Agreement
and any other agreements, resolutions, authorizations, policies and practices of
the Company regarding expense reimbursement, indemnification, security and other
matters concerning the Executive's employment with and service as a director of
the Company (the "Other Agreements").

                  Subject to Section 17, the Executive acknowledges that, except
with respect to vested benefits to be provided under the tax-qualified
retirement plans of the Company in which the Executive was participating as of
the Termination Date, the payments and benefits to be paid and provided under
this Agreement are in lieu of and in full satisfaction of any amounts that might
otherwise be payable under any agreement, contract, plan, policy or practice,
past or present, of the Company, or of their subsidiaries or affiliates,
including, but not limited to, the Employment Agreement, the 2002 Employment
Agreement and the Other Agreements.

                  13. Notices. For the purposes of this Agreement, notices,
demands, and all other communications provided for hereunder shall be in writing
and shall be deemed to have been duly given when hand delivered or (unless
otherwise specified) when mailed by United States certified mail, return receipt
requested, postage prepaid, addressed as follows:

                   If to the Executive: Charles C. Conaway
                                        c/o Stephen T. Lindo, Esq.
                                        Willkie Farr & Gallagher
                                        787 Seventh Avenue
                                        New York, NY 10019-6099

                                       8
<PAGE>

                   If to the Company:   Kmart Corporation
                                        3100 West Big Beaver Road
                                        Troy, MI 48084-3163
                                        Attention: Secretary
                                        (with a copy to the attention
                                        of the General Counsel)

                   with a copy to:      Stuart N. Alperin, Esq.
                                        Skadden, Arps, Slate, Meagher & Flom LLP
                                        Four Times Square
                                        New York, NY 10036-6522

or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.

                  14. Amendment. No provision of this Agreement may be modified
or discharged unless such modification or discharge is authorized and agreed to
in writing, signed by the Company and the Executive. No waiver by either party
of any breach by the other party of any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of any other
provision or condition at the time or at any prior or subsequent time. This
Agreement and the provisions contained in it shall not be construed or
interpreted for or against either party because that party drafted or caused
that party's legal representative to draft any of its provisions.

                  15. Captions. The captions used in this Agreement are for
convenience only and shall not change the substance of the provisions herein.

                  16. Applicable Law. This Agreement 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 Agreement 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.

                  17. Approval of Agreement. The Company represents and warrants
that all requisite approvals of the Board to enter into this Agreement have been
obtained. Notwithstanding anything in this Agreement to the contrary, the
effectiveness of this Agreement is subject to the approval of the United States
Bankruptcy Court having jurisdiction over the Company and its bankruptcy case.
The Company shall use its reasonable best efforts to seek Bankruptcy Court
approval of this Agreement and to obtain a Bankruptcy Court order approving this
Agreement as soon as practicable following the execution of this Agreement, such
order and the supporting motion or motions to be in form and substance
reasonably satisfactory to the Executive. If this Agreement is not approved by
the Bankruptcy Court, (a) the provisions of this Agreement

                                       9
<PAGE>

(other than Sections 1, 2, 3, 5(a), 8, 9 and 18) shall be null and void, (b) the
Executive's consent to this Agreement shall be deemed revoked and (c) all rights
both parties may have had prior to entering into this Agreement shall be fully
reserved, including, without limitation, rights under the 2000 Employment
Agreement, subject to offset for amounts received pursuant to Section 2.

                  18. Upon execution of this Agreement by the Company and the
Executive, the 2002 Employment Agreement is hereby revoked and rescinded in its
entirety.

                  19. This agreement may be signed in counterparts and delivered
by facsimile, each of which will be deemed an original but all of which together
shall constitute one and the same instrument.

                                       10
<PAGE>

                  IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of March 11, 2002.

                                            KMART CORPORATION

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

                                            Agreed and Accepted:

                                            ----------------------------------
                                            Charles C. Conaway

                                       11
<PAGE>

                                    EXHIBIT A

                             COVENANT NOT TO SUE AND
                              RELEASE OF LIABILITY

     1.  I, Charles C. Conaway (hereinafter referred to as the "Executive"), in
         exchange for the consideration contained in paragraph 2, do hereby
         release and forever discharge Kmart Corporation and any related or
         affiliated companies or divisions or their current or former directors,
         officers, employees, or agents (hereinafter referred to as "Kmart")
         from any and all actions, causes of action, suits, controversies,
         claims and demands whatsoever, for or by reason of any matter, cause or
         thing whatsoever, whether known or unknown, including, but not limited
         to, all claims arising under or in connection with the Michigan
         Elliott-Larsen Civil Rights Act, as amended, Michigan Whistle Blowers'
         Protection Act, as amended, the Michigan Persons With Disabilities
         Civil Rights Act, as amended, Americans With Disabilities Act of 1990,
         as amended, Title VII of the Civil Rights Act of 1964, as amended,
         Civil Rights Act of 1991, as amended, Employee Retirement Income
         Security Act of 1974, as amended, the Worker Adjustment Retraining and
         Notification Act, the Fair Labor Standards Act, as amended, the Family
         & Medical Leave Act of 1993, as amended, the common law of the State of
         Michigan, for tort, breach of express or implied employment contract,
         wrongful discharge, intentional infliction of emotional distress, and
         defamation or injuries incurred on the job or incurred as a result of
         loss of employment. This Covenant Not To Sue and Release of Liability
         shall not apply to actions to enforce rights arising under (i) the Age
         Discrimination in Employment Act of 1967, as amended, or (ii) any claim
         for benefits which may be due the Executive under (A) any tax-qualified
         pension plan of Kmart in which he was a participant as of March 11,
         2002, (B) COBRA and claims under welfare plans of the Company relating
         to events occurring on or prior to the Termination Date, (C) that
         certain Separation Agreement between the Company and the Executive,
         dated as of March 11, 2002 (the "Separation Agreement"), if approved by
         the U.S. Bankruptcy Court, and (D) if the Separation Agreement is not
         approved by the U.S. Bankruptcy Court, the 2000 Employment Agreement
         (as defined in the Separation Agreement), provided, however, that the
         payments and benefits provided under paragraph 2 hereof shall offset
         any payments and benefits to which the Executive may be entitled under
         the 2000 Employment Agreement. The Executive represents that he has not
         filed against Kmart any complaints, charges, or lawsuits arising out of
         his employment, or any other matter arising on or prior to the date of
         this Covenant Not To Sue and Release of Liability. The Executive
         covenants and agrees that he will not seek recovery against Kmart
         arising out of any of the matters released in this paragraph.

     2.  The Executive agrees to accept and Kmart agrees to provide the
         following consideration: the amount set forth in Section 2(b) of the
         Separation Agreement.

                                       12
<PAGE>

     3.  The Executive agrees that the acts done and evidenced hereby, and the
         release granted hereunder, are done and granted to compromise any
         doubtful and disputed claims and to avoid litigation as to matters
         released hereby, and are not an admission of liability on the part of
         Kmart, by whom any liability is expressly denied.

     4.  The Executive acknowledges that he has no seniority, recall,
         reinstatement, or rehire rights with Kmart in any capacity. The
         Executive also acknowledges that, except as set forth herein and in the
         Separation Agreement, he is not entitled to any compensation from
         Kmart.

     5.  The Executive agrees that he will honor the restrictive covenants
         concerning noncompetition, nonsolicitation, non-disparagement,
         nondisclosure and press releases set forth in the Separation Agreement.

     6.  If any provision or paragraph of this Covenant Not To Sue and Release
         of Liability is ever determined not enforceable, the remaining
         provisions and paragraphs shall remain in full force and effect.

     7.  The Executive acknowledges that this Covenant Not To Sue and Release of
         Liability will be governed by and construed and enforced in accordance
         with the internal laws of the State of Michigan. If a dispute arises
         concerning any provisions of this Covenant Not To Sue and Release of
         Liability, it shall be resolved by arbitration in Troy, Michigan in
         accordance with the rules of the American Arbitration Association.

     8.  Nothing in this Covenant Not To Sue and Release of Liability shall
         impair any indemnification rights the Executive may have as an officer
         or director of Kmart.

     9.  THE EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN ADVISED THAT HE SHOULD
         CONSULT WITH AN ATTORNEY BEFORE HE EXECUTES THIS COVENANT NOT TO SUE
         AND RELEASE OF LIABILITY, AND THAT HE UNDERSTANDS ALL OF ITS TERMS AND
         EXECUTES IT VOLUNTARILY AND WITH FULL KNOWLEDGE OF ITS SIGNIFICANCE AND
         THE CONSEQUENCES THEREOF.

                                                      -------------------------
                                                      Charles C. Conaway
                                                      March 11, 2002

                                       13
<PAGE>

                                    EXHIBIT B

                             COVENANT NOT TO SUE AND
                     FULL AND COMPLETE RELEASE OF LIABILITY

     1.  I, Charles C. Conaway (hereinafter referred to as the "Executive"), in
         exchange for the consideration contained in paragraph 2, do hereby
         release and forever discharge Kmart Corporation and any related or
         affiliated companies or divisions or their current or former directors,
         officers, employees, or agents (hereinafter referred to as "Kmart")
         from any and all actions, causes of action, suits, controversies,
         claims and demands whatsoever, for or by reason of any matter, cause or
         thing whatsoever, whether known or unknown including, but not limited
         to, all claims arising under or in connection with the Michigan
         Elliott-Larsen Civil Rights Act, as amended, Michigan Whistle Blowers'
         Protection Act, as amended, the Michigan Persons With Disabilities
         Civil Rights Act, as amended, Age Discrimination in Employment Act of
         1967, as amended, Americans With Disabilities Act of 1990, as amended,
         Title VII of the Civil Rights Act of 1964, as amended, Civil Rights Act
         of 1991, as amended, Employee Retirement Income Security Act of 1974,
         as amended, Older Workers Benefit Protection Act of 1990, as amended,
         the Worker Adjustment Retraining and Notification Act, the Fair Labor
         Standards Act, as amended, the Family & Medical Leave Act of 1993, as
         amended, the common law of the State of Michigan, for tort, breach of
         express or implied employment contract, wrongful discharge, intentional
         infliction of emotional distress, and defamation or injuries incurred
         on the job or incurred as a result of loss of employment. This Covenant
         Not To Sue and Full and Complete Release of Liability shall not apply
         to (i) any actions to enforce rights arising under, or any claim for
         benefits which may be due the Executive under that certain Separation
         Agreement between the Company and the Executive, dated as of March 11,
         2002 (the "Separation Agreement"), or (ii) any claim for benefits which
         may be due the Executive under any tax-qualified pension plan of Kmart
         in which he was a participant as of March 11, 2002. The Executive
         represents that he has not filed against Kmart any complaints, charges,
         or lawsuits arising out of his employment, or any other matter arising
         on or prior to the date of this Covenant Not To Sue and Full and
         Complete Release of Liability. The Executive covenants and agrees that
         he will not seek recovery against Kmart arising out of any of the
         matters released in this paragraph.

     2.  The Executive agrees to accept and Kmart agrees to provide the
         following consideration: All rights and benefits of the Executive upon
         termination of employment with, and services as a director to, Kmart,
         as set forth under the Separation Agreement.

     3.  The Executive agrees that the acts done and evidenced hereby, and the
         release granted hereunder, are done and granted to compromise any
         doubtful and disputed claims and to avoid litigation, and are not an
         admission of liability on the part of Kmart , by whom any liability is
         expressly denied.

                                       14
<PAGE>

     4.  The Executive acknowledges that he has no seniority, recall,
         reinstatement, or rehire rights with Kmart in any capacity. The
         Executive also acknowledges that, except as set forth herein and in the
         Separation Agreement, he is not entitled to any compensation from
         Kmart.

     5.  The Executive agrees that he will honor the restrictive covenants
         concerning noncompetition, nonsolicitation, non-disparagement,
         nondisclosure and press releases set forth in the Agreement.

     6.  If any provision or paragraph of this Covenant Not To Sue and Full and
         Complete Release of Liability is ever determined not enforceable, the
         remaining provisions and paragraphs shall remain in full force and
         effect.

     7.  The Executive acknowledges that he has been given 21 days within which
         to consider this Covenant Not To Sue and Full and Complete Release of
         Liability and that he has 7 days following his execution to revoke his
         signature. If the Executive revokes his consent hereto prior to the
         expiration of such 7-day period, the Covenant Not To Sue and Full and
         Complete Release of Liability shall not be effective, and Kmart shall
         have no obligations to provide the Executive with the consideration set
         forth in paragraph 2 above.

     8.  The Executive acknowledges that this Covenant Not To Sue and Full and
         Complete Release of Liability will be governed by and construed and
         enforced in accordance with the internal laws of the State of Michigan.
         If a dispute arises concerning any provisions of this Covenant Not To
         Sue and Full and Complete Release of Liability, it shall be resolved by
         arbitration in Troy, Michigan in accordance with the rules of the
         American Arbitration Association.

     9.  Nothing in this Covenant Not To Sue and Full and Complete Release of
         Liability shall impair any indemnification rights the Executive may
         have as an officer or director of Kmart.

                                       15
<PAGE>

     10. THE EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS COVENANT NOT TO SUE
         AND FULL AND COMPLETE RELEASE OF LIABILITY, THAT HE HAS BEEN PROVIDED
         21 DAYS TO CONSIDER THIS COVENANT NOT TO SUE AND RELEASE OF LIABILITY,
         THAT HE HAS BEEN ADVISED THAT HE HAS 7 DAYS TO REVOKE HIS SIGNATURE,
         THAT HE HAS BEEN ADVISED THAT HE SHOULD CONSULT WITH AN ATTORNEY BEFORE
         HE EXECUTES THIS COVENANT NOT TO SUE AND FULL AND COMPLETE RELEASE OF
         LIABILITY, AND THAT HE UNDERSTANDS ALL OF ITS TERMS AND EXECUTES IT
         VOLUNTARILY AND WITH FULL KNOWLEDGE OF ITS SIGNIFICANCE AND THE
         CONSEQUENCES THEREOF.

                                                      -------------------------
                                                      Charles C. Conaway
                                                      [__________], 2002

                                       16<PAGE>
                                                                    EXHIBIT 10ee

                              EMPLOYMENT AGREEMENT

                  THIS AGREEMENT, made and entered into by and between KMART
CORPORATION, a Michigan corporation (together with its successors and assigns
permitted under this Agreement, the "Company"), and Ronald Hutchison (the
"Executive").

                  WHEREAS, in light of current conditions, the Company is
considering various strategic initiatives, including but not limited to a
financial restructuring;

                  WHEREAS, the Company believes that the Executive's knowledge,
skill and experience will be essential in enabling the Company successfully to
implement any such strategic initiatives;

                  WHEREAS, the Company desires to employ the Executive and to
enter into an agreement embodying the terms of such employment (this
"Agreement") and the Executive desires to accept such employment, subject to the
terms and provisions of this Agreement;

                  NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
receipt of which is mutually acknowledged, the Company and the Executive
(individually a "Party" and together the "Parties") agree as follows:

         1. Definitions.

                  (a) "Base Salary" shall mean the salary granted to the
Executive pursuant to Section 4.

                  (b) "Board" shall mean the Board of Directors of the Company.

                  (c) "Cause" shall mean termination of the Executive based on
(i) conduct which is a material violation of Company policy or which is
fraudulent or unlawful or which materially interferes with the ability of the
Executive to perform his duties, (ii) misconduct which results in damage or
injury to the Company, including damage to its reputation, or (iii) gross
negligence in the performance of, or willful failure to perform, the Executive's
duties and responsibilities.

                  (d) "Chairman" shall mean the Chairman of the Board.

                  (e) A "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:

                           (i) 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

<PAGE>

         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

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

                           (iii) 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).

                                    The foregoing to the contrary
notwithstanding, if a Potential Change in Control involves a transaction
proposed by the Executive (or a group which includes the Executive), either as a
first proposal or a competing proposal, and a Change in Control does occur
(whether or not the transaction constituting such Change of Control is the same
transaction proposed by the Executive and whether or not the Executive
participates as an equity investor in the acquiring entity in such transaction),
then for purposes of this agreement, no Change in Control shall be deemed to
have occurred with respect to any such Executive.

                  (f) "Constructive Termination" by the Executive shall mean
termination based on the occurrence without the Executive's express consent of
any of the following: (i) a significant diminution by the Company of the
Executive's role with the Company or a significant detrimental change in the
nature and/or scope of the Executive's status with the Company, other than for
Cause or Disability or (ii) a reduction in the Executive's Base Salary, other
than for Cause or Disability. The Executive shall further be required to comply
with the provisions of Section 9(d)(i) of this Agreement with respect to a
Constructive Termination.

                  (g) "Disability" shall mean the Executive's inability to
substantially perform his duties and responsibilities under this Agreement by
reason of any physical or mental incapacity for a period of 180 consecutive
days.

                  (h) "Effective Date" shall mean the date of execution of this
Agreement.

                  (i) A "Potential Change in Control" shall mean the happening
of any of the following:

                                    (i) the Company enters into an agreement,
         the consummation of which would result in the occurrence of a Change in
         Control;

                                    (ii) any person (including the Company)
         publicly announces an intention to take or to consider taking actions
         which if consummated would constitute a Change in Control;

                                       2
<PAGE>

                                    (iii) any person, other than a trustee or
         other fiduciary holding securities under an employee benefit plan of
         the Company (or an entity owned, directly or indirectly, by the
         stockholders of the Company in substantially the same proportions as
         their ownership of stock of the Company), who is or becomes the
         beneficial owner, directly or indirectly, of securities of the Company
         representing 9.5% or more of the combined voting power of the Company's
         then outstanding securities, increases his beneficial ownership of such
         securities by 5% or more over the percentage so owned by such person on
         the date hereof; or

                                    (iv) the Board adopts a resolution to the
         effect that, for purposes of this Plan, a Potential Change in Control
         has occurred.

                           (j) "Restructuring Date" shall mean the date on which
a plan of reorganization that is confirmed by the bankruptcy court becomes
effective or the Company otherwise emerges from Chapter 11, as a result of which
the business of the Company is maintained on an ongoing basis, whether
maintained by the Company, the debtor in possession or by an entity that has
acquired all or substantially all of the Company's or debtor in possession's
assets.

                           (k) "Term of Employment" shall mean the period
commencing on the Effective Date and ending on the earlier of (i) January 31,
2003 or (ii) the Restructuring Date provided, however, that the Term of
Employment shall be extended for an additional year to January 31, 2004 (but not
beyond the Restructuring Date), unless the Company delivers a written notice of
non-extension to the Executive prior to December 31, 2002.

                  2. Term of Employment. Subject to Section 9, the Company
hereby employs the Executive, and the Executive hereby accepts such employment
for the Term of Employment.

                  3. Position, Duties and Responsibilities.

                           (a) During the Term of Employment, the Executive
shall be employed and serve as the Chief Restructuring Officer of the Company
(or such other position or positions as may be agreed upon in writing by the
Executive and the Company) and be responsible for managing and implementing the
restructuring of the Company as directed by the Chairman and the Board. The
Executive shall devote substantially all of his business time, attention and
skill to the performance of such duties and responsibilities, and shall use his
best efforts to promote the interests of the Company. The Executive shall have
all authority commensurate with such position. The Executive shall not, without
the prior written approval of the Board, engage in any other business activity
which is in violation of policies established from time to time by the Company.

                           (b) Anything herein to the contrary notwithstanding,
nothing shall preclude the Executive from (i) serving on the boards of directors
of a reasonable number of other corporations or the boards of a reasonable
number of trade associations and/or charitable organizations (subject to the
reasonable approval of the Board), (ii) engaging in charitable activities and
community affairs, and (iii) managing his personal investments and affairs,

                                       3
<PAGE>

provided that such activities do not materially interfere with the proper
performance of his duties and responsibilities as an executive officer of the
Company.

                           (c) The Executive is expected to perform his services
hereunder primarily at the Company's headquarters. To that end, the Company
shall provide the Executive with office space and staff at its headquarters in
Troy, Michigan that are commensurate with the Executive's duties hereunder.

                  4. Base Salary. During the Term of Employment, the Executive
shall be paid an annualized Base Salary, payable in bi-monthly installments, of
$475,000.

                  5. Inducement Payment. The Executive shall be entitled to
receive, upon execution of this Agreement, a lump sum cash payment of $250,000.

                  6. Success Payment. Provided the Executive is employed by the
Company on the Restructuring Date, the Executive shall be entitled to receive,
promptly, but in no event later than ten days following the Restructuring Date,
a lump sum cash payment of $1,000,000.

                  7. Employee Benefit Programs. During the Term of Employment,
the Executive shall be eligible to participate in all employee pension and
welfare benefit plans and programs made available generally to the Company's
senior-level executives (other than the CEO) or to its employees generally, as
such plans or programs may be in effect from time to time, including, without
limitation, pension, profit sharing, savings and other retirement plans or
programs, medical (including annual executive physicals), dental,
hospitalization, short-term and long-term disability and life insurance plans,
accidental death and dismemberment protection, travel accident insurance, and
any other pension or retirement plans or programs and any other employee welfare
benefit plans or programs that may be sponsored by the Company from time to
time, including any plans that supplement the above-listed types of plans or
programs, whether funded or unfunded; provided, however, that the Executive
shall not be eligible to participate in any annual performance bonus or long
term incentive plan or program.

                  8. Reimbursement of Business and Other Expenses; Perquisites;
Vacations.

                           (a) The Executive is authorized to incur reasonable
expenses in carrying out his duties and responsibilities under this Agreement
and the Company shall promptly reimburse him for all reasonable business
expenses incurred in connection with carrying out the business of the Company,
subject to documentation in accordance with the Company's policy. The Company
shall pay all reasonable legal and financial advisor expenses incurred in
connection with the preparation of this Agreement.

                           (b) During the Term of Employment, the Company shall
reimburse the Executive for personal financial (including tax) counseling (other
than legal fees) by a firm or consultant to be chosen by the Executive, such
reimbursement to be no more than the amount authorized under Company policy in
effect from time to time.

                           (c) The Executive shall be entitled to three weeks
paid vacation per year.

                                       4
<PAGE>

                           (d) The Company agrees to continue and maintain a
directors' and officers' liability insurance policy covering the Executive to
the extent the Company provides such coverage for its other executive officers
or former officers.

                           (e) During the Term of Employment, the Company shall
reimburse the Executive for reasonable living expenses incurred by the Executive
while residing in the Troy, Michigan area. The Company shall make to the
Executive additional payments on a fully grossed-up basis to cover applicable
federal, state and local income and excise taxes, when and to the extent, if
any, that such taxes are payable by the Executive with respect to benefits
provided under this Section 7(e).

                  9. Termination of Employment.

                           (a) Termination Due to Death. In the event the
Executive's employment is terminated due to his death, his estate or his
beneficiaries as the case may be, shall be entitled to the following:

                                    (i) Base Salary through the date of death;

                                    (ii) any amounts earned, accrued or owing to
         the Executive but not yet paid under this Agreement; and

                                    (iii) other or additional benefits in
         accordance with applicable plans and programs of the Company.

                           (b) Termination Due to Disability. In the event the
Executive's employment is terminated due to his Disability, he shall be entitled
in such case to the following:

                                    (i) Base Salary through the date of
         termination;

                                    (ii) through the Company's long-term
         disability plans or otherwise, an amount equal to 60% of the Base
         Salary for the period beginning on the date of termination through the
         Executive's attainment of age 65;

                                    (iii) any amounts earned, accrued or owing
         to the Executive but not yet paid under this Agreement; and

                                    (iv) other or additional benefits in
         accordance with applicable plans and programs of the Company.

                                    In no event shall a termination of the
         Executive's employment for Disability occur unless the Party
         terminating his employment gives written notice to the other Party in
         accordance with Section 16 below.

                           (c) Termination by the Company for Cause. In the
event the Company terminates the Executive's employment for Cause, he shall be
entitled to:

                                       5
<PAGE>

                                    (i) Base Salary through the date of the
         termination of his employment;

                                    (ii) any amounts earned, accrued or owing to
         the Executive but not yet paid under this Agreement; and

                                    (iii) other or additional benefits in
         accordance with applicable plans or programs of the Company.

                           (d) Termination Without Cause or Constructive
Termination.

                                    (i) A Constructive Termination shall not
         take effect unless the provisions of this paragraph 9(d)(i) are
         complied with. The Company shall be given written notice by the
         Executive of the intention to terminate his employment on account of a
         Constructive Termination, such notice (A) to state in detail the
         particular act or acts or failure or failures to act that constitute
         the grounds on which the proposed Constructive Termination is based and
         (B) to be given within six months of the Executive learning of such act
         or acts or failure or failures to act. The Company shall have 30 days
         after the date that such written notice has been given to the Company
         in which to cure such conduct, to the extent such cure is possible.

                                    (ii) In the event the Executive's employment
         is terminated by the Company without Cause, other than due to
         Disability or death, or in the event there is a Constructive
         Termination, the Executive shall be entitled to receive:

                                             (A) Base Salary through the date of
         termination of the Executive's employment;

                                             (B) if such termination occurs
         prior to the Restructuring Date, a lump sum cash payment equal to the
         Executive's annual Base Salary in effect on the date of termination of
         the Executive's employment (or in the event a reduction in Base Salary
         is the basis for a Constructive Termination, then the Base Salary in
         effect immediately prior to such reduction);

                                             (C) if such termination occurs
         prior to the Restructuring Date and the Restructuring Date occurs
         within 12 months following such termination, a lump sum cash payment of
         $525,000 to be paid promptly, but in no event later than 10 days,
         following the Restructuring Date;

                                             (D) any amounts earned, accrued or
         owing to the Executive but not yet paid under this Agreement;

                                             (E) continued participation in all
         medical, dental, hospitalization and life insurance coverage and in
         other employee welfare benefit plans or programs in which he was
         participating on the date of the termination of his employment for an
         additional 12 months following such termination; provided that the
         Company's obligations under this clause (E) shall be reduced to the
         extent that the Executive receives similar coverage and benefits under
         the plans and programs of a subsequent employer: and

                                       6
<PAGE>

         provided, further, that (x) if the Executive is precluded from
         continuing his participation in any employee benefit plan or program as
         provided in this clause, he shall be provided with the after-tax
         economic equivalent of the benefits provided under the plan or program
         in which he is unable to participate for the period specified in this
         clause (E) of this Section 9(d), (y) the economic equivalent of any
         benefit foregone shall be deemed to be the lowest cost that would be
         incurred by the Executive in obtaining such benefit himself on an
         individual basis, and (z) payment of such after-tax economic equivalent
         shall be made quarterly in advance; and

                                             (F) other or additional benefits in
         accordance with applicable plans and programs of the Company.

                           (e) Termination of Employment Following a Change in
Control. If, within two years following a Change in Control, the Executive's
employment is terminated without Cause or there is a Constructive Termination,
(in either event, a "CIC Termination") the Executive shall be entitled to the
payments and benefits provided in Section 9(d) above, provided that all cash
payments provided therein shall be paid in a lump sum without any discount and
all of such payments shall be grossed up to cover applicable federal, state and
local income and excise taxes thereon, including, without limitation, any tax
imposed by Section 4999 of the Code or any similar tax. In addition, immediately
following a CIC Termination, all accrued or earned amounts that are not
otherwise vested, shall become fully vested, including, without limitation, the
Executive's accrued benefits under any supplemental retirement plan maintained
by the Company. All accrued benefits under such plans shall be paid as a
lump-sum cash payment, except for amounts, if any, payable to the Executive
under the Company's tax qualified pension plan.

                           (f) Voluntary Termination. In the event of a
termination of employment by the Executive on his own initiative, other than a
termination due to death or Disability or a Constructive Termination, the
Executive shall have the same entitlements as provided in Section 9(c) above for
a termination for Cause. A voluntary termination under this Section 9(f) shall
be effective upon 30 days' prior written notice to the Company and shall not be
deemed a breach of this Agreement.

                           (g) Payment Following a Change in Control. In the
event of a CIC Termination and if the aggregate of all payments of benefits made
or provided to the Executive under Section 9(e) above and under all other plans
and programs of the Company (the "Aggregate Payment") is determined to
constitute a Parachute Payment, as such term is deemed in Section 280G(b)(2) of
the Internal Revenue Code, the Company shall pay to the Executive, prior to the
time an excise tax imposed by Section 4999 of the Internal Revenue Code ("Excise
Tax") is payable with respect to such Aggregate Payment, an additional amount
which, after the imposition of all income and excise taxes thereon, is equal to
the Excise Tax on the Aggregate Payment. The determination of whether the
Aggregate Payment constitutes a Parachute Payment and, if so, the amount to be
paid to the Executive and the time of payment pursuant to this Section 9(g)
shall be made by an independent auditor (the "Auditor") jointly selected by the
Company and the Executive and paid by the Company. The Auditor shall be a
nationally recognized United States public accounting firm which has not, during
the two years preceding the date of its selection, acted in any way on behalf of
the Company or any affiliate thereof. If

                                       7
<PAGE>

the Executive and the Company cannot agree on the firm to serve as the Auditor,
then the Executive and the Company shall each select one accounting firm and
those two firms shall jointly select the accounting firm to serve as the
Auditor.

                           (h) No Mitigation; No Offset. In the event of any
termination of employment under this Section 9, the Executive shall be under no
obligation to seek other employment and there shall be no offset against amounts
due the Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that he may obtain except as
specifically provided in this Section 9.

                           (i) Nature of Payments. Any amounts due under this
Section 9 are in the nature of severance payments considered to be reasonable by
the Company. Failure to qualify for any such payment is not in the nature of a
penalty.

                           (j) Exclusivity of Severance Payments. Upon
termination of the Executive's employment during the Term of Employment, he
shall not be entitled to any payments or benefits from the Company, other than
as provided herein, or any payments by the Company on account of any claim by
him of wrongful termination, including claims under any federal, state or local
human and civil rights or labor laws, other than the payments and benefits
provided hereunder, except for any benefits which may be due the Executive in
normal course under any employee benefit plan of the Company which provides
benefits after termination of employment.

                           (k) Restrictive Covenants. The Executive agrees that
any right to receive any payments and/or benefits hereunder, other than Base
Salary and/or any other compensation already earned by the Executive and
required to be paid by state law other than under this Agreement, will cease and
be immediately forfeited if the Executive breaches the provisions of Section 10
below. The foregoing is in addition to the rights of the Company under Section
10.

                           (l) Release of Claims. As a condition of the
Executive's entitlement to the payment and/or delivery of any of the severance
rights and benefits provided in this Section 9 (other than in the event of the
Executive's death or in the event of a Change in Control), the Executive shall
be required to execute and honor a release of claims in the form reasonably
requested by the Company.

                           (m) Termination at Will. Notwithstanding anything
herein to the contrary, the Executive's employment with the Company is
terminable at will with or without Cause; provided, however, that a termination
of the Executive's employment shall be governed in accordance with the terms
hereof.

                  10. Restrictive Covenants.

                           (a) Confidential Information. During the Term of
Employment and at all times thereafter, Executive agrees that he will not
divulge to anyone or make use of any Confidential Information except in the
performance of his duties as an executive of the Company or when legally
required to do so (in which case the Executive shall give prompt written notice
to the Company in order to allow the Company the opportunity to object or
otherwise resist such disclosure). "Confidential Information" shall mean any
knowledge or information of any type relating to the business of the Company or
any of its subsidiaries or affiliates, as well as any

                                       8
<PAGE>

information obtained from customers, clients or other third parties, including,
without limitation, all types of trade secrets and confidential commercial
information. The Executive agrees that he will return to the Company immediately
upon termination, any and all documents, records or reports (including
electronic information) that contain any Confidential Information. Confidential
Information shall not include information (i) that is or becomes part of the
public domain, other than through the breach of this Agreement by the Executive
or (ii) regarding the Company's business or industry properly acquired by the
Executive in the course of his career as an executive in the Company's industry
and independent of the Executive's employment by the Company. The Executive
acknowledges that the Company has expended, and will continue to expend,
significant amounts of time, effort and money in the procurement of its
Confidential Information, that the Company has taken all reasonable steps in
protecting the secrecy of the Confidential Information, that said Confidential
Information is of critical importance to the Company.

                           (b) Non-Disparagement. The Executive agrees that,
during the term of employment and thereafter (including following the
Executive's termination of employment for any reason), the Executive will not
make statements or representations, or otherwise communicate, directly or
indirectly, in writing, orally, or otherwise, or take any action which may,
directly or indirectly, disparage the Company or any subsidiary or affiliate or
their respective officers, directors, employees, advisors, businesses or
reputations. Notwithstanding the foregoing, nothing in this Agreement shall
preclude either the Executive or the Company from making truthful statements or
disclosures that are required by applicable law, regulation or legal process.

                           (c) Cooperation. The Executive agrees to cooperate
with the Company, during the term of employment and thereafter (including
following the Executive's termination of employment for any reason), by being
reasonably available to testify on behalf of the Company or any subsidiary or
affiliate in any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, and to assist the Company, or any subsidiary
or affiliate, in any such action, suit or proceeding, by providing information
and meeting and consulting with the Board or its representatives or counsel, or
representatives or counsel to the Company, or any subsidiary or affiliate, as
reasonably requested. The Company agrees to reimburse the Executive for all
expenses actually incurred in connection with his provision of testimony or
assistance.

                           (d) Remedies. The Executive agrees that any breach of
the terms of this Section 10 would result in irreparable injury and damage to
the Company for which the Company would have no adequate remedy at law; the
Executive therefore also agrees that in the event of said breach or any
reasonable threat of breach, the Company shall be entitled to an immediate
injunction and restraining order to prevent such breach and/or threatened breach
and/or continued breach by the Executive and/or any and all persons and/or
entities acting for and/or with the Executive. The terms of this paragraph shall
not prevent the Company from pursuing any other available remedies for any
breach or threatened breach hereof, including, but not limited to, remedies
available under this Agreement and the recovery of damages.

                           (e) Continuing Operation. The provisions of this
Section 10 shall survive any termination of this Agreement and the Term of
Employment, and the existence of any claim or cause of action by the Executive
against the Company, whether predicated on this Agreement or

                                       9
<PAGE>

otherwise, shall not constitute a defense to the enforcement by the Company of
the covenants and agreements of this Section. The Executive agrees to cooperate
with the Company, during the term of employment and thereafter (including
following the Executive's termination of employment for any reason), by being
reasonably available to testify on behalf of the Company or any subsidiary or
affiliate in any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, and to assist the Company, or any subsidiary
or affiliate, in any such action, suit or proceeding, by providing information
and meeting and consulting with the Board or its representatives or counsel, or
representatives or counsel to the Company, or any subsidiary or affiliate, as
reasonably requested. The Company agrees to reimburse the Executive for all
expenses actually incurred in connection with his provision of testimony or
assistance.

                  11. Assignability; Binding Nature. This Agreement shall be
binding upon and inure to the benefit of the Parties and their respective
successors, heirs (in the case of the Executive) and assigns. No rights or
obligations of the Company under this Agreement may be assigned or transferred
by the Company except that such rights or obligations may be assigned or
transferred pursuant to a merger or consolidation in which the Company is not
the continuing entity, or the sale or liquidation of all or substantially all of
the assets of the Company, provided that the assignee or transferee is the
successor to all or substantially all of the assets of the Company and such
assignee or transferee assumes the liabilities, obligations and duties of the
Company, as contained in this Agreement, either contractually or as a matter of
law. The Company further agrees that, in the event of a sale or reorganization
transaction as described in the preceding sentence, it shall take whatever
action it legally can in order to cause such assignee or transferee to expressly
assume the liabilities, obligations and duties of the Company hereunder. No
rights or obligations of the Executive under this Agreement may be assigned or
transferred by the Executive other than his rights to compensation and benefits,
which may be transferred only by will or operation of law, except as otherwise
provided herein.

                  12. Entire Agreement. This Agreement contains the entire
understanding and agreement between the Parties concerning the subject matter
hereof and supersedes all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, between the Parties with
respect thereto; provided, however, that this Agreement shall not supersede any
separate written commitments by the Company with respect to indemnification.

                  13. Miscellaneous Provisions.

                           (a) No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by the Executive and an
authorized officer of the Company. No waiver by either Party of any breach by
the other Party of any condition or provision contained in this Agreement to be
performed by such other Party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same or any prior or subsequent time.
Any waiver must be in writing and signed by the Executive or an authorized
officer of the Company, as the case may be.

                           (b) In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for any
reason, in whole or in part, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law.

                                       10
<PAGE>

                           (c) The respective rights and obligations of the
Parties hereunder shall survive any termination of the Executive's employment to
the extent necessary to the intended preservation of such rights and
obligations.

                           (d) The Executive shall be entitled, to the extent
permitted under any applicable law, to select and change a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
the Executive's death by giving the Company written notice thereof. In the event
of the Executive's death or a judicial determination of his incompetence,
reference in this Agreement to the Executive shall be deemed, where appropriate,
to refer to his beneficiary, estate or other legal representative.

                           (e) All amounts required to be paid by the Company
shall be subject to reduction in order to comply with applicable Federal, state
and local tax withholding requirements, except as otherwise provided herein.

                           (f) The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.

                           (g) This Agreement may be executed in two or more
counterparts.

                  14. Governing Law/Jurisdiction. This Agreement shall be
governed by and construed and interpreted in accordance with the laws of
Michigan without reference to principles of conflict of laws. Subject to Section
15, the Company and the Executive hereby consent to the jurisdiction of any or
all of the following courts for purposes of resolving any dispute under this
Agreement: (a) the United States District Court of Detroit, Michigan or (b) the
State of Michigan Courts of Oakland County, Michigan. The Company and the
Executive further agree that any service of process or notice requirements in
any such proceeding shall be satisfied if the rules of such court relating
thereto have been substantially satisfied. The Company and the Executive hereby
waive, to the fullest extent permitted by applicable law, any objection which it
or the Executive may now or hereafter have to such jurisdiction and any defense
of inconvenient forum.

                  15. Resolution of Disputes. Any disputes arising under or in
connection with this Agreement shall be resolved by binding arbitration, to be
held in Detroit, Michigan in accordance with the rules and procedures of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. All costs
and expenses of any arbitration or court proceeding (including fees and
disbursements of counsel) shall be borne by the respective Party incurring such
costs and expenses, but the Company shall reimburse the Executive for such
reasonable costs and expenses in the event he substantially prevails in such
arbitration or court proceeding. Notwithstanding the foregoing, following a
Change of Control, all reasonable costs and expenses (including fees and
disbursements of counsel) incurred by the Executive pursuant to this Section 15
shall be paid on behalf of or reimbursed to the Executive promptly by the
Company; provided, however, that no reimbursement shall be made of such expenses
if and to the extent the arbitrator(s) or the court determine(s) that any of the
Executive's litigation assertions or defenses were in bad faith or frivolous.
Notwithstanding the foregoing, the Company shall be entitled to seek equitable
relief

                                       11
<PAGE>

pursuant to Section 10(d) hereof without otherwise waiving the right to
exclusive arbitration of all other disputes.

                  16. Notices. Any notice given to a Party shall be in writing
and shall be deemed to have been given when delivered personally or sent by
certified or registered mail, postage prepaid, return receipt requested, duly
addressed to the Party concerned at the address indicated below or to such
changed address as such Party may subsequently give such notice of:

                  If to the Company:         Kmart Corporation
                                             3100 West Big Beaver Road
                                             Troy, MI 48084-3163
                                             Attention: General Counsel

                  If to the Executive:       Ronald Hutchison
                                             c/o Kmart Corporation
                                             3100 West Big Beaver Road
                                             Troy, MI 48084-3163

                  17. Approval By Court. The Company shall undertake to file a
motion (the "Motion") seeking, and use its best efforts to obtain, approval of
this Agreement by a United States Bankruptcy Court or by a United States
District Court having jurisdiction over the Company and its bankruptcy case,
promptly, and in no event more than seven business days following the filing of
a case under the provisions of Title 11 of the United States Bankruptcy Code.

                                       12
<PAGE>

                  IN WITNESS WHEREOF, the undersigned have executed this
Agreement on the dates provided below.

                                       KMART CORPORATION

                                       By:
                                          --------------------------------------
                                       Dated: January 21, 2002

                                       EXECUTIVE

                                       -----------------------------------------
                                       Ronald Hutchison
                                       Dated: January 21, 2002

                                       13

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00039-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00039-of-00352.parquet"}]]