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Sample Business Contracts

Employment Agreement - Kmart Corp. and Warren Flick

Employment Forms

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  • Executive Employment Agreement. Companies may offer their business executives a contract that is different from the one provided to their regular employees. Executive employment agreements may be more complex because the compensation structure may include a combination of salary and commissions, provide for bonuses based on sales, stock or other financial targets, and include non-compete, confidentiality and severance provisions.
  • Sales Representative Contract. Independent sales representatives offer companies the potential to increase the sale of products or services without the burden of increasing headcount. Both parties should understand how commissions are calculated, when commissions will be paid, as well as how the representative will treat confidential information from the company and whether the representative may also sell a competing line of products or services.
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                                   AGREEMENT


     AGREEMENT, made and entered into the 5th day of December, 1995, by and
between Kmart Corporation, a Michigan corporation (together with its successors
and assigns permitted under this Agreement, the "Company"), and Warren Flick
(the "Executive").

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

     WHEREAS, the Company desires to employ the Executive and to enter into an
agreement concerning such employment (this "Agreement") and the Executive
desires to enter into this Agreement and 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) "Affiliate" of a person or other entity shall mean a person or
other entity that directly or indirectly controls, is controlled by, or is under
common control with the person or other entity specified.

          (b) "Base Salary" shall mean the salary provided for in Section 4
below or any increased salary granted to the Executive pursuant to Section 4.

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

          (d)  "Cause" shall mean:

                  (i) the Executive is convicted of a felony involving moral
turpitude or any other felony if in the case of such other felony the Executive
is unable to show that he (A) acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company and (B)
had no reasonable cause to believe his conduct was unlawful; or

                  (ii) the Executive engages in conduct that constitutes willful
gross neglect or willful gross misconduct in carrying out his duties under this
Agreement, resulting, in either case, in material harm to the Company, unless
the Executive believed in good faith that such act or nonact was in or not
opposed to the best interests of the Company.

          (e) A "Change in Control" shall have the meaning set forth in Section
5(B) of the Company's 1992 Stock Option Plan (the "1992 Plan") as in effect on
the date hereof.

          (f) "Committee" shall mean the Compensation and Incentives Committee
of the Board or any other committee of the Board performing similar functions.

          (g) "Constructive Termination Without Cause" shall mean a termination
of the Executive's employment at his initiative as provided in Section 10(d)
below within six months following the occurrence, without the Executive's prior
written consent, of one or more of the following events (except in consequence
of a prior termination):


<PAGE>

                 (i) a reduction in the Executive's then current Base Salary or
on-plan target bonus opportunity under the Company's Annual Incentive Bonus Plan
or any similar plan (the "Bonus Plan") below the minimum opportunity set forth
herein or the termination or material reduction of any employee benefit or
perquisite enjoyed by him (other than as part of an across-the-board reduction
of such benefit or perquisite applicable to all executive officers of the
Company);

                (ii) removal of the Executive from any of the positions
described in Section 3 below;

               (iii) a material diminution in the Executive's duties or
responsibilities or the assignment to the Executive of duties which are
materially inconsistent with his duties or which materially impair the
Executive's ability to function in his position;

                (iv) the relocation of the Company's principal office, or the
Executive's own office location as assigned to him by the Company, to a location
more than 35 miles from Troy, Michigan; or

                 (v) the failure of the Company to obtain the assumption in
writing of its obligation to perform this Agreement by any successor to all or
substantially all of the assets of the Company within 15 days after a merger,
consolidation, sale or similar transaction.

          (h) "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.

          (i) "Stock" shall mean the Common Stock of the Company.

          (j) "Subsidiary" of the Company shall mean any corporation of which
the Company owns, directly or indirectly, more than 50% of the Voting Stock.

     2.   Employment.

          The Company hereby employs the Executive, and the Executive hereby
accepts such employment, commencing as of the earlier of 6:00 p.m. on December
31, 1995, or, in the event the Executive is released or resigns from his current
position prior to such date, the date which is not more than five business days
following the date of such release (such commencement date being referred to as
the "Effective Date").  The Executive's employment with the Company shall be
subject to termination in accordance with the terms of this Agreement.

     3.   Position, Duties and Responsibilities.

          (a) During his employment with the Company, the Executive shall be
employed and serve as an Executive Vice President of the Company and as
President & General Merchandise Manager, U.S. Kmart Stores (or such other
position or positions as may be agreed upon in writing by the Executive and the
Company) and shall report to the Chief Executive Officer of the Company ("CEO").

          (b) The Executive shall perform such duties and carry out such
responsibilities incident to his position as may be determined from time to time
by the CEO, which shall be consistent with the duties and responsibilities
customarily performed by persons in a similar executive capacity.  The Executive
shall have primary responsibility for all merchandising, marketing and inventory
planning and management (including foreign

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<PAGE>

buying functions), but excluding any such responsibilities relating to groceries
and consumables.  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 not, without the prior written approval of the
CEO, engage in any other business activity which would materially interfere with
the performance of the Executive's duties and responsibilities hereunder or
which is in violation of policies established from time to time by the Company.

          (c) 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 CEO), (ii) engaging in charitable activities and community
affairs, and (iii) managing his personal investments and affairs, provided that
such activities do not materially interfere with the proper performance of his
duties and responsibilities hereunder.

     4.   Base Salary.

          During his employment with the Company, the Executive shall be paid an
annualized Base Salary, payable in accordance with the regular payroll practices
of the Company, of $600,000.  The Base Salary shall be reviewed no less
frequently than annually (commencing in the Spring of 1996) for increase in the
discretion of the Board and/or the Committee.

     5.   Hiring Payment; Annual Incentive Awards.

          Provided the Executive shall have reported for work at the Company's
headquarters and, if requested by the Company, affirmed in writing that he has
ceased employment with his current employer, the Company shall, within five
business days following the Effective Date (but in no event prior to January 2,
1996), make a hiring payment to the Executive in the amount of $1,000,000 (the
"Hiring Payment").  During his employment with the Company, the Executive shall
participate in all annual incentive award programs, including, without
limitation, commencing with the Fiscal Year beginning on or about February 1,
1997, the Bonus Plan.  The Executive shall receive a guaranteed bonus of
$300,000 for the fiscal year ending on or about January 31, 1997.  Thereafter,
the Executive shall have an on-plan target bonus opportunity each year under the
Bonus Plan of an amount equal to fifty percent (50%) of the Executive's Base
Salary, which amount shall be payable if the performance goals established by
the Committee for the relevant year are met.  If such performance goals are
exceeded, the Executive shall receive a greater amount as determined in
accordance with guidelines established by the Committee, but not more than 225%
of the target bonus, unless the Committee shall increase the maximum payable
under such guidelines.  If such performance goals are not met, the Executive
shall receive a lesser amount as determined in accordance with guidelines
established by the Committee, consistent with the guidelines applicable to other
senior executives of the Company.  Payment of annual incentive awards shall be
made at the same time that other senior-level executives receive their incentive
awards.  The Executive shall participate in the Company's Management Stock
Purchase Plan, which requires that a minimum of 20% of an officer's annual bonus
be used to purchase restricted stock of the Company under such plan.  The
Executive also acknowledges that payment of any cash compensation in excess of
$1,000,000 per year which is not deductible by the Company by reason of Section
162(m) of the Internal Revenue Code of 1986, as amended, is subject to mandatory
deferral under the Company's Executive Deferred Compensation Plan.  The Company
acknowledges that the Hiring Payment shall not constitute an annual bonus for
purposes of the Management Stock Purchase Plan.

                                       3

<PAGE>

     6.   Long-Term Incentive Programs.

          (a) General. During his employment with the Company, the Executive
shall be eligible to participate in the long-term incentive programs of the
Company, any awards under such programs to be in the sole discretion of the
Committee. In any event, he shall be entitled to the awards described in Section
6(b) below.

          (b) Stock Option Awards. The Company shall grant to the Executive non-
qualified stock options under the 1992 Plan, substantially in the form attached
hereto as Exhibit A, as follows: an option to purchase 400,000 shares of Stock
as of the Effective Date and an option to purchase a minimum of 250,000 shares
of Stock no later than May 1, 1996 (the "Options"). Subject to the terms of this
Agreement and the provisions of the 1992 Plan, the Options shall (a) have a per
share option price equal to the fair market value of the Stock as of the date of
grant, (b) have a term of ten years and two days and (c) unless previously
terminated, become exercisable on the third anniversary of the date of grant.
Notwithstanding anything to the contrary, (i) if the Executive's employment
terminates pursuant to Section 10(c) or 10(f) below prior to the third
anniversary of the date of grant, or pursuant to Section 10(c) after the third
anniversary of the date of grant, the Options shall terminate, (ii) if the
Executive's employment terminates pursuant to Section 10(d) below, the Options,
to the extent not otherwise exercisable, shall become fully exercisable and
remain exercisable for the lesser of three years or the remainder of their
respective terms; provided, however, that the ability of the Options to be
exercised for up to three years following such termination shall be subject to
the approval by Company shareholders at the 1996 annual meeting of an amendment
to the 1992 Plan to such effect (which approval shall be sought by the Company
only if necessary for grants of options under the 1992 Plan to comply with the
requirements of Rule 16b-3 under the Securities Exchange Act of 1934, as
amended, and in the absence of the need to obtain such approval, this proviso
shall be of no force and effect), and (iii) if the Executive violates the
provisions of Section 11 hereof, the Options shall terminate.

     7.   Employee Benefit Programs.

          During his Employment with the Company, the Executive shall be
entitled to participate in all employee pension and welfare benefit plans and
programs made available to the Company's senior-level executives 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, 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. The Executive shall be entitled to post-retirement welfare
benefits, if any, as are made available by the Company to its senior-level
executives, provided that for this purpose the Executive's period of employment
shall, in accordance with the last sentence of this Section 7, be deemed to be
the period necessary to obtain the maximum level of such benefits. The Executive
shall, in all events, be entitled during his employment with the Company to term
life insurance which, together with other life insurance under the Company's
term life insurance program, shall provide face amount coverage of no less than
two times Base Salary, provided that the amount of such coverage in excess of
$1,000,000 may be subject to a physical examination. To the extent there is a
period of employment required as a condition for full benefit coverage under any
employee welfare benefit program, the Executive shall be deemed to have met such
requirement.

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<PAGE>

     8.   Supplemental Pension.

          The Executive shall be entitled to participate in any nonqualified
supplemental retirement plan the Company may subsequently adopt. For the
purposes of determining his eligibility to participate in such subsequently
adopted plan, the Executive shall be deemed to have been employed for five years
prior to the Effective Date, to have received the Base Salary for each such year
and to have participated in any Company plan, participation in which shall be a
condition to eligibility under such subsequently adopted nonqualified
supplemental retirement plan. If the Executive is eligible to participate in
such subsequently adopted plan, he shall be deemed credited with five years of
service under such plan as of the commencement of his employment in addition to
credited service for his actual employment with the Company.

     9.   Reimbursement of Business and Other Expenses; Perquisites; Vacations;
Loans.

          (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 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 expenses incurred in connection with the preparation of the
Executive's employment arrangements with the Company.

          (b) During his employment with the Company, the Executive shall be
entitled to participate in any of the Company's executive fringe benefits,
including the Company's relocation policy, in accordance with the terms and
conditions of such arrangements as are in effect from time to time for the
Company's senior-level executives.

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

          (d) Provided the Executive shall have reported to work at the
Company's headquarters and, if requested by the Company, affirmed in writing
that he has ceased employment with his current employer, the Company shall,
within five business days following the Effective Date, make an interest-free
loan to the Executive in the aggregate principal amount of $1,000,000. Such loan
shall have a maturity date of January 31, 2003, provided, that so long as the
Executive remains employed by the Company, as of the end of each fiscal year
(commencing with the fiscal year ending on or about January 31, 1997), the
Company shall forgive the following amount:

i)  On or about January 31, 1997:       the excess of (a) $1,000,000 over (b)
                                        the sum of (i) the Executive's Base
                                        Salary for the fiscal year ended on or
                                        about such date, plus (ii) the bonus
                                        payable under Section 5 hereof in
                                        respect of such fiscal year.


(ii)  On or about each subsequent       the excess of (a) $1,000,000 over (b)
      January 31 (until the principal   the Executive's Base Salary for the
      amount of the loan has been       fiscal year ended on or about such
      reduced to zero):                 January 31.


In the event the Executive's employment terminates pursuant to Section 10(c) or
10(f) hereof, the then outstanding principal amount of the loan shall

                                       5
<PAGE>

become due and payable immediately.  If the Executive's employment terminates
due to death or Disability or pursuant to Section 10(d) or 10(e) hereof, the
remaining outstanding principal amount of the loan shall be forgiven.

     10.  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:

                 (i)  Base Salary through the date of death;

                (ii)  a pro rata annual incentive award for the year in which
the Executive's death occurs based on the on-plan target bonus for such year,
payable in a single installment promptly after his death;

               (iii)  any restricted stock award outstanding at the time of his
death, subject to any forfeiture provisions set forth in the relevant restricted
stock agreement;

                (iv)  the balance of any incentive awards earned (but not yet
paid);

                 (v)  the right to exercise any stock option to the extent and
for the period set forth herein or in the relevant option agreement;

                (vi)  any amounts earned, accrued or owing to the Executive but
not yet paid under Section 7 or 9 above; and

               (vii)  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)  the benefits due him under the then current disability
program of the Company;

                (ii)  annual incentive award for the year in which termination
due to Disability occurs based on the on-plan target bonus for such year,
payable in a single installment promptly following termination due to
Disability;

               (iii)  any restricted stock award outstanding at the time of his
termination due to Disability, subject to any forfeiture provisions set forth in
the relevant restricted stock agreement;

                (iv)  the balance of any incentive awards earned (but not yet
paid);

                 (v)  the right to exercise any stock option to the extent and
for the period set forth herein or in the relevant option agreement;

                (vi)  any amounts earned, accrued or owing to the Executive but
not yet paid under Section 7 or 9 above;

               (vii)  continued participation to the extent provided in medical,
dental, hospitalization and life insurance coverage and in all other employee
welfare plans and programs in which he was participating on

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<PAGE>

the date of termination of his employment due to Disability until he attains age
65; and

              (viii)  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 23 below.

          (c) Termination by the Company for Cause.

                 (i) A termination for Cause shall not take effect unless the
provisions of this paragraph (i) are complied with.  The Executive shall be
given written notice by the CEO of the intention to terminate him for Cause,
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 termination
for Cause is based and (B) to be given within six months of the CEO learning of
such act or acts or failure or failures to act.  The Executive shall have 10
days after the date that such written notice has been given to the Executive in
which to cure such conduct, to the extent such cure is possible.  If he fails to
cure such conduct, the Executive shall then be entitled to written notice by the
CEO confirming that, in his judgment, grounds for Cause on the basis of the
original notice exist, at which time he shall thereupon be terminated for Cause.

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

                     (A) Base Salary through the date of the termination of his
     employment for cause;

                     (B) any incentive awards earned (but not yet paid);

                     (C) the right to exercise any stock option to the extent
     and for the period set forth herein or in the relevant option agreement;

                     (D) any amounts earned, accrued or owing to the Executive
     but not yet paid under Section 7 or 9 above; and

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

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

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

                (ii) Base Salary, at the annualized rate 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 without Cause, then the
Base Salary in effect immediately prior to such reduction), for a period of
twenty-four (24) months; provided that the Executive and the Company may agree
that the Company shall pay him the present value of such salary continuation
payments in a lump sum (using as the discount rate the Applicable Federal Rate
for short-term Treasury obligations as published by

                                       7
<PAGE>

the Internal Revenue Service for the month in which such termination occurs);

          (iii) pro rata annual incentive award for the year in which
termination occurs based on the Executive's on-plan target bonus for such year,
payable in a single installment promptly following termination;

          (iv) an amount equal to one-twelfth (1/12) of the Executive's on-plan
target bonus for the year in which termination occurs, payable monthly for a
period of twenty-four (24) months; provided that the Executive and the Company
may agree that the Company shall pay him the present value of the aggregate
payments in a lump sum (using the discount referred to in Section 10(d)(ii)
above);

          (v) any restricted stock award outstanding at the time of such
termination of employment, subject to any forfeiture provisions set forth in the
relevant restricted stock agreement;

          (vi) the balance of any incentive awards earned (but not yet paid);

          (vii) the right to be issued the Options under Section 6(b) and the
right to exercise any stock option to the extent and for the period set forth
herein or in the relevant option agreement;

          (viii) any amounts earned, accrued or owing to the Executive but not
yet paid under Section 7 or 9 above;

          (ix) 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 until the end of the period during which he is receiving salary
continuation payments (or in respect of which a lump-sum severance payment is
made); provided that the Company's obligations under this clause (ix) shall be
reduced to the extent that the Executive receives similar coverage and benefits
under the plans and programs of a subsequent employer; and 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 (ix) of this Section
10(d), 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 (ix) of this Section 10(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

                 (x) 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 Without Cause,
the Executive shall be entitled to the payments and benefits provided in Section
10(d) above, provided that the salary and bonus continuation payments under
Section 10(d)(ii) and 10(d)(iv) shall be paid in a lump sum without any
discount. Also, immediately following a Change in Control, all accrued or earned
amounts that are not otherwise vested, as well as all options, restricted stock
and other equity-based awards in which he is not yet vested, shall become fully
vested.

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<PAGE>

          (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 Without Cause, the
Executive shall have the same entitlements as provided in Section 10(c)(ii)
above for a termination for Cause.  A voluntary termination under this Section
10(f) shall be effective upon 30 days prior written notice to the Company and
shall not be deemed a breach of this Agreement.

          (g) No Mitigation; No Offset.  In the event of any termination of
employment under this Section 10, 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 (i) any remuneration attributable
to any subsequent employment that he may obtain, except as specifically provided
in this Section 10 or (ii) any claims the Company may have against the
Executive; provided, however, that, the Executive acknowledges that, in
connection with a termination of employment pursuant to Section 10(c) or 10(f)
hereof, the Company may deduct from any amounts owed to the Executive all or any
portion of the then principal amount of the loan referred to in Section 9(d)
hereof which the Executive is then obligated to repay.

          (h) Nature of Payments.  Any amounts due under this Section 10 are in
the nature of severance payments considered to be reasonable by the Company and
are not in the nature of a penalty.

          (i) Assignment.  The severance payments hereunder may not be
transferred, assigned or encumbered in any manner, either voluntarily or
involuntarily.

          (j) Exclusivity of Severance Payments.  Upon termination of the
Executive's employment, he shall not be entitled to any severance payments or
severance benefits from the Company 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) Non-competition.  The Executive agrees that any right to receive
severance payments hereunder will cease if the Executive breaches the provisions
of Section 11 below.

          (l) 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.

     11.  Non-Compete.

          (a) 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, during his employment with the Company and
for a period equal to the period during which he is receiving salary
continuation payments (or in respect of which a lump-sum salary continuation
payment is made), directly or indirectly own, manage, operate, join, control, be
employed by, or participate in the ownership, management, operation or control
of or be connected in any manner, including but not limited to holding the
positions of officer, director, shareholder, consultant, independent contractor,
employee, partner, or investor, with any


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<PAGE>

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
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 any person, corporation, partnership or other entity
which owns and operates retail stores selling general merchandise and/or food if
at least 10 of such stores have an area of 50,000 or more square feet and at
least 10 of such stores with 50,000 or more square feet are within 25 miles of a
Kmart retail store.

          (b) The Executive agrees that any breach of the terms of this Section
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 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.

          (c) The provisions of this Section shall survive any termination of
this Agreement, and 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.

     12.  Indemnification.

          (a) The Company agrees that if the Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), 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

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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 11(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.

     13.  Effect of Agreement on Other Benefits.

          Except as specifically provided in this Agreement, the existence of
this Agreement shall not prohibit or restrict the Executive's entitlement to
full participation in the employee benefit and other plans or programs in which
senior executives of the Company are eligible to participate.

     14.  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 of
assets or liquidation 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 provided in Section 20 below.

     15.  Representation.

          The Company represents and warrants that it is fully authorized and
empowered by action of the Board to enter into this Agreement and that the
performance of its obligations under this Agreement will not violate any
agreement between it and any other person, firm or organization.

     16.  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

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and undertakings, whether written or oral, between the Parties with respect
thereto.

     17.  Amendment or Waiver.

          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.

     18.  Severability.

          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.

     19.  Survivorship.

          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.

     20.  Beneficiaries/References.

          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.

     21.  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.

     22.  Resolution of Disputes.

          Any disputes arising under or in connection with this Agreement shall,
at the election of the Executive or the Company, 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. One-half of all costs incurred by the Executive in connection with such
arbitration or litigation, including, without limitation, reasonable attorneys'
fees, shall be borne by the Company.

     23.  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

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<PAGE>

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:   Warren Flick
                       c/o Kmart Corporation
                       3100 West Big Beaver Road
                       Troy, MI  48084-3163

     24.  Withholding.

          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.

     25.  Headings.

          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.

     26.  Counterparts.

          This Agreement may be executed in two or more counterparts.

          IN WITNESS WHEREOF, the undersigned have executed this Agreement on
the date first written above.


                             Kmart Corporation

                             By: /s/ Floyd Hall
                                 -----------------------------

                                 /s/ Warren Flick
                                 -----------------------------


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