Severance Agreement - Kmart Corp. and Janet G. Kelley
February 5, 2003
Ms. Janet G. Kelley
533 Wallace Street
Birmingham, Michigan 48009
Dear Janet:
This letter ("Amended Letter") serves to amend and restate that certain
letter to you dated January 15, 2003 (the "January 15 Letter"), and evidences
the current position of Kmart Corporation (the "Company") with respect to the
termination of your employment, pending any subsequent determination by the
Company of its rights and obligations relating to your termination.
1. Termination. Your employment with the Company terminated effective
January 16, 2003 (the "Termination Date").
2. Compliance with Agreement. The Company expects that you will comply in
all respects with your obligations (other than noncompetition
obligations) under your Special Retention Agreement dated December 7,
2001 (the "2001 Agreement").
3. Return of Company Property. You represent that, except as noted below,
you have returned to the Company all property of the Company or its
subsidiary or affiliates which was in your possession, including, but
not limited to, customers or client lists, documents, contracts,
agreements, plans, photographs, books, notes, memoranda, manuals,
records, electronically stored data, proprietary computer software,
source codes, algorithms and all copies of the foregoing, as well as
any laptop or other computer hardware, automobile or other materials or
equipment supplied by the Company to you. The Company agrees that you
and/or your counsel may retain certain documents, copies of which have
been provided to the Company and/or its counsel, that are necessary for
purposes of your providing testimony in connection with matters
relating to the Company's stewardship investigation and investigation
of its accounting and financial statements.
4. Reservation of Rights. The Company reserves all of its rights relating
to your termination, including, without limitation, the right of the
Company to characterize your termination in a particular manner for
purposes of the 2001 Agreement, the promissory note dated December 7,
2001, relating to a $500,000 loan to you from the Company (the "Loan"),
and any other agreement, plan or arrangement between you and the
Company.
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5. Severance. Provided you shall have fully repaid the principal amount of
the Loan by no later than February 6, 2003, and provided that (i) you
execute the enclosed copy of this letter and the enclosed Release and
return them to the Company by February 6, 2003, (ii) you do not revoke
the Release and (iii) you are and remain in compliance with your
obligations under this letter, the Company will pay to you as severance
a monthly sum, less applicable withholding (including withholding with
respect to forgiveness of accrued interest on the Loan), in an amount
equal to your monthly salary as in effect on the Termination Date and
will pay a monthly COBRA subsidy on your behalf and will provide
outplacement services. Such payments will commence as soon as
practicable following expiration of the revocation period applicable to
the Release (the initial payment will cover the period from January 17,
2003 through the date of payment) and, subject to the provisions
hereof, shall be made for a period of 24 months (except that
outplacement services will be provided for up to one year). These
monthly payments shall be reduced by the amount of compensation you
earn from subsequent employment (including self-employment) and you
shall promptly notify the Company of any such compensation. Further,
the Company reserves the right to terminate these monthly payments at
any time upon ten (10) days' notice to you and to seek repayment by you
of any amounts previously paid by the Company pursuant to the preceding
sentence if, based on the results of its current stewardship
investigation and investigation of its accounting and financial
statements, the Company determines that your employment was terminated
by the Company for Cause (as such term is defined in the 2001
Agreement).
6. Consulting with Counsel. The Company has advised you to consult with an
attorney of your choosing prior to signing this letter. You represent
that you understand and agree that you have the right and have been
given the opportunity to review this letter with an attorney. You
further represent that you understand and agree that the Company is
under no obligation to offer this letter to you and that you have
executed this letter freely and voluntarily.
7. Governing Law. This letter shall be governed by and construed and
enforced in accordance with the laws of the State of Michigan, applied
without reference to principles of conflicts of laws.
KMART CORPORATION
By: ___________________________
Julian Day
President and Chief Executive
Officer
ACCEPTED AND AGREED TO:
___________________________
Janet G. Kelley
Dated: