Term Sheet
                              Amended and Restated Employment Agreement
                                                 For
                                             Julian Day



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Effective Date; Term          Effective Date:  January 17, 2003.

                              Term of Employment:  From Effective Date until January 31, 2006.

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Titles; Reporting             Titles:  Chief Executive Officer and President.  President title to be given
                              to a suitable hire if found.

                              Reporting:  Reports directly to the Board; all other executive officers
                              report to Day.

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Base Salary                   $1 million.

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Cash Incentives               Annual Incentive:  For 2003 fiscal year, annual bonus at discretion of
                              post-Emergence Compensation Committee.  For subsequent fiscal years, annual
                              bonus opportunity expressed as a percentage of Base Salary, based on
                              achievement against performance criteria included in business plan approved
                              in connection with plan of reorganization, as follows:

                                  Performance as % of Target             Bonus as % of Salary
                                  --------------------------             --------------------
                                            Below  75%                                  0
                                                   75%                                 50%
                                                  100%                                100%
                                                  200%                                200%
                                                  300% or more                        400%

                                  (straight-line interpolation for incremental performance).  For 2004
                                  fiscal year, target is $400 million EBITDA.

                              In addition, eligible for participation in any other long-term cash-based
                              incentive programs that may be established by the Company for its senior
                              executives.

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Equity Incentives             Initial equity grant of 10-year option on 1.5% of fully diluted equity at
                              Emergence.  Option price for 2/3 of grant based on $1 billion valuation;
                              option price for remaining 1/3 of grant based on $2 billion valuation;
                              customary equitable adjustment provisions, including stock splits.  Option to
                              vest ratably over 4 years.  In case of Day's death or termination entitling
                              Day to severance, portion of option that would have vested within next 24
                              months will immediately vest; vested option remains exercisable for 2 years;
                              and Company has right to repurchase stock at time of exercise at market
                              price.  Accelerated vesting on change in control, to be defined in equity
                              plan.

                              Eligible for participation in any equity-based incentive programs that may be
                              established by the Company for its senior executives.

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Emergence Payment             $1 million at Emergence.

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Perquisites                   Use of Company aircraft for business purposes and, if necessary for security,
                              personal purposes.

                              No tax gross-ups on this benefit; personal use of aircraft to be reimbursed
                              by Day based on applicable tax rates.

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Severance                     Severance payable if Day dies, is terminated by the Company without cause or
                              because of a constructive termination (customary terms) or if agreement not
                              renewed, subject in each case to execution of a mutual release.  Severance to
                              consist of:

                                      Lump sum cash severance equal to 3 times base salary if termination
                                      is prior to 2/1/04; otherwise, 2 times base salary;

                                      Prorated annual bonus for the year in which termination occurs, based
                                      on actual performance for the entire year;

                                      Balance of any incentives earned but not paid;

                                      Additional vesting of initial option grant (see above, "Equity
                                      Incentives");

                                      Continued participation in welfare benefit plans for 3 years if
                                      termination is prior to 2/1/04; otherwise, for 2 years; and

                                      If termination is pre-Emergence, entitled to Emergence Payment at
                                      Emergence.

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Restrictive Covenants         Day:  2-year post-termination non-competition and non-solicitation covenants;
                              perpetual confidentiality and cooperation covenants.

                              Day and Company:  perpetual non-disparagement covenant.

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Administrative Liability Cap  Cap on claims by Day, in the event the Company does not reorganize as a
                              stand-alone business enterprise, equivalent to the claims that would have
                              been allowed under his existing contract.

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Other                         Indemnification; 280G Gross-up; Day pays his own legal fees.

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                                                          JD Term Sheet

                                                     KMART CORPORATION


                                                     /s/ Robert Kennedy
                                                     ---------------------------
                                                     By:  Robert Kennedy
                                                     Chairman, Compensation and
                                                     Incentives Committee of the
                                                     Board of Directors

ACCEPTED AND AGREED:                                 JULIAN C. DAY


                                                     Julian C. Day
                                                     ---------------------------