Deferred Compensation Plan for Non-Employee Directors - Kmart Corp.

                                KMART CORPORATION

              DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
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SECTION 1.        ELIGIBILITY

      Each member of the Board of Directors (the 'Board') of Kmart Corporation
(the 'Company') who is not an employee of the Company or any of its subsidiaries
(an 'Eligible Director') is eligible to participate in the Kmart Corporation
Deferred Compensation Plan for Non-Employee Directors (the 'Plan').


SECTION 2.        PARTICIPATION

      (a) Prior to the beginning of any calendar year, commencing with the
calendar year 1991, each Eligible Director may elect to participate in the Plan
by directing that all or any part of the compensation otherwise payable in cash
for services as an Eligible Director (including services as non-executive
Chairman or Vice-Chairman of the Board) during such calendar year and subsequent
calendar years shall be credited to a deferred compensation account subject to
the terms of the Plan.

      (b) An election to participate in the Plan shall be in the form of a
document executed by the director and filed with the Secretary of the Company.
An election related to cash compensation otherwise payable currently in any
calendar year shall become irrevocable on the last day prior to the beginning of
such calendar year. An election shall continue until the director ceases to be a
director of the Company or until he or she terminates or modifies such election
by written notice. Any such termination or modification shall become effective
as of the end of the calendar year in which such notice is given with respect to
all cash compensation otherwise payable in subsequent calendar years.

      (c) A director who has filed a termination of election may thereafter
again file an election to participate for any calendar year or years subsequent
to the filing of such election.


SECTION 3.        DEFERRED CASH COMPENSATION ACCOUNTS

      All deferred cash compensation shall be held in the general funds of the
Company and shall be credited to the director's account and shall bear interest
from the date such cash compensation would otherwise be payable. The interest
credited to the account shall be compounded quarterly at the end of each
calendar quarter. For all amounts whenever credited, the rate of interest
credited thereon shall be equal to the average ten-year U.S. Treasury note rate
for the previous calendar quarter plus 5%.








SECTION 4.        DISTRIBUTION

      (a) At the time of election to participate in the Plan, a director shall
also make an election with respect to the distribution (during the director's
lifetime or in the event of the director's death) of amounts deferred under the
Plan plus accumulated interest. Such an election shall be contained in the
document referred to in Section 2(b) hereof, executed by the director and filed
with the Secretary of the Company. Such an election related to cash compensation
otherwise payable currently in any calendar year shall become irrevocable on the
last day prior to the beginning of such calendar year.

      (b) A director may elect to receive amounts credited to his or her account
in one lump sum or in some other number of equal annual installments (not
exceeding ten), with the first installment (or lump sum if the director has so
elected) to be distributed on the tenth day of the calendar year immediately
following the year in which the director ceases to be a director of the Company.

      (c) Notwithstanding an election pursuant to Section 4(b) hereof: (i) if,
as determined by the Board in its sole discretion, the director (during or
following his or her membership on the Board) engaged in any activity or
association in competition with or adverse or detrimental to the interest of the
Company, the entire balance of the director's deferred cash compensation
hereunder, including interest, shall be distributed immediately in a lump sum
payment; (ii) upon the occurrence of a Change in Control (as defined below), the
entire balance of all deferred cash compensation hereunder, including interest,
shall be distributed immediately in a lump sum payment.

      A Change in Control shall have occurred if (i) the 'beneficial ownership'
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934 as amended
(the 'Exchange Act')) of securities representing more than 50% of the combined
voting power of the Company is acquired by any 'person' as defined in Sections
13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company), or (ii) the stockholders of the Company approve a definitive
agreement to merge or consolidate the Company with or into another corporation
or to sell or otherwise dispose of all or substantially all of its assets, or
adopt a plan of liquidation, or (iii) during any period of two 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 two-thirds of the directors then
still in office who were directors at the beginning of such period).

      (d) Installments subsequent to the first installment to the director shall
be distributed on the tenth day of each succeeding calendar year until the
entire amount credited to the director's deferred account shall have been
distributed. Deferred amounts held pending distribution shall continue to be
credited with interest, determined in accordance with Section 3 hereof.

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      (e) In the event the director should die before full distribution of all
amounts credited to the director's account, the balance of the deferred amounts
shall be distributed in a lump sum payment to the beneficiary or beneficiaries
designated in writing by the director, or if no designation has been made, to
the estate of the director.

      (f) The Committee shall have the authority to alter the timing or manner
of payment of deferred cash compensation in the event an Eligible Director
establishes, to the satisfaction of the Committee, severe financial or medical
hardship. In such event, the Committee may, in its discretion:

           (a)    Authorize the cessation of deferrals of cash compensation; 
                  and/or

           (b)    Provide that all, or a portion of such deferred cash
                  compensation payable over a period of time shall immediately
                  be paid in a lump sum; and/or

           (c)    Provide for such other payment schedule as deemed appropriate
                  by the Committee under the circumstances.

      However, any amount paid pursuant to this Section 4(f) shall not exceed
that amount which the Committee determines to be reasonably necessary for the
Eligible Director to meet the financial or medical hardship at the time of such
payment. The severity of the financial or medical hardship shall be judged by
the Committee. Severe financial or medical hardship shall be deemed to exist in
the event of the Eligible Director's long and serious illness, impending
bankruptcy or similar unforeseeable and extraordinary circumstances arising as a
result of events beyond the control of the Eligible Director. The Committee's
decision with respect to the severity of financial or medical hardship and the
manner which the distribution of deferred cash compensation to an Eligible
Director is altered shall be final, conclusive and not subject to appeal.


SECTION 5.        MISCELLANEOUS

      (a) The right of a director to any deferred cash compensation and/or
interest thereon shall be non-assignable and shall not be subject in any manner
to the debts or other obligations of the director or any other person.

      (b) The Company shall not be required to reserve or otherwise set aside
funds to meet any obligations of the Plan.

      (c) The Plan shall remain in effect until the earlier to occur of a Change
in Control or the termination of the Plan by the Board; provided, however, that,
except as provided in Section 4(c)(ii) hereof, distribution may be made pursuant
to a deferral election after such date.

      (d) The Plan may be amended or discontinued by the Board at any time in
its sole judgment. In the event the Plan is terminated, amounts credited to
directors' accounts shall be 

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distributed at such time and in such manner as the Board shall determine, no
later than they would have been made as elected under Section 4 hereof.

      (e) Nothing in the Plan shall be construed as conferring any right upon
any director to continuance as a member of the Board.

      (f) The Plan and all rights hereunder shall be construed in accordance
with and governed by the laws of the State of Michigan.


6.     RABBI TRUST

       (a) Establishment of a Rabbi Trust. As soon as practicable following
December 16, 1997, the Company shall establish an irrevocable Rabbi Trust,
governed by a Rabbi Trust Agreement (which shall be a grantor trust within the
meaning of Code Sections 671-678) for the benefit of Eligible Directors and
beneficiaries of Eligible Directors, as appropriate and applicable. The Rabbi
Trust shall have an independent Trustee (such Trustee to have a fiduciary duty
to carry out the terms and conditions of the Trust) as selected by the Company,
and shall have restrictions as to the Company's ability to amend the Trust or to
cancel benefits provided thereunder.

       Assets contained in the Rabbi Trust shall at all times be specifically
subject to the claims of the Company's general creditors in the event of
insolvency, which term shall be specifically defined within the provisions of
the Rabbi Trust, along with a required procedure for notifying the Trustee of
any such insolvency.

       All benefits hereunder, shall be paid first from the Rabbi Trust, to the
extent assets exist in the Rabbi Trust and then, as necessary, by the Company
from general assets.

       (b) Funding of the Rabbi Trust. At the discretion of the Committee, the
Company may contribute cash and/or cash equivalents to the Rabbi Trust, for the
benefit of Eligible Directors and beneficiaries of Eligible Directors as the
Committee deems appropriate. It is intended that the Rabbi Trust will be fully
funded at all times to cover the accrued obligations of the Company under the
Plan. Upon a Change in Control (as defined in Section 4.c), the Company shall be
required to make an immediate contribution to the Rabbi Trust to cause all such
accrued obligations to be fully or overfunded as of that date.

      The Committee reserves the right to invest the Trust assets in any
investment deemed appropriate by the Committee.




Dated:  December 18, 1990  (Amended as of December 16, 1991, March 28, 1995,
           September 19, 1995, December 16, 1997 and March 16, 1999)

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