EXHIBIT 10.1
EXECUTION COPY
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT by and among Sears, Roebuck and Co., a
New York corporation ("Sears"), Kmart Holding Corporation, a Delaware
corporation ("Kmart") and Alan J. Lacy (the "Executive") is dated as of the 16th
day of November, 2004 (the "Agreement").
Sears and Kmart have determined that it is in the best interests
of Sears and Kmart and their respective shareholders to assure that Sears will
have the continued dedication of the Executive pending the Sears Merger and
the Kmart Merger (each pursuant to and as defined in the Agreement and Plan of
Merger dated as of November 16, 2004 (the "Merger Agreement") by and between
Kmart and Sears (the "Merger Agreement")) and that Sears, Kmart and Sears
Holdings Corporation (the "Company") will have the dedication of the Executive
following consummation of the Sears Merger and the Kmart Merger. Therefore, in
order to accomplish these objectives, the Executive, Sears and Kmart desire to
enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean the date on
which the "Effective Time" (as defined in the Merger Agreement) of the Merger
occurs. In the event that the Effective Time shall not occur, this Agreement
shall be null and void ab initio and of no further force and effect.
2. Employment Period. The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to serve the Company, subject to the
terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the fifth anniversary thereof (the "Employment
Period").
3. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, the Executive shall serve as the Vice Chairman and Chief
Executive Officer of the Company and a member of the Office of the Chairman with
such duties and responsibilities as are customarily assigned to such positions.
It is understood that the President of the Company shall report directly to the
Office of the Chairman. The Executive shall report directly and exclusively to
the Board of Directors of the Company (the "Board"). The Executive shall be
appointed to the Board and shall serve on the Board during the Employment
Period, subject to election by the shareholders of the Company, without
additional consideration.
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote substantially all of his business attention and time to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) subject to the approval of the Board,
serve on corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such activities do
not significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Executive prior to the Effective Time
and set forth on Schedule A hereto, the continued conduct of such activities (or
the conduct of activities similar in nature and scope thereto) subsequent to the
Effective Time shall not thereafter be deemed to interfere with the performance
of the Executive's responsibilities to the Company.
(b) Compensation (i) Base Salary. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary") at a
rate of not less than $1,500,000 payable in accordance with the Company's normal
payroll policies. The Executive's Annual Base Salary shall be reviewed for
increase at least annually by the Board pursuant to its normal performance
review policies for senior executives. Annual Base Salary shall not be reduced
after any increase and the term Annual Base Salary as utilized in this Agreement
shall refer to Annual Base Salary as so increased.
(ii) Annual Bonus. With respect to each fiscal year ending
during the Employment Period, the Executive shall receive an annual bonus
("Annual Bonus") with a target of 150% of the Executive's Annual Base Salary
(the "Reference Bonus"). The actual Annual Bonus, which could be higher or lower
than the Reference Bonus, shall be based on the attainment of performance
objectives as determined by the Compensation Committee of the Board (the
"Committee").
(iii) Equity-Based Grants. On the Effective Date, the
Executive will receive a grant of 75,000 restricted shares of the Company (the
"Restricted Shares"). The Restricted Shares will vest on June 30, 2006, subject
to the Executive's continued employment with the Company on the applicable
vesting date and Section 5 of this Agreement. In addition, on the Effective
Date, the Executive will receive a grant of options to purchase 200,000 shares
of the Company's common stock (the "Stock Options") with a per share exercise
price equal to the closing price of a share of the Company's common stock on the
New York Stock Exchange or the NASDAQ (as to be agreed by the parties) on the
date of grant. The Stock Options will vest with respect to 1/4 of the shares
subject to the Stock Option on each of the first four (4) anniversaries of the
Effective Date, subject to the Executive's continued employment with the Company
on each applicable vesting date and Section 5 of this Agreement. In the event of
any stock split, reverse stock split, stock dividend, merger, consolidation,
recapitalization or similar event affecting the capital structure of the Company
occurring prior to the Effective Time, the number of shares subject to the
Restricted Shares and Stock Options shall be equitably and proportionately
adjusted. Effective as of the Effective Time, the Executive and the Company
shall enter into a Restricted Share agreement and a Stock Option agreement
evidencing the grant of the Restricted Shares and the Stock Options in the forms
attached hereto as Exhibit A and Exhibit B, respectively.
(iv) Other Employee Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits under savings
and retirement plans that are tax-qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the
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"Code"), in plans that are supplemental to any such tax-qualified plans, and
welfare benefit plans, practices, policies and programs provided by the Company
(including, without limitation, medical, prescription, dental, vision,
disability, salary continuance, group life and supplemental group life,
accidental death, travel accident insurance, sick leave and vacation plans,
practices, policies and programs), but not any severance plan, practice, policy
or program, on a basis that is no less favorable than those generally applicable
or made available to other senior executives of the Company. The Executive shall
be eligible for participation in fringe benefits and perquisite plans,
practices, policies and programs (including, without limitation, expense
reimbursement plans, practices, policies and programs) on a basis that is no
less favorable than those generally applicable or made available to other senior
executives of the Company.
4. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may provide the Executive
with written notice in accordance with Section 10(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive days as a result of incapacity due to mental or physical illness
which is determined to be total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive or the Executive's legal
representative.
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period either with or without Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the Executive is convicted of, or pleads guilty or nolo
contendere to a charge of commission of, a felony; or
(ii) the Executive has engaged in willful gross neglect or
willful gross misconduct in carrying out his duties, which results in material
economic harm to the Company or in reputational harm causing quantifiable
material injury to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Board or the Chairman of
the Company or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The cessation of employment
of the Executive shall not be deemed to be for Cause unless and until there
shall have been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of not less than two-thirds of the entire membership of
the Board at a meeting of
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the Board called and held for such purpose (after reasonable notice is provided
to the Executive and the Executive is given an opportunity, together with
counsel, to be heard before the Board), finding that, in the good faith opinion
of the Board, the Executive is guilty of the conduct described in clause (ii)
above, and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by
the Executive with or without Good Reason. For purposes of this Agreement, "Good
Reason" shall mean in the absence of a written consent of the Executive:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a) of this Agreement, or any other action by the
Company which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial or
inadvertent action not taken in bad faith and which is remedied by the Company
within 30 days after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 3(b) of this Agreement, other than an isolated,
insubstantial or inadvertent failure not occurring in bad faith and which is
remedied by the Company within 30 days after receipt of notice thereof given by
the Executive;
(iii) any requirement by the Company that the Executive's
services be rendered primarily at a location or locations other than Hoffman
Estates, Illinois;
(iv) any failure by the Company, Sears or Kmart to comply
with Section 9(c) of this Agreement;
(v) any failure to elect or reelect the Executive to the
Board.
For purposes of this provision, "Good Reason" shall cease to exist for an event
on the ninetieth day after the Executive first has knowledge of such event,
unless the Executive has given the Company written notice thereof prior to such
date. Anything in this Agreement to the contrary notwithstanding, a termination
by the Executive for any reason pursuant to a Notice of Termination given during
the 30-day period immediately following June 30, 2006 shall be deemed to be a
termination for Good Reason for all purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 10(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than 30
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance
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which contributes to a showing of Good Reason or Cause shall not waive any right
of the Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or circumstance
in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive with or without Good Reason, the date of receipt of the Notice of
Termination or any later date specified therein within 30 days of such notice,
as the case may be, (ii) if the Executive's employment is terminated by the
Company other than for Cause or Disability, the Date of Termination shall be the
date on which the Company notifies the Executive of such termination and (iii)
if the Executive's employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be.
(f) Resignation. Upon termination of the Executive's employment
for any reason, the Executive agrees to resign, as of the Date of Termination,
to the extent applicable, from any positions that the Executive holds with the
Company and its affiliated companies, the Board (and any committees thereof) and
the Board of Directors (and any committees thereof) of any of the affiliated
companies.
5. Obligations of the Company upon Termination. (a) Good Reason;
Other Than for Cause, Death or Disability. If, during the Employment Period, the
Company shall terminate the Executive's employment other than for Cause, death
or Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination (except that the amount
described in clause B below shall be paid when annual bonuses are paid to senior
executives generally) the aggregate of the following amounts:
A. the sum of (1) the Executive's accrued Annual Base Salary
and any accrued vacation pay through the Date of Termination, (2)
the Executive's business expenses that have not been reimbursed
by the Company as of the Date of Termination that were incurred
by the Executive prior to the Date of Termination in accordance
with the applicable Company policy, and (3) the Executive's
Annual Bonus earned for the fiscal year immediately preceding the
fiscal year in which the Date of Termination occurs if such bonus
has been determined but not paid as of the Date of Termination
(the sum of the amounts described in clauses (1) through (3),
shall be hereinafter referred to as the "Accrued Obligations");
and
B. the product of (1) the Annual Bonus, determined as if the
Executive had remained employed through the end of the applicable
fiscal year of the Company, and (2) a fraction, the numerator of
which is the number of days in the fiscal year in which the Date
of Termination occurs through the Date of Termination, and the
denominator of which is 365 (the "Pro Rata Bonus"); and
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C. the amount equal to the product of (1) two and (2) the
sum of (x) the Executive's Annual Base Salary and (y) the
Reference Bonus; and
(ii) the Executive shall receive two additional years of age
and service credit under all welfare benefit plans, programs, agreements and
arrangements of the Company; and
(iii) any equity-based awards granted to the Executive,
including the Restricted Shares and the Stock Options shall vest and become free
of restrictions immediately, any stock options granted to the Executive,
including the Stock Options, shall be exercisable for a period of three years
after his termination of employment, without regard to any provisions relating
to earlier termination of the stock options based on termination of employment
(the "Equity Benefits"); and
(iv) for the two-year period following the Date of
Termination, the Company shall continue to provide medical and dental benefits
to the Executive and his eligible dependents as if the Executive remained an
active employee of the Company, and the Executive and his eligible dependents
shall be eligible to participate in the Company's post-retirement welfare
benefit programs in effect for senior executives of the Company (collectively
"Welfare Benefits"). The applicable period of health benefit continuation under
the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") shall begin
on the Date of Termination; and
(v) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice or contract or agreement of
the Company and its affiliated companies through the Date of Termination (such
other amounts and benefits shall be hereinafter referred to as the "Other
Benefits"). As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.
In the event of the Executive's termination during the Employment Period by the
Company other than for Cause or Disability or by the Executive for Good Reason,
each of the Executive and the Company agree to execute a mutual general release
in favor of the other party, substantially in the form attached hereto as
Exhibit C. The payments and provision of benefits to the Executive required by
Section 5(a) (other than the Accrued Obligations and Other Benefits) shall be
conditioned upon the Executive's delivery (and non-revocation prior to the
expiration of the revocation period contained in the release) of such release in
favor of the Company, subject to the Company's delivery to the Executive of such
release in favor of the Executive.
(b) Death. If the Executive's employment is terminated by reason
of the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for (i) payment of Accrued Obligations, (ii)
the timely payment or provision of Other Benefits, (iii) payment of the Pro Rata
Bonus, (iv) the Welfare Benefits and (v) the Equity Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination and
the Pro Rata Bonus shall be paid to the
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Executive's estate or beneficiary, as applicable, on the date specified in
Section 5(a)(i). With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 5(b) shall include death benefits for which
the Company pays as in effect on the date of the Executive's death and the
continued provision of the Welfare Benefits. The applicable period of health
benefit continuation under COBRA shall begin on the Date of Termination.
(c) Disability. If the Executive's employment is terminated by
the Company by reason of the Executive's Disability during the Employment
Period, this Agreement shall terminate without further obligations to the
Executive, other than for (i) payment of Accrued Obligations, (ii) the timely
payment or provision of Other Benefits, (iii) payment of the Pro Rata Bonus,
(iv) the Welfare Benefits and (v) the Equity Benefits. Accrued Obligations shall
be paid to the Executive's estate or beneficiary, as applicable, in a lump sum
in cash within 30 days of the Date of Termination and the Pro Rata Bonus shall
be paid to the Executive's estate or beneficiary, as applicable, on the date
specified in Section 5(a)(i). With respect to the provision of Other Benefits,
the term Other Benefits as utilized in this Section 5(c) shall include, and the
Executive shall be entitled after the Disability Effective Date to receive,
disability and the continued provision of Welfare Benefits. The applicable
period of health benefit continuation under COBRA shall begin on the Date of
Termination.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated by the Company for Cause or the Executive
terminates his employment without Good Reason during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (i) the Accrued Obligations through
the Date of Termination and (ii) Other Benefits, in each case to the extent
theretofore unpaid. Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination.
6. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest by the Company, any of its affiliates or their respective
predecessors, successors or assigns, the Executive, his estate, beneficiaries or
their respective successors and assigns of the validity or enforceability of, or
liability under, any provision of this Agreement (including as a result of any
contest by the Executive about the amount of any payment pursuant to this
Agreement); provided, that the Executive prevails on at least one material
claim.
7. Certain Additional Payments by the Company. (a) Anything in
this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Company or any of its
affiliates to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this
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Section 7) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) Subject to the provisions of Section 7(c), all determinations
required to be made under this Section 7, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Deloitte &
Touche LLP or such other nationally recognized certified public accounting firm
reasonably acceptable to the Executive as may be designated by the Company (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 7, shall be paid by the Company to the Executive or directly to the
Internal Revenue Service, in the sole discretion of the Company, within five
days of the later of (i) the due date for the payment of any Excise Tax, and
(ii) the receipt of the Accounting Firm's determination. Any determination by
the Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 7(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
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(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 7(c), the Company shall control all proceedings taken in connection
with such contest, and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either pay the
tax claimed to the appropriate taxing authority on behalf of the Executive and
direct the Executive to sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine; provided, however,
that, if the Company pays such claim and directs the Executive to sue for a
refund, the Company shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such payment or with
respect to any imputed income in connection with such payment; and provided,
further, that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which the Gross-Up Payment would be payable hereunder, and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of a payment by the
Company of an amount on the Executive's behalf pursuant to Section 7(c), the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the requirements of
Section 7(c)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after payment by the Company of an amount on the Executive's behalf pursuant to
Section 7(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then the amount of such payment
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
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8. Confidential Information; Non-Solicit of Employees;
Non-Compete. (a) The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company or as may otherwise
be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it or as may be required by applicable law, court order, a
regulatory body or arbitrator or other mediator.
(b) In consideration of the grant of the Stock Options and the
Company's obligations under Section 5 hereof:
(i) During the one-year period following the Executive's
termination of employment during the Employment Period for any reason (the
"Restricted Period"), the Executive will not, directly or indirectly, on behalf
of the Executive or any other person, become associated with, whether as a
principal, partner, employee, consultant or shareholder (other than as a holder
of 5% or less of the outstanding voting shares of any publicly traded company),
a Competitor. For purposes of this Section 8(b) a "Competitor" shall mean any
entity that is actively engaged in any retail business with more than $1 billion
in annual revenue from such retail business; provided, however, that if the
Executive terminates employment for any reason pursuant to a Notice of
Termination given during the 30-day period immediately following June 30, 2006,
a "Competitor" shall mean only Wal-Mart Stores, Inc., The Home Depot, Inc.,
Target Corporation, J. C. Penney Company, Inc., Lowe's Companies, Inc., Best Buy
Co., Inc., Circuit City Stores, Inc., or Kohl's Corporation, or any successor
thereto.
(ii) During the Restricted Period, the Executive shall not,
directly or indirectly, solicit or encourage any person to leave his or her
employment with the Company or assist in any way with the hiring of any Sears
employee by any other business.
(c) The Executive acknowledges that the Company would be
irreparably injured by a violation of this Section 8 and the Executive or the
Company, as applicable, agrees that the Company or the Executive, as applicable,
in addition to any other remedies available to it for such breach or threatened
breach, shall be entitled, without posting a bond, to a preliminary injunction,
temporary restraining order, or other equivalent relief, restraining the
Executive or the Company (including its executive officers and directors), as
applicable, from any actual or threatened breach of this Section 8.
9. Successors. (a) This Agreement is personal to the Executive
and without the prior written consent of the Company shall not be assignable by
the Executive. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives, heirs or legatees.
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(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) Kmart and Sears will assign and cause the Company to assume
this Agreement as soon as practicable following the formation of the Company and
in no event later than the Effective Time. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
10. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. If, under any such law, any portion
of this Agreement is at any time deemed to be in conflict with any applicable
statute, rule, regulation or ordinance, such portion shall be deemed to be
modified or altered to conform thereto. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. This Agreement
may not be amended or modified otherwise than by a written agreement executed by
the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other parties or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: At the most recent address
on file at the Company.
If to Sears: Sears, Roebuck and Co.
3333 Beverly Road
Hoffman Estates, Illinois 60179
Attention: General Counsel
If to Kmart: Kmart Holding Corporation
3100 West Big Beaver Road
Troy, Michigan 48084-3163
Attention: General Counsel
If to the Company: Sears Holdings Corporation
3333 Beverly Road
Hoffman Estates, Illinois 60179
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
11
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 4(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement, except as set forth in Section 4(c).
(f) Except as otherwise expressly provided herein, from and after
the Effective Time, this Agreement shall supersede any other employment,
severance or change of control agreement between the parties and between the
Executive and Sears, with respect to the subject matter hereof (including
without limitation, the Executive Non-Disclosure and Non-Solicitation of
Employees Agreement and the Executive Severance/Non-Compete Agreement between
the Executive and Sears, each dated as of November 26, 2001). Any provision of
this Agreement that by its terms continues after the expiration of the
Employment Period or the termination of the Executive's employment shall survive
in accordance with its terms.
12
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its Board of Directors,
Sears and Kmart have caused these presents to be executed in its name on its
behalf, all as of the day and year first above written and Kmart has caused
these presents to be assumed in the name of the Company and on its behalf, as of
the date set forth below.
ALAN J. LACY
/s/ Alan J. Lacy
-----------------------------------------
KMART HOLDING CORPORATION
By /s/ William C. Crowley
--------------------------------------
Name: William C. Crowley
Title: Senior Vice President, Finance
SEARS, ROEBUCK AND CO.
By /s/ Glenn R. Richter
--------------------------------------
Name: Glenn R. Richter
Title: Senior Vice President and
Chief Financial Officer
Assumed by Sears Holdings Corporation:
By
-----------------------------
Name:
Title:
Date:
EXHIBIT A
SEARS HOLDINGS CORPORATION
RESTRICTED SHARE AGREEMENT
RESTRICTED SHARE AGREEMENT, entered into as of [ ], 200[ ],
between Sears Holdings Corporation, a Delaware corporation (the "Company"), and
Alan J. Lacy (the "Executive");
WHEREAS, Sears, Roebuck and Co., a New York corporation, and
Kmart Holding Corporation, a Delaware corporation, and the Executive have
entered into an employment agreement dated as of the 16th day of November, 2004
(the "Employment Agreement"), which has been assumed by the Company, pursuant to
which, among other things, the Company has determined that, as an inducement
material to the Executive's agreement to enter into employment with the Company,
in satisfaction of certain of the Company's obligations under Section 3(b)(iii)
of the Employment Agreement, and subject to the restrictions stated below, the
Executive should be granted shares of the Company's common stock, par value $.01
(the "Common Stock");
WHEREAS, the Company desires to grant the Executive 75,000 shares
of restricted Common Stock (the "Restricted Shares");
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the parties
hereto do hereby agree as follows:
1. Capitalized Terms. Capitalized terms not defined herein shall have the
definitions ascribed to such terms in the Employment Agreement.
2. Grant. Pursuant to Section 3(b)(iii) of the Employment Agreement, the
Executive is hereby granted, effective as of the Effective Date (the "Grant
Date") and subject to the terms and conditions of this Agreement, 75,000
Restricted Shares.
3. Equity Plan. At such time, if any, as the Company shall have adopted (and,
if required, there shall have been approved by the Company's shareholders)
an equity incentive plan under which restricted shares of Common Stock may
be granted (the "Plan"), the Restricted Shares and this Agreement shall be
subject to the terms of such Plan, to the extent the terms of such Plan are
not inconsistent with the terms of this Agreement and the applicable
provisions of the Employment Agreement.
4. Issuance of Stock. The Restricted Shares shall be held in the custody of
the Company or its designee for the Executive's benefit. The Restricted
Shares shall be subject to the restrictions described herein. The
Restricted Shares shall bear appropriate legends with respect to the
restrictions described herein.
A-1
5. Vesting.
(a) The Restricted Shares shall vest in full and become free of
restrictions on June 30, 2006, provided that the Executive is employed
by or rendering services to the Company or a subsidiary or affiliate
thereof as of each such date.
(b) Notwithstanding the foregoing, any unvested Restricted Shares shall
immediately vest in full, and become free of restriction upon the
Executive's termination of employment (i) by the Company without
Cause, (ii) by the Executive for Good Reason, or (iii) by reason of
the Executive's death or Disability.
6. Restrictions.
(a) No portion of the Restricted Shares or rights granted hereunder may be
sold, transferred, assigned, pledged or otherwise encumbered or
disposed of by the Executive until such portion of the Restricted
Shares becomes vested in accordance with Section 3 of this Agreement,
and any purported sale, transfer, assignment, pledge, encumbrance or
disposition shall be void and unenforceable against the Company. The
period of time between the Grant Date and the date all Restricted
Shares become vested is referred to herein as the "Restriction
Period."
(b) If the Executive's employment with the Company terminates for any
reason which does not result in vesting of the Restricted Shares as
provided in Section 3 above, the balance of the Restricted Shares
subject to the provisions of this Agreement which have not vested at
the time of the Executive's termination of employment shall be
forfeited by the Executive, and ownership transferred back to the
Company.
7. Executive Shareholder Rights. During the Restriction Period, the Executive
shall have all the rights of a shareholder with respect to the Restricted
Shares except for the right to transfer the Restricted Shares, as set forth
in Section 4 of this Agreement. Accordingly, the Executive shall have the
right to vote the Restricted Shares and to receive any cash dividends paid
to or made with respect to the Restricted Shares, provided, however, that
dividends paid, if any, with respect to that Restricted Shares which has
not vested at the time of the dividend payment shall be held in the custody
of the Company and shall be subject to the same restrictions that apply to
the corresponding Restricted Shares; provided, further, that if such a
restriction on dividends would be subject to the tax imposed under the
provisions of Section 409A of the Code, such dividends shall be paid to the
Executive immediately and shall not be subject to the same restrictions
that apply to the corresponding Restricted Shares.
8. Changes in Stock. In the event of (a) a stock dividend, stock split,
reverse stock split, share combination, or recapitalization or similar
event of or by the Company (each, a "Share Change"), or (b) a merger,
consolidation, acquisition of property or shares, separation, spinoff,
reorganization, stock rights offering, liquidation, disaffiliation, or
similar event of or by the Company (each, a "Corporate Transaction"), in
each case, affecting the Common Stock, the Committee or the Board may in
its discretion make
A-2
such substitutions or adjustments as it deems appropriate and equitable to
adjust the number and kind of Restricted Shares. In the case of Corporate
Transactions, (x) unless otherwise determined by the Committee, if the
Corporate Transaction results in shareholders of Common Stock receiving
cash, securities, property, or any combination thereof in exchange for each
share of Common Stock, such consideration being exchanged for each share of
Common Stock shall be substituted for each Restricted Share subject to this
Agreement, and (y) the Committee may in its discretion make such
alternative or additional substitutions or adjustments as it deems
appropriate and equitable, including, without limitation, (i) the
cancellation of the Restricted Shares in exchange for payments of cash,
property or a combination thereof having an aggregate value equal to the
value of the Restricted Shares, as determined by the Committee or the Board
in its sole discretion (it being understood that in the case of a Corporate
Transaction with respect to which shareholders of Common Stock receive
consideration other than equity securities of the ultimate surviving
entity, any such determination by the Committee that the value of the
Restricted Shares shall for this purpose be deemed to equal the value of
the consideration being paid for each share of Common Stock pursuant to
such Corporate Transaction shall conclusively be deemed valid); and (ii)
the substitution of other property (including, without limitation, cash or
other securities of the Company and securities of entities other than the
Company) for the Restricted Shares. The determination of the Committee
regarding any adjustment shall be final and conclusive.
9. Taxes. No later than the date as of which an amount first becomes
includible in the gross income of the Executive for federal income tax
purposes with respect to any Restricted Shares, the Executive shall pay to
the Company, or make arrangements satisfactory to the Company regarding the
payment of, all federal, state, local and foreign taxes that are required
by applicable laws and regulations to be withheld with respect to such
amount. The Executive may direct the Company, to the extent permitted by
law, to deduct any such taxes from any payment otherwise due to the
Executive, including the delivery of the Restricted Shares that gives rise
to the withholding requirement.
10. Notices. Any notices required or permitted hereunder shall be addressed to
the Company at its corporate headquarters, attention: General Counsel, or
to the Executive at the address then on record with the Company, as the
case may be, and deposited, postage prepaid, in the United States mail.
Either party may, by notice to the other given in the manner aforesaid,
change his/her or its address for future notices.
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its
conflict of laws principles.
12. Successor. This Agreement shall bind and inure to the benefit of the
Company, its successors and assigns, and the Executive and his or her
personal representatives and assigns.
13. Amendment. This Agreement may be amended or modified at any time by an
instrument in writing signed by the parties hereto.
A-3
14. Certificates. Certificates representing the Restricted Shares as originally
or from time to time constituted shall bear the following legend:
The Shares represented by this stock certificate have been granted as
restricted stock under a Restricted Share Agreement between the registered
holder of these Shares and the Company. The Shares represented by this
stock certificate may not be sold, exchanged, assigned, transferred,
pledged, hypothecated or otherwise encumbered or disposed of until the
restrictions set forth in the Restricted Stock Agreement between the
registered holder of these Shares and the Company shall have lapsed.
As soon as administratively practicable after the lapsing of the restrictions
with respect to any Restricted Shares, the Company shall deliver to the
Executive or his or her personal representative, in book-entry or certificate
form, the formerly Restricted Shares that do not bear any restrictive legend
making reference to this Agreement. Such Shares shall be free of restrictions,
except for any restrictions required under Federal securities laws.
15. Laws and Regulations. No shares of Common Stock shall be issued under this
Agreement unless and until all legal requirements applicable to the
issuance of such shares have been complied with to the satisfaction of the
Committee. The Committee shall have the right to condition any issuance of
shares of Common Stock to the Executive hereunder on the Executive's
undertaking in writing to comply with such restrictions on the subsequent
disposition of such shares as the Committee shall deem necessary or
advisable as a result of any applicable law or regulation.
16. Registration. As of the Grant Date, the Company shall, at its expense,
cause issuance of the Restricted Shares and the resale thereof to be
registered under the Securities Act of 1933, as amended, and registered or
qualified under applicable state law, to be freely resold. The Company
shall thereafter maintain the effectiveness of such registration and
qualification for so long as the Executive holds the Restricted Shares (or
any portion thereof) or any of the shares of Common Stock that were
previously Restricted Shares, or until such earlier date as such Restricted
Shares and shares of Common Stock, as applicable, may otherwise be freely
sold under applicable law.
17. Miscellaneous.
(a) The Company shall not be required (i) to transfer on its books any
Restricted Shares which shall have been sold or transferred in
violation of any of the provisions set forth in this Agreement, or
(ii) to treat as owner of such shares or to accord the right to vote
as such owner or to pay dividends to any transferee to whom such
shares shall have been so transferred.
(b) This Agreement shall not be construed so as to grant the Executive any
right to remain in the employ of the Company.
(c) This Agreement may be executed in counterparts, which together shall
constitute one and the same original.
A-4
IN WITNESS WHEREOF, the Company has caused this Agreement to be
duly executed by its officer thereunder duly authorized and the Executive has
hereunto set his hand, all as of the day and year first set forth above.
SEARS HOLDINGS CORPORATION
---------------------------------
Name:
Title:
ACCEPTED:
The undersigned hereby acknowledges having read this Restricted Share Agreement
and hereby agrees to be bound by all provisions set forth herein.
---------------------------------
Executive
EXHIBIT B
SEARS HOLDINGS CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
NONQUALIFIED STOCK OPTION AGREEMENT, entered into as of [ ],
200[ ], between Sears Holdings Corporation, a Delaware corporation (the
"Company"), and Alan J. Lacy (the "Executive");
WHEREAS, Sears, Roebuck and Co., a New York corporation, and
Kmart Holding Corporation, a Delaware corporation, and the Executive have
entered into an employment agreement dated as of the 16th day of November, 2004
(the "Employment Agreement"), which has been assumed by the Company, pursuant to
which, among other things, the Company has determined that, as an inducement
material to the Executive's agreement to enter into employment with the Company,
in satisfaction of certain of the Company's obligations under Section 3(b)(iii)
of the Employment Agreement, the Executive should be granted by the Company a
nonqualified option to purchase shares of its common stock (the "Option");
WHEREAS, the Company desires to grant such Option to the
Executive;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the parties
hereto do hereby agree as follows:
1. Capitalized Terms. Capitalized terms not defined herein shall have the
definitions ascribed to such terms in the Employment Agreement.
2. Grant. Pursuant to Section 3(b)(iii) of the Employment Agreement, the
Executive is hereby granted as of the Effective Date (the "Grant Date") and
subject to the terms and conditions of this Agreement, a nonqualified stock
option (the "Option") to purchase an aggregate of 250,000 shares of the
Company's common stock, par value $0.01 ("Common Stock"). Shares of Common
Stock subject to the Option shall be referred to herein as "Option Shares".
3. Equity Plan. At such time, if any, as the Company shall have adopted (and,
if required, there shall have been approved by the Company's shareholders)
an equity incentive plan under which stock options may be granted (the
"Plan"), the Option and this Agreement shall be subject to the terms of
such Plan, to the extent the terms of such Plan are not inconsistent with
the terms of this Agreement and the applicable provisions of the Employment
Agreement.
4. Option Term. Subject to earlier termination as provided herein, the Option
shall expire on the tenth anniversary of the Grant Date (the "Expiration
Date").
5. Purchase Price. The purchase price per share of Common Stock with respect
to the Option shall be [the closing price of a share of the Company's
common stock on the New York Stock Exchange or the NASDAQ (as to be agreed
by the parties) on the Grant Date,
B-1
provided that such a means of determining the exercise price will not
result in the imposition of taxes under Section 409A of the Code].
6. Vesting/Exercisability. The Option shall vested and become exercisable with
respect to 67,500 shares of Common Stock on each of the first four (4)
anniversaries of the Grant Date, provided that the Executive is employed by
or rendering services to the Company or a subsidiary or affiliate thereof
as of each such date. The Option may be exercised either for the total
number of shares of Common Stock vested, or for less than the total number
in multiples of 100 shares of Common Stock.
7. No Rights as a Shareholder. The Executive or other permitted holder of the
Option shall have none of the rights of a shareholder of Common Stock with
respect to the shares of Common Stock covered by the Option until the
Option Shares are issued or transferred to such holder upon exercise of the
Option.
8. Method of Exercise. Upon the exercise of the Option, the purchase price may
be paid (a) in cash or cash equivalents, or (b) by tendering to the Company
shares of Common Stock already owned by the Executive, which, in the case
of shares of Common Stock purchased by the Executive pursuant to the
exercise of an option granted by the Company, have been held by the
Executive for no less than six months following the date of such purchase,
in any case having a total Fair Market Value (as defined in the Plan and,
if no Plan, based on the closing price of a share of the Company's common
stock on the New York Stock Exchange or the NASDAQ (as to be agreed by the
parties) on the date of exercise) equal to the aggregate purchase price,
(c) to the extent permitted by law, by a "cashless exercise" procedure
approved by the Compensation Committee of the Board of Directors of the
Company or any other committee of the board of directors of the Company
performing similar functions (the "Committee"), or (d) by a combination of
the foregoing methods. The Option shall be exercised by written notice of
election in such form as shall be determined by the Committee and delivered
in person or by regular mail to the Company at its principal executive
office.
9. Withholding. The Company may require that the Executive pay to the Company
at the time of exercise of any portion of the Option the amount necessary
to satisfy the Company's liability to withhold federal, state or local
income tax or any other employment taxes incurred by reason of the exercise
of the Option. The Executive may satisfy the foregoing requirement by (a)
tendering to the Company shares of Common Stock already owned by the
Executive, which, in the case of shares of Common Stock purchased by the
Executive pursuant to the exercise of an option granted by the Company,
have been held by the Executive for no less than six months following the
date of such purchase, or (b) by electing to have the Company withhold from
delivery Option Shares, provided that, in either case, such shares have a
Fair Market Value equal to the minimum amount of tax required to be
withheld. Such shares of Common Stock shall be valued at their Fair Market
Value (as defined above) on the date as of which the amount of tax to be
withheld is determined.
B-2
10. Effect of Termination of Employment.
(a) If the employment of the Executive with the Company and its
subsidiaries and affiliates is terminated by reason of his death or
Disability, or by the Company without Cause or by the Executive for
Good Reason, the Option shall become immediately vested and
exercisable in full as of the date of such termination of employment
and any portion of the Option that is or becomes vested and
exercisable pursuant to this Section 10(a) as of the date of the
Executive's termination of employment shall be exercisable by the
Executive (or other Option holder, as applicable) for the period
ending on the third anniversary of such termination of employment, but
no later than the Expiration Date.
(b) If the employment of the Executive with the Company and its
subsidiaries and affiliates is terminated by the Company for Cause,
the Option shall immediately be forfeited and cancelled in its
entirety as of the date of such termination of employment.
(c) If the employment of the Executive with the Company and its
subsidiaries and affiliates is terminated other than as provided under
Sections 10(a) and 10(b) above, any vested portion of the Option as of
the date of termination of employment shall remain exercisable for 90
days, but no later than the Expiration Date, and the remainder of the
Option shall immediately be forfeited and cancelled in its entirety as
of the date of such termination of employment.
11. Adjustment. In the event of (a) a stock dividend, stock split, reverse
stock split, share combination, or recapitalization or similar event of or
by the Company (each, a "Share Change"), or (b) a merger, consolidation,
acquisition of property or shares, separation, spinoff, reorganization,
stock rights offering, liquidation, disaffiliation, or similar event of or
by the Company (each, a "Corporate Transaction"), in each case, affecting
the Common Stock, the Committee or the Board may in its discretion make
such substitutions or adjustments as it deems appropriate and equitable to
(i) adjust the number and kind of shares subject to the Stock Option, (ii)
adjust the exercise price per share of the Stock Option. In the case of
Corporate Transactions, (x) unless otherwise determined by the Committee,
if the Corporate Transaction results in shareholders of Common Stock
receiving cash, securities, property, or any combination thereof in
exchange for each share of Common Stock, such consideration being exchanged
for each share of Common Stock shall be substituted for each share of
Common Stock subject to this Agreement, and (y) the Committee may in its
discretion make such alternative or additional substitutions or adjustments
as it deems appropriate and equitable, including, without limitation, (A)
the cancellation of the Stock Option in exchange for payments of cash,
property or a combination thereof having an aggregate value equal to the
value of the Stock Option, as determined by the Committee or the Board in
its sole discretion (it being understood that in the case of a Corporate
Transaction with respect to which shareholders of Common Stock receive
consideration other than equity securities of the ultimate surviving
entity, any such determination by the Committee that the value of the Stock
Option shall for this purpose be deemed to equal the excess, if any, of the
value of the consideration being paid for each share of Common Stock
pursuant to such Corporate
B-3
Transaction over the exercise price per share of the Stock Option shall
conclusively be deemed valid) and (B) the substitution of other property
(including, without limitation, cash or other securities of the Company and
securities of entities other than the Company) for the Stock Option. The
determination of the Committee regarding any adjustment will be final and
conclusive.
12. Transferability of Option. The Option shall not be transferable other than
(a) by will or the laws of descent and distribution or (b) to the
Participant's family members, whether directly or indirectly or by means of
a trust or partnership or otherwise or (c) as otherwise determined by the
Committee. For purposes of this Agreement, "family member" shall have the
meaning given to such term in General Instructions A.1(a)(5) to Form S-8
under the Securities Act of 1933, as amended, and any successor thereto.
The Option shall be exercisable during the Executive's lifetime only by the
Executive or by his guardian or legal representative or the permitted
transferees pursuant to clause (a), (b) and (c) of this Section 12.
13. Laws and Regulations. No shares of Common Stock shall be issued under this
Option unless and until all legal requirements applicable to the issuance
of such shares of Common Stock have been complied with to the satisfaction
of the Committee. The Committee shall have the right to condition any
issuance of shares to the Executive hereunder on the Executive's
undertaking in writing to comply with such restrictions on the subsequent
disposition of such shares as the Committee shall deem necessary or
advisable as a result of any applicable law or regulation.
14. Registration. As of the Grant Date, the Company shall, at its expense,
cause issuance of the Option, the exercise of the Option and the resale of
the shares of Common Stock subject to the Option to be registered under the
Securities Act of 1933, as amended, and registered or qualified under
applicable state law, to be freely resold. The Company shall thereafter
maintain the effectiveness of such registration and qualification for so
long as the Executive holds the Option (or any portion thereof) or any of
the Option Shares, or until such earlier date as such Option Shares may
otherwise be freely sold under applicable law. The Company shall take all
corporate action necessary to reserve for issuance a sufficient number of
shares of common stock for delivery with respect to the Options.
15. Notices. Any notices required or permitted hereunder shall be addressed to
the Company at its corporate headquarters, attention: General Counsel, or
to the Executive at the address then on record with the Company, as the
case may be, and deposited, postage prepaid, in the United States mail.
Either party may, by notice to the other given in the manner aforesaid,
change his/her or its address for future notices.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its
conflict of laws principles.
17. Successor. This Agreement shall bind and inure to the benefit of the
Company, its successors and assigns, and the Executive and his or her
personal representatives and assigns.
B-4
18. Amendment. This Agreement may be amended or modified at any time by an
instrument in writing signed by the parties hereto.
19. Miscellaneous.
(a) This Agreement shall not be construed so as to grant the Executive any
right to remain in the employ of the Company.
(b) This Agreement may be executed in counterparts, which together shall
constitute one and the same original.
B-5
IN WITNESS WHEREOF, the Company has caused this Agreement to be
duly executed by its officer thereunder duly authorized and the Executive has
hereunto set his hand, all as of the day and year first set forth above.
SEARS HOLDINGS CORPORATION
---------------------------------
Name:
Title:
ACCEPTED:
The undersigned hereby acknowledges having read this Nonqualified Stock Option
Agreement and hereby agrees to be bound by all provisions set forth herein.
---------------------------------
Executive
EXHIBIT C
For and in consideration of the payments and other benefits described in
the employment agreement dated as of November 16, 2004 (the "Agreement") by and
among Sears, Roebuck and Co., a New York corporation ("Sears"), and Kmart
Holding Corporation, a Delaware corporation ("Kmart"), and Alan J. Lacy
("Executive"), which has been assumed by Sears Holdings Corporation (the
"Company") and for other good and valuable consideration, Executive hereby
releases the Company, its divisions, affiliates, subsidiaries, parents,
branches, predecessors, successors, assigns, officers, directors, trustees,
employees, agents, shareholders, administrators, representatives, attorneys,
insurers and fiduciaries, past, present and future (the "Released Parties") from
any and all claims of any kind arising out of, or related to, his employment
with the Company, its affiliates and subsidiaries (collectively, with the
Company, the "Affiliated Entities"), his separation from employment with the
Affiliated Entities or derivative of Executive's employment, which Executive now
has or may have against the Released Parties, whether known or unknown to
Executive, by reason of facts which have occurred on or prior to the date that
Executive has signed this Release. Such released claims include, without
limitation, any and all claims under federal, state or local laws pertaining to
employment, including, without limitation, the Age Discrimination in Employment
Act, Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section
2000e et. seq., the Fair Labor Standards Act, as amended, 29 U.S.C. Section 201
et. seq., the Americans with Disabilities Act, as amended, 42 U.S.C. Section
12101 et. seq. the Reconstruction Era Civil Rights Act, as amended, 42 U.S.C.
Section 1981 et. seq., the Rehabilitation Act of 1973, as amended, 29 U.S.C.
Section 701 et. seq., the Family and Medical Leave Act of 1992, 29 U.S.C.
Section 2601 et. seq., and any and all state or local laws regarding employment
discrimination and/or federal, state or local laws of any type or description
regarding employment, including but not limited to any claims arising from or
derivative of Executive's employment with the Affiliated Entities, as well as
any and all claims under state contract or tort law.
Executive has read this Release carefully, acknowledges that Executive has
been given at least 21 days to consider all of its terms and has been advised to
consult with any attorney and any other advisors of Executive's choice prior to
executing this Release, and Executive fully understands that by signing below
Executive is voluntarily giving up any right which Executive may have to sue or
bring any other claims against the Released Parties, including any rights and
claims under the Age Discrimination in Employment Act. Executive also
understands that Executive has a period of seven days after signing this Release
within which to revoke his agreement, and that neither the Company nor any other
person is obligated to make any payments or provide any other benefits to
Executive pursuant to the Agreement until eight days have passed since
Executive's signing of this Release without Executive's signature having been
revoked, other than the Accrued Obligations and the Other Benefits (in each
case, as defined in the Agreement). Finally, Executive has not been forced or
pressured in any manner whatsoever to sign this Release, and Executive agrees to
all of its terms voluntarily.
C-1
For and in consideration of the obligations upon Executive as set forth in
the Agreement, and for other good and valuable consideration, the Company hereby
(on its own behalf and that of the other Affiliated Entities, the divisions and
predecessors and successors of the Affiliated Entities and the directors and
officers of the Company in their capacity as such (collectively, the "Releasing
Entities")) releases Executive and his heirs, executors, successors and assigns
(the "Executive Released Parties") of and from all debts, obligations, promises,
covenants, collective bargaining obligations, agreements, contracts,
endorsements, bonds, controversies, suits, claims or causes of every kind and
nature whatsoever, arising out of, or related to, his employment with the
Affiliated Entities, his separation from employment with the Affiliated Entities
or derivative of Executive's employment, which the Releasing Entities now have
or may have against the Executive Released Parties, whether known or unknown, by
reason of facts which have occurred on or prior to the date that the Company has
signed this Release; provided, however, that nothing contained in this Release
shall release the Executive Released Parties from any claim or form of liability
arising out of acts or omissions by Executive which constitute a violation of
the criminal or securities laws of any applicable jurisdiction.
Notwithstanding anything else herein to the contrary, this Release shall
not affect: the obligations of the Company or Executive set forth in the
Agreement or other obligations that, in each case, by their terms, are to be
performed after the date hereof by the Company or Executive (including, without
limitation, obligations to Executive under any stock option, stock award or
agreements or obligations under any pension plan or other benefit or deferred
compensation plan, all of which shall remain in effect in accordance with their
terms); obligations to indemnify Executive respecting acts or omissions in
connection with Executive's service as a director, officer or employee of the
Affiliated Entities; or any right Executive may have to obtain contribution in
the event of the entry of judgment against Executive as a result of any act or
failure to act for which both Executive and any of the Affiliated Entities are
jointly responsible.
This Release, and the attached covenants, are final and binding and may not
be changed or modified except in a writing signed by both parties.
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Date ALAN J. LACY
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Date SEARS HOLDINGS CORPORATION