SEARS HOLDINGS
CORPORATION
NONQUALIFIED STOCK OPTION
AGREEMENT
NONQUALIFIED STOCK OPTION AGREEMENT, entered into as of
March 28, 2005, between Sears Holdings Corporation, a Delaware
corporation (the “Company”), and Alan J. Lacy (the
“Executive”);
WHEREAS, Sears, Roebuck & 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:
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1.
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Capitalized
Terms. Capitalized terms
not defined herein shall have the definitions ascribed to such
terms in the Employment Agreement.
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2.
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Grant. Pursuant to Section 3(b)(iii) of the
Employment Agreement, the Executive is hereby granted as of
March 28, 2005 (the “Grant Date”) and subject to
the terms and conditions of this Agreement, a nonqualified stock
option (the “Option”) to purchase an aggregate of
200,000 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”.
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3.
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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.
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4.
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Option
Term. Subject to earlier
termination as provided herein, the Option shall expire on the
tenth anniversary of the Grant Date (the “Expiration
Date”).
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5.
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Purchase
Price. The purchase price
per share of Common Stock with respect to the Option shall be
$131.11 per share, which is the closing price of a share of the
Company’s common stock on the NASDAQ on the Grant
Date.
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6.
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Vesting/
Exercisability. The
Option shall vested and become exercisable with respect to 50,000
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.
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7.
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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.
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8.
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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
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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.
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9.
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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
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