Exhibit 10.2
SEARS HOLDINGS
CORPORATION
2009 LONG-TERM INCENTIVE
PROGRAM (LTIP)
SECTION 1
GENERAL
1.1. Purpose . The
Sears Holdings Corporation 2009 Long-Term Incentive Program (the
“LTIP”) is a performance-based program. The LTIP is
designed to motivate the executive leadership of Sears Holdings
Corporation (the “Company”) and the participating
Subsidiaries (as defined in Section 8) to achieve significant,
lasting change that successfully positions the Company for future
growth. Performance goals under the LTIP align Participants’
financial incentives with the financial goals of the Company.
Awards (as defined in Section 8) under the LTIP are designed
to vary commensurately with achieved performance . Both
(a) Awards structured to satisfy the requirements for
“performance-based compensation” outlined in
regulations issued under Section 162(m) of the Internal
Revenue Code (“Code Section 162(m)”), and
(b) Awards not so structured, may be issued hereunder. The
effective date of the LTIP is April 28, 2009, which is the
date the Compensation Committee (as defined in Section 8)
adopted the LTIP (the “Effective Date”).
1.2. Operation,
Administration, and Definitions . The operation and
administration of the LTIP, including the Awards made under the
LTIP, shall be subject to the provisions of Section 6
(relating to operation and administration). Capitalized terms in
the LTIP shall be defined as set forth in the LTIP (including as
defined in Section 8). The LTIP is established under, and
constitutes a part of, the Sears Holdings Corporation Umbrella
Incentive Program (the “UIP”).
SECTION 2
PARTICIPATION
2.1. Eligible Employee
. The term “Eligible Employee” means those salaried
employees of the Company or a participating Subsidiary who
(a) hold a position of divisional vice president (or
equivalent) or higher, as determined by the Senior Corporate
Compensation Executive (as defined in Section 8), and
(b) are designated as Eligible Employees by the Senior
Corporate Compensation Executive or the Compensation Committee, as
applicable. Subject to the terms and conditions of the LTIP, the
Senior Corporate Compensation Executive or the Compensation
Committee, as applicable, shall determine and designate, from time
to time, from among the Eligible Employees, those persons who shall
be granted one or more Awards under the LTIP, and thereby become
“Participants” in the LTIP. The Senior Corporate
Compensation Executive shall make eligibility determinations under
this Section 2 with respect to all Eligible Employees other
than those who are Executives for whom compensation matters are
under the purview of the Compensation Committee (as defined in
Section 8).
2.2. New Hires and Promotions
to Eligible Employee Status . The Senior Corporate
Compensation Executive or the Compensation Committee, as
applicable, may designate as Participants those employees whom the
Senior Corporate Compensation Executive or the Compensation
Committee, as applicable, determines have been newly hired or
promoted into the group of Eligible Employees identified in
subsection 2.1(a) above, after the Effective Date, provided that
the terms and conditions of Awards to such
2009 LTIP
individuals shall be subject to (a) a
fraction, the numerator of which is the number of full days
remaining in the Performance Period (as described in subsection
3.2) after the Eligible Employee’s date of hire, or
promotion, as applicable, and the denominator is the number of full
days in the Performance Period, and (b) if Awards to such
individuals are intended to meet the requirements of Code
Section 162(m), such other adjustments as the Compensation
Committee deems necessary or desirable to qualify such Awards as
“performance-based compensation” for purposes of Code
Section 162(m). The term “performance-based
compensation”, as referred to herein, shall have the meaning
ascribed to it under Code Section 162(m) and the regulations
thereunder.
2.3. Demotions from Eligible
Employee Status . If a Participant is demoted below a
position of divisional vice president (or equivalent), as of the
date of such demotion, the individual will no longer be a
Participant, will be deemed to have forfeited any unvested portion
of his or her Award, and will receive no LTIP distribution under
Section 4.
2.4 Other Changes in
Status If a Participant is promoted after the Effective
Date, the Senior Corporate Compensation Executive or the
Compensation Committee, as applicable, may make a second Target
Cash Incentive Award (as defined in subsection 3.1) to such
individual and the total amount payable to such individual shall be
based on a pro-ration, whereby the Target Cash Incentive Award for
the new position will apply to the remainder of the Performance
Period and the Target Cash Incentive Award for the immediately
preceding long-term incentive-eligible position, if applicable,
will apply to the portion of the Performance Period immediately
preceding the effective date of the promotion. Notwithstanding the
foregoing, in no event will positive discretion be applied to any
Award that has been designated as intended to meet the requirements
of Code Section 162(m) (and the regulations issued thereunder)
with respect to the Performance Period or as of the payment date
(as defined in subsection 4.1). If a Participant is demoted, but is
still an Eligible Employee, the Senior Corporate Compensation
Executive or the Compensation Committee, as applicable, may make a
second Target Cash Incentive Award to such individual and the total
Award for such an individual shall be based on a pro-ration,
whereby the Target Cash Incentive for the new position will apply
only to the remainder of the Performance Period and the Target Cash
Incentive for the immediately preceding position will apply only to
the portion of the Performance Period immediately preceding the
effective date of the promotion, and in either case an Award will
only be paid if the target for the full Performance Period is
met.
SECTION 3
CASH INCENTIVE
AWARDS
3.1. Target Cash Incentive
Awards . After the Effective Date, the Senior Corporate
Compensation Executive or the Compensation Committee (at one or
more meetings of the Compensation Committee), as applicable, may
award “Target Cash Incentive Awards” (as defined in
subsection 3.1(a) below) to each Participant designated by the
Senior Corporate Compensation Executive or the Compensation
Committee (at such meeting), as applicable, in an amount determined
by the applicable entity in its sole discretion. In connection with
such Awards, the Senior Corporate Compensation Executive or the
Compensation Committee, as applicable, shall establish
“Target LTIP EBITDA” and “Threshold LTIP
EBITDA” (each as defined in subsection 3.3 below), provided,
however, that Threshold LTIP EBITDA shall be expressed as a
percentage of Target LTIP EBITDA. The Senior Corporate
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2009 LTIP
Compensation Executive shall make the
determinations referred to in this Section 3 with respect to
all Participants other than those who are Executives for whom
compensation matters are under the purview of the Compensation
Committee.
(a) A Target Cash Incentive Award
shall, at the date of grant, consist of a commitment by the Company
to distribute, at the time specified in, and in accordance with the
provisions of, Section 4 below, as applicable, an amount equal
to the Participant’s Target Cash Incentive Award multiplied
by the applicable Award Multiple set forth in subsection 3.4 below,
subject to approval of the final award amount by the Senior
Corporate Compensation Executive or Compensation Committee, as
applicable, (the “Cash Incentive Award”) and to the
provisions of subsection 6.4.
(b) A Cash Incentive Award shall
generally be satisfied by a distribution in cash to the
Participant, provided, however, that, at the discretion of the
Compensation Committee, the Company may elect, by such deadline as
specified under uniform and nondiscriminatory rules established by
the Compensation Committee, to satisfy such Cash Incentive Award by
payment of shares of Company common stock (“Stock”) in
lieu of cash, or a combination of cash and shares of Stock. The
number of shares of Stock shall be equal to (i) the amount of
the Award to be paid in stock in accordance with this paragraph
(b), divided by (ii) the Fair Market Value of a share of
Stock, on the principal securities exchange or market on which the
shares are then listed or admitted, on the business day immediately
preceding the date of distribution or, if the Stock is not traded
on that date, on the next preceding date on which Stock was traded;
provided that issuance of any shares of Stock in accordance with
this subsection 3.1(b) shall be contingent on the availability of
shares of Stock under any shareholder-approved plan of the Company
providing for the issuance of Stock in satisfaction of the Awards
hereunder (which in no event shall be an employee stock purchase
plan).
3.2. Performance
Period . The “Performance Period” shall be the
Company’s 2009, 2010 and 2011 Fiscal Years; provided that, in
the case of an employee who is newly hired or promoted into the
group of Eligible Employees after the Effective Date, the
Performance Period shall be such shorter period as established by
the Senior Corporate Compensation Executive or the Compensation
Committee, as applicable, subject to the requirements of Code
Section 162(m), if applicable. The amount of the Cash
Incentive Award shall be determined at the completion of the
Performance Period in accordance with subsection 3.1 above and
subsection 4.1 below.
3.3. “ LTIP
EBITDA .”
(a) LTIP EBITDA. Subject to
adjustment, if any, in accordance with subsection (d) of this
subsection 3.3, “LTIP EBITDA” refers to earnings before
interest, taxes, depreciation and amortization for the Performance
Period computed as operating income appearing on the
Company’s statement of operations for the applicable
reporting period, other than Sears Canada (referred to as the
“Domestic Company”), less depreciation and amortization
and gains/(losses) on sales of assets. In addition, it is adjusted
to exclude significant litigation or claim judgments or settlements
(defined as matters which are
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2009 LTIP
$1,000,000 or more) including the
costs related thereto; the effect of purchase accounting and
changes in accounting methods; gains, losses and costs associated
with acquisitions, divestitures and store closures; integration
costs that are disclosed as merger related; and restructuring
activities. If after the Effective Date, the Domestic Company
acquires assets or an entity that has associated EBITDA (measured
using the same principles as those described in the preceding
provisions of this subsection 3.3(a)) in its last full fiscal year
prior to the acquisition of greater than or equal to $100,000,000,
any EBITDA associated with such assets or entity (after its
acquisition) and during the Performance Period shall be disregarded
in determining LTIP EBITDA under this subsection 3.3(a).
(b) Target LTIP EBITDA .
Subject to adjustment, if any, in paragraph (d), “Target LTIP
EBITDA” refers to the target level of LTIP EBITDA,
established by the Compensation Committee in accordance with
subsection 3.1 above, for the Performance Period.
(c) Threshold LTIP EBITDA .
Subject to adjustment, if any, in paragraph (d), “Threshold
LTIP EBITDA” refers to a level of LTIP EBITDA, for the
Performance Period, established by the Compensation Committee,
which shall be equal to eighty percent (80%) of Target LTIP
EBITDA and, if exactly achieved, shall generate an Award Multiple
(described in subsection 3.4 below) of sixty percent
(60%).
(d) Adjustments to Target LTIP
EBITDA . The LTIP EBITDA incentive target contemplates that the
Domestic Company does not make any significant acquisitions or
divestitures over the period of the LTIP. If after the Effective
Date the Domestic Company divests itself of assets or an entity
that has associated EBITDA (measured using the same principles as
those described in subsection 3.3(a)) in its last full fiscal year
prior to the divestiture of greater than or equal to $100,000,000,
Target LTIP EBITDA for the Company’s fiscal year in which the
divestiture occurs will be decreased by actual EBITDA of such
assets or entity for the portion of such assets’ or
entity’s last full fiscal year prior to the divestiture
corresponding to the portion of the Company’s fiscal year (in
which the divestiture occurs) remaining after the divestiture
occurs; and Target LTIP EBITDA for each of the following fiscal
years of the Company, if any, in the Performance Period will be
decreased by the actual EBITDA of such assets or entity for such
assets’ or entity’s last full fiscal year prior to the
divestiture.
3.4. “ Award
Multiple .” The Award Multiple shall be as outlined
below:
(a) if LTIP EBITDA is one hundred
percent (100%) of Target LTIP EBITDA, the Award Multiple shall
be one hundred percent (100%);
(b) if LTIP EBITDA is equal to
Threshold LTIP EBITDA, the Award Multiple shall be sixty percent
(60%);
(c) if LTIP EBITDA is greater than
Threshold LTIP EBITDA, but less than Target LTIP EBITDA, the Award
Multiple shall be a whole percentage between sixty percent
(60%) and one hundred percent (100%), determined by
interpolation on a straight line basis relative to such LTIP
EBITDA, Threshold LTIP EBITDA and Target LTIP EBITDA amounts, and
rounded down to the nearest whole percentage;
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2009 LTIP
(d) if LTIP EBITDA is less than
Threshold LTIP EBITDA, the Award Multiple shall be zero (0);
and
(e) if LTIP EBITDA is greater than
Target LTIP EBITDA, the Award Multiple shall be a percentage equal
to one hundred (100%) plus two percent (2%) for each one
percent (1%) by which LTIP EBITDA exceeds Target LTIP EBITDA,
and rounded down to the nearest whole percentage.
3.5. Limitation on Individual
Awards . Notwithstanding anything herein to the contrary,
the total Cash Incentive Award paid to any Participant for the
Performance Period pursuant to the LTIP shall in no event exceed
$15 million.
3.6. Additional
Requirements. All Cash Incentive Awards awarded under the
LTIP (and any Stock or cash otherwise distributable pursuant
thereto) are subject to the provisions of Sections 4, 5 and
6.
SECTION 4
DISTRIBUTION
4.1.
General . Subject to Sections 5 and 6, the cash or
shares of Stock, if any, that result from the payout formula
described at Section 3 shall be distributed, in a single lump
sum, as soon as practicable after the first Compensation Committee
meeting occurring on or after the LTIP EBITDA results for the
Company’s 2011 Fiscal Year are available to the Compensation
Committee, which shall in no event be later than the date that is
two and one-half (2 1 / 2 ) months after the last day
of the 2011 Fiscal Year. Notwithstanding anything herein to the
contrary, no distribution shall be made hereunder until after the
Compensation Committee has certified the attainment of the
performance goals and, with respect to Participants under its
purview, approved the amount to be paid to each Participant. The
Senior Corporate Compensation Executive shall be responsible for
approving the amount payable to all other Participants. The date as
of which payment is made in accordance with this subsection 4.1 is
referred to herein as the “payment date.”
4.2. Termination of Employment
and Other Provisions . All distributions are subject to the
provisions of Sections 5 and 6 below.
SECTION 5
TERMINATION OF
EMPLOYMENT
The effect of termination of
employment on a Participant’s right to receive a Cash
Incentive Award (whether payable in cash or Stock) depends on the
reason for the termination, as described below.
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2009 LTIP
5.1. Termination of
Employment .
(a) Voluntary Termination or
Involuntary Termi
