Exhibit 10.28
[Mitigation]
EXECUTIVE SEVERANCE
AGREEMENT
By this Executive Severance
Agreement dated as of
,
200 (“ Agreement ”),
Sears Holdings Corporation (“Sears”) and “Sears
Affiliates” (as such term is defined in Section 2
below), and
[ ]
(“ Executive ”), intending to be legally bound,
and for good and valuable consideration, agree as
follows:
1. Severance-Related Leave of
Absence .
(a) Severance Benefits
.
i. Continuation of
Compensation .
1. In the event that Executive
incurs a Separation from Service (as defined in Section 2
below) from each Sears Affiliate by which Executive is employed for
any reason other than “Cause”, death or
“Disability” (as defined in Section 2 below) or by
Executive for “Good Reason” (as defined in
Section 2 below), subject to the provisions of subsection
4(e), Section 5 and Section 10 herein, Executive shall be
placed on a severance-related leave of absence
(“Leave”) and Sears or the appropriate Sears Affiliate
shall continue to pay Executive’s base salary, at the rate in
effect immediately prior to the first day of the Leave, for a
period of one (1) year (“Salary Continuation
Period”), which amount shall be paid on each regular salary
payroll period within the Salary Continuation Period and without
interruption between active employment and the Salary Continuation
Period (subject to subsection (a)(i)(2) below) (“Salary
Continuation”). Notwithstanding the foregoing, the Sears or
Sears Affiliate obligations under this subsection (a)(i) shall be
reduced on a dollar-for-dollar basis (but not below zero), by the
amount, if any, of fees, salary or wages that Executive earns
during the same payroll period from a subsequent employer
(including those arising from self-employment) during the Salary
Continuation Period. For avoidance of doubt, Executive shall not be
obligated to seek affirmatively or accept an employment,
contractor, consulting or other arrangement in order to mitigate
Salary Continuation. In all events, Executive’s Salary
Continuation Period shall end on the date that is twelve
(12) months after the date of your “Separation from
Service” (as such terms are defined in Section 2 below),
and no additional Salary Continuation or benefits (described under
subsections (a)(ii) and (iii) below) shall be paid hereunder.
Further, to the extent Executive does not execute and timely submit
the General Release and Waiver (in accordance with subsection 4(e)
below) by the deadline specified therein, Salary Continuation
payments shall terminate and forever lapse, and Executive shall be
obligated to reimburse Sears for any portion of the Salary
Continuation paid during the Salary Continuation Period.
2. Notwithstanding anything in this
subsection (a)(ii) to the contrary, if the Salary Continuation
payable to Executive in accordance with subsection (a)(i)(1) above
during the first six (6) months after Executive’s
Separation from Service would exceed the “Section 409A
Threshold” (as defined herein) and if as of the date of the
Separation from Service Executive is a “specified
employee” within the meaning of Internal Revenue Code
(“Code”) Section 409A and regulations issued
thereunder and as defined in Section 2 below, then, payment to
Executive for the first six (6) months of salary continuation
shall be made to Executive on each regular salary payroll period
until the aggregate amount received equals the Section 409A
Threshold, and any portion of the Salary Continuation in excess of
such threshold that would otherwise be paid during such first six
(6) months shall instead be paid to Executive in a lump sum
payment on the date that is six (6) months after the date of
Executive’s Separation from Service. The remaining six
(6) months of Salary Continuation (if any) shall be paid on
each regular salary payroll period.
3. In addition to the foregoing, a
lump sum payment will be made to Executive within ten
(10) business days following the first day of the Leave in an
amount equal to the sum of any accrued base salary through the
first day of the Leave to the extent not already paid and any
vacation benefits that accrued prior to the Leave. No vacation will
accrue during the Leave.
4. All Salary Continuation payments
(described under this subsection (a)(i)) will terminate and forever
lapse if Executive is employed by a “ Sears Competitor
” (as defined in subsection 4(b)(ii) herein) during the
Salary Continuation Period, and Executive shall be obligated to
reimburse Sears for any portion of the Salary Continuation paid
during the Salary Continuation Period.
ii. Continuation of Benefits
.
1. During the Salary Continuation
Period, Executive will be entitled to participate in all benefit
plans and programs (except as specified in this subsection
(a)(ii)), as an active associate, in which Executive was eligible
to participate immediately prior to the Leave (subject to the terms
and conditions and continued availability of such plans and
programs); provided, however, that Executive will not be eligible
to participate in the long-term disability plan, flexible spending
accounts, Sears paid life insurance and the Sears Holdings 401(k)
Savings Plan (or any other defined contribution plan sponsored by
Sears or a Sears Affiliate) during the Leave. Executive and
Executive’s eligible dependents shall be entitled to continue
to participate, as active participants, in Sears medical and dental
plans (subject to the terms and conditions and continued
availability of such plans).
2
2. If Executive does not timely
execute and submit the General Release and Waiver (in accordance
with subsection 4(e) herein) by the deadline specified therein,
Executive shall be obligated to reimburse Sears for any portion of
the cost for the benefits referred to under subsection (a)(ii)(1)
immediately above paid by Sears during the Salary Continuation
Period, and Executive shall instead by eligible for COBRA
continuation coverage under the Sears medical and dental plans as
of Executive’s Severance from Service date.
3. Subject to subsection (a)(ii)(4)
immediately below, in the event Executive provides services to
another employer and is covered by such employer’s health
benefits plan or program, the medical and dental benefits provided
by Sears hereunder shall be secondary to such employer’s
health benefits plan or program in accordance with the terms of
Sears health benefit plans.
4. All of the benefits described in
this subsection (a)(ii) will terminate and forever lapse if
Executive is employed by a “ Sears Competitor ”
(as defined in subsection 4(b)(ii) herein) during the Salary
Continuation Period, and Executive shall be obligated to reimburse
Sears for any portion of the cost for the benefits referred to
under subsection (a)(ii)(1) immediately above paid by Sears during
the Salary Continuation Period, and Executive shall instead be
eligible for COBRA continuation coverage under the Sears medical
and dental plans as of Executive’s Severance from Service
date.
iii. Outplacement . From the
first day of the Leave, Executive will be immediately eligible for
outplacement services at the expense of Sears or the appropriate
Sears Affiliate. Sears and Executive will mutually agree on which
outplacement firm, among current vendors used by Sears, will
provide these services. Such services will be provided for up to
one (1) year from the beginning of the Salary Continuation
Period or until employment is obtained, whichever occurs first.
Outplacement benefits described in this subsection (a)(iii) will
terminate and forever lapse if Executive is employed by a “
Sears Competitor ” as defined in subsection 4(b)(ii)
herein.
iv. Salary Continuation (described
under subsection (a)(i) above) or benefits (described under
subsections (a)(ii) and (iii) above) are referred to
collectively hereinafter as “Severance
Benefits”.
v. Notwithstanding the foregoing and
anything herein to the contrary, in the event of Executive’s
death during the Salary Continuation Period, any unpaid portion of
the Salary Continuation payable in accordance with subsection
(a)(i) above shall be paid in a lump sum, as soon as
administratively feasible, to Executive’s estate, and any
eligible dependents (as described under subsection (a)(ii)(1)
above) who are covered dependents as of the date of death shall
incur a qualifying event under COBRA as a result of such
death.
(b) Impact of Leave on Certain
Other Plans/Programs .
3
(i) Annual Incentive Plan .
Upon occurrence of the Leave, Executive’s entitlement to any
award under the applicable annual incentive plan
(“AIP”) sponsored by Sears, shall be determined in
accordance with the terms and conditions of the AIP document
regarding termination of employment (as if such termination of
employment occurred on the first day of the Leave).
(ii) Long-Term Performance
Program . Upon occurrence of the Leave, Executive’s
entitlement to any award granted to Executive under a long-term
incentive program (“LTIP”) sponsored by Sears, shall be
determined in accordance with the terms and conditions of the award
letter and the LTIP document regarding termination of employment
(as if such termination of employment occurred on the first day of
the Leave).
(iii) Stock Plan . Upon
occurrence of the Leave, any unvested options or restricted stock
awarded to Executive under a stock plan sponsored by Sears shall be
forfeited as of the first day of the Leave.
2. Definitions . For purposes
of this Agreement, the following terms shall have the definitions
as set forth below:
(a) “ Cause ”
shall mean (i) a material breach by Executive (other than a
breach resulting from Executive’s incapacity due to a
Disability) of Executive’s duties and responsibilities which
breach is demonstrably willful and deliberate on Executive’s
part, is committed in bad faith or without reasonable belief that
such breach is in the best interests of Sears or the Sears
Affiliates and is not remedied in a reasonable period of time after
receipt of written notice from Sears specifying such breach;
(ii) the commission by Executive of a felony involving moral
turpitude; or (iii) dishonesty or willful misconduct in
connection with Executive’s employment.
(b) “ Disability
” shall mean disability as defined under the Sears long-term
disability plan.
(c) “ Good Reason
” shall mean, without Executive’s written consent,
(i) a reduction of more than ten percent (10%) in the sum
of Executive’s annual base salary and target bonus from those
in effect as of the date of this Agreement;
(ii) Executive’s mandatory relocation to an office more
than fifty (50) miles from the primary location at which
Executive is required to perform Executive’s duties
immediately prior to the date of this Agreement; or (iii) any
other action or inaction that constitutes a material breach of the
terms of this Agreement, including failure of a successor company
to assume or fulfill the obligations under this Agreement. In
each case, Executive must provide Sears with written notice of the
facts giving rise to a claim that “Good Reason” exists
for purposes of this Agreement, within thirty (30) days of the
initial existence of such Good Reason event, and Sears
shall have a right to remedy such event within sixty (60) days
after receipt of Executive’s written notice (“the
sixty (60) day period”). If
Sears remedies the Good Reason event within the sixty
(60) day period, the Good Reason event (and Executive's
right to receive any benefit under this Agreement on account of
termination of employment for Good Reason) shall cease to
exist. If Sears does not remedy the Good Reason event within the
sixty (60) day period, and Executive does not incur a
termination of employment within thirty
(30) days following the earlier of: (y) the date
Sears notifies Executive that it does not intend to remedy the Good
Reason or does not agree that there has been a Good Reason event,
or (z) the expiration of the sixty
4
(60) day
period, the Good Reason event (or any claim of Good Reason) shall
cease to exist. Notwithstanding the foregoing, if
Executive fails to provide written notice to Sears of the facts
giving rise to a claim of Good Reason within thirty (30) days
of the initial existence of such Good Reason event,
the Good Reason event (and Executive's right to receive
any benefit under this Agreement on account of termination of
employment for Good Reason) shall cease to exist as of
the thirty-first (31 st ) day following the later
of its occurrence or Executive’s knowledge
thereof.
(d) “ Sears Affiliate
” shall mean any person with whom Sears is considered to be a
single employer under Code Section 414 (b) and all
persons with whom Sears would be considered a single employer under
Code Section 414 (c), substituting “50%” for the
“80%” standard that would otherwise apply.
(e) “ Section 409A
Threshold ” shall, with respect to Executive, refer to an
amount equal two times the lesser of (i) Executive's annual
compensation (as defined under Treasury Regulation
Section 1.415-1(d)(2)) for services provided to Sears and any
Sears Affiliate as an employee for the calendar year preceding the
calendar year in which Executive has a Separation from Service with
Sears and each Sears Affiliate; or (ii) the maximum amount
that may be taken into account under a qualified plan in accordance
with Code Section 401(a)(17).
(f) “ Separation from
Service ” shall mean, for purposes of satisfying the
applicable requirements of Code Section 409A, the date
Executive is deemed to have incurred a separation from service
within the meaning of Code Section 409A and the regulations
issued thereunder, which in turn shall refer to Executive’s
ceasing to be employed by Sears and any Sears Affiliate, subject to
the following:
i. The employment relationship will
be deemed to have ended at the time Executive and Sears reasonably
anticipate that the level of bona fide services Executive would
perform for Sears or any Sears Affiliate after such date (whether
as an employee or independent contractor, but not as a director)
would permanently decrease to no more than 20% of the average level
of bona fide services performed by Executive over the immediately
preceding thirty-six (36)-month period.
ii. The employment relationship will
be treated as continuing intact while Executive is on a bona fide
leave of absence (determined in accordance with Treasury Regulation
Section 409A-1(h)), but (1) only if there is a reasonable
expectation that Executive will return to active employment status,
and (2) only to the extent that such leave of absence does not
exceed six (6) months, or, if longer, for so long as Executive
has a contractual or statutory right to reemployment.
iii. The fact that Executive is
placed on a Leave, as defined in Section 1(a)(i) above, will
not prevent him from having a Separation from Service, as defined
above, for purposes of this Agreement.
iv. Notwithstanding anything herein
to the contrary, the fact that Executive is treated as having
incurred a Separation from Service under Code Section 409A and
the terms of this Agreement shall not be determinative, or in any
way affect
5
the analysis, of whether Executive
has retired, terminated employment, separated from service,
incurred a severance from employment or become entitled to a
distribution, under the terms of any retirement plan (including
pension plans and 401(k) savings plans) maintained by Sears
(including by a Sears Affiliate).
(g) “ Specified
Employee ” shall, for purposes of subsection 1(a)(i)(2)
above, refer to Executive’s status as a “specified
employee” under Code Section 409A (and regulations
issued thereunder) as of the date of his Separation from Service,
which shall be determined in accordance with the provisions of
Supplement A to the Supplemental Retirement Income Plan (as amended
and restated effective January 1, 2008).
3. Intellectual Property
Rights . Executive acknowledges that Executive’s
development, work or research on any and all inventions or
expressions of ideas, that may or may not be eligible for patent,
copyright, trademark or trade secret protection, hereafter made or
conceived solely or jointly within the scope of employment at Sears
or any Sears Affiliate, provided such invention or expression of an
idea relates to the business of Sears or any Sears Affiliate, or
relates to actual or demonstrably anticipated research or
development of Sears or any Sears Affiliate, or results from any
work performed by Executive for or on behalf of Sears or any Sears
Affiliate, are hereby assigned to Sears, including
Executive’s entire rights, title and interest.
Executive
