Letter from Registrant to Mark S. Cosby



 



Exhibit 10.37


SEARS, ROEBUCK AND CO.



3333 BEVERLY ROAD



HOFFMAN ESTATES, IL 60179


	 	 
	 	Greg A. Lee

Senior Vice President

Human Resources

847-286-0558

Fax 847-286-3258



November 13, 2002



Mr. Mark S. Cosby

12026 Hunting Crest

Prospect, KY 40059


Dear Mark,


This letter will confirm your acceptance of our offer of employment to join
Sears, Roebuck and Co. as Executive Vice President, Sears, Roebuck and Co. and
President, Full Line Stores, reporting to Alan J. Lacy, Chairman and CEO. Your
start date will be determined.


Your compensation package will consist of the following:



	 	•	 	Annual base salary of $530,000, with periodic increases based upon performance.
	 
	 	•	 	Sign-on bonus of $100,000, less applicable withholding taxes and any legal deductions.
	 
	 	•	 	Participation in the Sears Annual Incentive Plan. Your annual
incentive opportunity will equate to a bonus target equal to 85%
of base salary, amounting to $450,500 on an annualized basis. The
annual incentive performance objective for your position may be
based on a combination of earnings per share as well as other
relevant strategic or operational goals. Any incentive earned
will be paid by March 15 of the year following the end of the
performance cycle.
	 
	 	•	 	For the 2002 incentive payable in 2003, we will guarantee you a
minimum Annual Incentive award equal to 50% of your non-prorated
2002 annual bonus target.
	 
	 	•	 	For the 2003 incentive payable in 2004, we will guarantee you a
minimum Annual Incentive award equal to 100% of your 2003 annual
bonus target.
	 
	 	•	 	60,000 non-qualified stock options that will vest in three
equal annual installments from the date of grant. You will be
eligible for future annual stock option grants commensurate with
your position.
	 


	 	–	 	20,000 options will vest one year from the date of grant
	 
	 	–	 	20,000 options will vest two years from the date of grant
	 
	 	–	 	20,000 options will vest three years from the date of grant
	 


	 	•	 	40,000 shares of restricted stock that will cliff vest three years from the date of the grant.
	 
	 	•	 	30,000 performance shares granted as part of the Sears
Long-Term Performance Incentive Program (LTPIP). The Sears Board
of Directors has approved the terms and provisions of the LTPIP,
which is designed to reward senior-level executives for
achievement of specified goals.
	 
	 	•	 	Your stock option, restricted stock, and LTPIP grants will be
made effective two business days after your start date.
	 
	 	•	 	Pension will commence at your employment date. A service
enhancement to your pension benefit will be provided through a
non-qualified pension plan. The service enhancement will be
accrued to you as a 2-year-for-1-year service credit during your
first ten years of employment with Sears,



 






 





	 	 	 	resulting in 20 years of
credited service at the end of the ten-year period. Your pension
benefit will vest after five years of continuous service with
Sears. At age 65, the estimated value of your Sears pension would
equal a lump sum of approximately $6.5 million, while the
enhancement would equal an additional lump sum of approximately
$2.3 million.
	 
	 	•	 	You will participate in all retirement and welfare programs on
a basis no less favorable than other executives at your level, in
accordance with the applicable terms of those programs.
	 
	 	•	 	You will be eligible for relocation assistance benefits that
are typically provided to an executive at your level and in
accordance with the terms of the relocation program, to include
reimbursement for temporary living expenses and the purchase of
your home, if required.
	 
	 	•	 	You will be asked to sign an Executive Severance / Non-Compete
Agreement and an Executive Non-Disclosure and Non-Solicitation of
Employees Agreement as a condition of your participation in the
Long-Term Performance Incentive Program. If you are involuntarily
terminated from Sears for any reason other than cause, death,
total and permanent disability, resignation, or retirement after
age 65, you will receive two years of pay continuation (i.e., base
salary and target annual bonus). If you are terminated following
a change-in-control, you will receive the aforementioned severance
benefit in an undiscounted lump-sum payment. In consideration for
these severance terms, you agree not to disclose confidential
information and not to solicit employees. You would also agree
not to aid, assist or render services for any ‘Competitor’ (as
defined in the agreement) for two years following termination of
employment. Should you be involuntarily terminated for a reason
other than for Cause (as defined in the agreement) before the
first anniversary of your service with Sears, the following would
occur:
	 


	 	–	 	The 40,000 shares of restricted stock granted to you
at the time of your hire would fully vest at the end of your
two-year severance period.
	 
	 	–	 	You would receive a cash payment within 30 days of
the end of the two-year salary continuation period
equivalent in value to the product of the 20,000 options
that would not otherwise vest during the salary continuation
period times the option ‘spread’ (the positive difference
between the fair market value on the last day of the salary
continuation period and the exercise price of the option
grant).
	 


	 	•	 	The above has been approved by the Compensation Committee of
the Sears, Roebuck and Co. Board of Directors. Your employment is
contingent upon your satisfactorily passing a pre-employment drug
test.



Regards,


	 
	 
	/s/Greg A. Lee


Greg A. Lee
	 
	 
	cc: Alan J. Lacy
	 





	 	 	 
	Accepted: /s/Mark S. Cosby	 	
Date: November 14, 2002