****SEARS, ROEBUCK AND CO.****Hoffman Estates, Illinois****

  N Date: February 14, 2001S Total Number of Shares:Price per Share: $38.65
Pursuant to action taken by Sears, Roebuck and Co. (the"Company") under the 2000 Employees Stock Plan (the "Plan"), you are herebygranted the option (herein called "this option") to purchase, at the priceper share shown above, upon and subject to the provisions and conditionshereinafter set forth, the total number of common shares of the Companyshown above, in three installments, each for one-third of said total numberof shares, such installments to accrue, respectively, on the fourteenthday of February in each of the years 2002, 2003 and 2004.
You may exercise your right to purchase all or any ofthe shares included in any such installment on or after the date on whichsuch installment accrues, but in any event not later than February 14,2011 (the "Expiration Date"), by making payment in full for the shareswhich you so elect to purchase, at the price per share herein prescribed.Your payment may be made by check or by tendering common shares of theCompany, or by means of a combination of a check and common shares of theCompany, subject to the provisions set forth herein. Only whole commonshares (and not fractional shares) of the Company may be tendered in paymentof all or a portion of the purchase price, you must have owned any suchshares tendered in payment for at least six months prior to the date ofexercise and the certificate(s) for any such shares tendered in paymentmust be accompanied by duly executed instruments of transfer in a formacceptable to the Company. If all or part of the payment is in the formof common shares of the Company, such shares shall be valued at their fairmarket value on the date of exercise. The fair market value of common sharesof the Company on the date of exercise shall be the mean (adjusted to thenext higher full cent to eliminate any fractional cent) between the highand low prices per share for the Company's common shares as reported ina summary of composite transactions for stocks listed on the New York StockExchange on the date of exercise or, if the New York Stock Exchange isnot open for trading on such date, the average of the means between thehigh and low prices per share for the Company's common shares, as so reported,on the nearest date before and the nearest date after such date on whichthe New York Stock Exchange is open for trading (adjusted to the next higherfull cent to eliminate any fractional cent). The excess, if any, of thepurchase price for the shares which you elect to purchase under this optionover the fair market value of the shares, if any, which you tender in paymentof the purchase price must be paid by check, made payable to "Sears, Roebuckand Co." Please submit your payment to:Stock Option OfficeSears, Roebuck and Co.Hoffman Estates, IL 60179The exercise of this option shall be effective on the datewhen payment in full for the shares being purchased is actually receivedin the Stock Option Office; provided that no payment shall be acceptedwhich is received in the Stock Option Office after the Expiration Date.You will receive a stock certificate representing the shares for whichyou have made payment, except that the Company shall not be obligated todeliver any stock certificates unless and until (i) there has been compliancewith any federal or state laws or regulations or national securities exchangerequirements which the Company may deem applicable; (ii) all legal mattersin connection with the sale and delivery of the shares have been approvedby the Company's counsel; and (iii) your check in payment for the shareshas cleared.
You are also hereby granted additional installments topurchase common shares of the Company under this option on the terms setforth in this paragraph each time you elect to pay all or a portion ofthe purchase price upon any exercise of this option prior to February 14,2008 by tendering common shares of the Company as set forth above. Suchadditional option rights permit you to purchase, in the aggregate, a numberof shares equal to the number of shares so tendered in payment, at a priceper share equal to the fair market value of a common share of the Companyon the date of your exercise of this option (subject to a minimum priceper share equal to the price per share specified for the purchase of sharesunder this option in respect of which such additional rights are granted).Such additional option rights shall be exercisable in three annual installments(with the first installment accruing one year from the date of exerciseof this option, the number of shares subject to each of the first two installmentsbeing equal to one-third of the aggregate number of shares subject to suchadditional option rights (adjusted to the next lower number of whole sharesto eliminate any fractional shares) and the number of shares subject tothe third installment being equal to the aggregate number of shares subjectto such additional option rights less the aggregate number of shares subjectto the first two installments), shall expire on the Expiration Date setforth herein, and shall otherwise be on terms and conditions substantiallysimilar to those set forth herein.
In addition, any gain related to any portion of this optionexercised as set forth in the previous paragraph by paying the purchaseprice by tendering common shares of the Company, may be deferred in accordancewith the terms of the Sears, Roebuck and Co. Deferred Compensation Plan.
Upon the occurrence from time to time prior to the ExpirationDate of a Change of Control (as defined in Appendix A), notwithstandingany other provision of this option:(i) Each installment of this option which hasnot theretofore accrued shall immediately accrue and become exercisable,providedhowever, that no installment of this option may be exercised untilsix months after the date of grant of this option.
(ii) During the sixty-day period from and after the Changeof Control, you are hereby granted the right ("limited stock appreciationrights") to elect to surrender, in whole or in part, any exercisable optionright which has accrued under this option and receive payment therefor,from the Company or one of its subsidiaries, in cash, with respect to eachshare subject to the surrendered option right in an amount equal to theexcess of the fair market value of such share on the date of surrenderover the option price. The fair market value of common shares of the Companyon the date of surrender shall be the mean (adjusted to the next higherfull cent to eliminate any fractional cent) between the high and low pricesper share for the Company's common shares as reported in a summary of compositetransactions for stocks listed on the New York Stock Exchange on the datethe Stock Option Office receives the notice referred to below of your electionto exercise such right or, if the New York Stock Exchange is not open fortrading on such date, the average of the means between the high and lowprices per share for the Company's common shares, as so reported, on thenearest date before and the nearest date after such date on which the NewYork Stock Exchange is open for trading (adjusted to the next higher fullcent to eliminate any fractional cent). You may exercise such electionby notifying the Stock Option Office, in writing, of the number of shareswith respect to which you wish to exercise limited stock appreciation rights.Notification of your election must be received in the Stock Option Officeno later than the end of the aforesaid sixty-day period and prior to theExpiration Date. In no event may any such election be made until six monthsafter the date of grant of this option.provided, however, that in the case of anyinstallment of this option which has accrued, or a limited stock appreciationright which is exercisable, solely as a result of a Change of Control dueto approval by the shareholders of the Company of a Business Combination(as defined in Appendix A), any exercise by you shall be conditioned upon,and deemed effective immediately prior to, consummation of the BusinessCombination (except that the fair market value of common shares of theCompany shall continue to be determined, in accordance with the provisionsset forth above, on the date the Stock Option Office receives the electionto exercise all or any portion of such limited stock appreciation rights),and provided further, that notwithstanding the provisions of this paragraph,you may at any time exercise any option rights in accordance with the otherprovisions of this option.
This option will not be treated as an incentive stockoption for federal income tax purposes. Therefore, under existing lawsand regulations, the difference between the price paid for the shares purchasedhereunder and the market value thereof on the date this option is exercised,or any amounts received in cash upon the exercise of limited stock appreciationrights or otherwise with respect to this option, will be subject to federalincome tax at ordinary rates and to FICA tax and to their respective withholdingrequirements, and may be subject to state and local taxes and withholdingrequirements. The payment of all such federal, state and local taxes isyour personal responsibility. However, the Company, at its discretion,may require you to deposit with it an amount equal to any required withholding.You may elect that all or any portion of any such withholding requiredto be deposited upon exercise of this option shall be satisfied by havingthe Company withhold a portion of the whole shares issuable pursuant toyour exercise of this option, subject to the provisions set forth below.Such shares shall be valued at their fair market value on the date of exercise.In addition, if you are an officer of the Company subject to Section 16(b)of the Securities Exchange Act of 1934 (the "Exchange Act"), your electionto have shares withheld to satisfy such tax withholding requirements maybe subject to certain restrictions. Your Officers' Stock Manual will includea detailed explanation of these restrictions.
The Company reserves and shall have the right, by writtennotice to you, to change the provisions of this option in any manner thatit may deem necessary or advisable to carry out the purpose of its grantas a result of any change in applicable laws or regulations or any futureregulation, ruling or judicial decision; provided that any such changeshall be applicable only to shares for which payment or limited stock appreciationrights elections shall not then have been made as herein provided.
If you cease to be employed by the Company or any of itssubsidiaries (except in the event of retirement, permanent and total disability("Disability") or death, as hereinafter provided), this option shall terminateas to the shares for which you shall not then have made payment or limitedstock appreciation rights elections as aforesaid, except that within threemonths after the date you cease to be so employed, but in no event laterthan the Expiration Date, you may pay for and receive all or any of theshares comprising the installment or installments that shall have accruedat the date you cease to be so employed and for which you shall not thenhave made payment or limited stock appreciation rights elections as aforesaid.In the event of your normal retirement or, with Company approval, earlyretirement, you may, within five years of your retirement, but in no eventlater than the Expiration Date, pay for and receive such number of Companyshares as is determined by multiplying the total number of Company commonshares granted pursuant to this option by a fraction, the numerator ofwhich is the number of calendar months which have elapsed from the dateof grant of this option through the date of your termination of employment(rounded up to the nearest whole number, but in no event shall such numeratorbe greater than the denominator) and the denominator of which is the numberof calendar months that have elapsed from the date of grant through thedate on which this option is scheduled to vest ("Prorated Shares") andfor which you shall not then have made payment or limited stock appreciationrights elections as aforesaid. In the event of your Disability or death,while employed by the Company or any of its subsidiaries, or during theperiod in which this option continues to be exercisable after terminationof employment, you, or in the case of death, your legal representative(including any person designated in your will to have the right), may withinfive years after the date of your Disability or death, but in no eventlater than the Expiration Date, pay for and receive such number of sharesthat shall have continued to vest during such period; provided that inthe event such Disability or death shall occur within twelve months ofthe date of grant of this option, you shall receive such number of Companyshares as is determined by multiplying the total number of Company commonshares granted pursuant to this option by a fraction, the numerator ofwhich is the number of calendar months which have elapsed from the dateof grant of this option through the date of your Disability or death (roundedup to the nearest whole number but in no event shall such numerator begreater than the denominator) and the denominator of which is 12 and forwhich you shall not then have made payment or limited stock appreciationrights elections as aforesaid. Any shares so received shall continue tovest in accordance with the terms of your option grant. In lieu, in wholeor in part, of any such exercise of your option rights, you (or your legalrepresentative as set forth above in the event of your death) may makeelections with respect to any limited stock appreciation rights which wereexercisable at the date you so ceased to be employed, or at the date ofsuch Disability, normal retirement or, with Company approval, early retirement,or death, as the case may be, but in no event after the expiration of theaforesaid sixty-day period from and after a Change of Control or afterthe Expiration Date.
In the event that the Company (in connection with thedisposition of all or a portion of the stock of any subsidiary of the Company,the sale of stock by any subsidiary or otherwise) no longer includes, oranticipates that it will no longer include, your employer in the Company'sconsolidated federal income tax return, the Company will terminate yourrights under this option as to shares or rights not theretofore vested.Shares that have vested as of the date of such divestiture shall be subjectto the standard termination provisions outlined in this document.
In the event of a stock dividend or stock split of issuedcommon shares of the Company, the Company shall, and in the event of acombination or other reduction in the number of issued common shares ofthe Company, or spin-off or other distribution of any assets of the Companyor any subsidiary or all or any portion of the interest of the Companyin any subsidiary to the shareholders of the Company, the Company may,make such adjustments, if any, in the number of unpurchased shares subjectto this option, the exercise price per share and the limited stock appreciationrights with respect thereto, as it may in good faith determine to be appropriateand equitable.
In the event of a merger, consolidation, reorganization,sale or exchange of substantially all assets, or dissolution of the Company(an "extraordinary corporate transaction"):(i) your rights under this option shall terminateas to shares or rights not theretofore purchased or exercised except tothe extent provided by the Company or in the terms of the merger, consolidation,reorganization, or plan for dissolution or sale or exchange of the assets;
(ii) appropriate and equitable provision shall be made,by the Company, in the terms of the merger, consolidation, reorganizationor plan for dissolution or sale or exchange of the assets, or otherwise,with respect to your rights under this option; and
(iii) for purposes of the foregoing clause (ii), in thecase of any extraordinary corporate transaction which is consummated sixmonths or more after the date of grant of this option, such appropriateand equitable provision shall mean that either (a) appropriate and equitableprovision shall be made for the continuation and adjustment of the rightsunder this option or (b) the Company shall be obligated to make adequateprovision (including without limitation (1) to the extent required, obtainingany necessary approvals or consents by the shareholders, the Board of Directorsor any committee of the Board of Directors of the Company or any governmentalauthority, and (2) if you are subject to Section 16(b) of the ExchangeAct, such action as may be required to assure that any amounts receivedby you are not subject to recovery pursuant to Section 16(b)) to assurethat either (x) each installment of this option shall have accrued andbeen exercisable for such period of time prior to consummation of suchextraordinary corporate transaction so as to afford you a reasonable opportunityprior to such consummation during which you may elect to exercise any ofyour rights under each installment of this option, or (y) upon consummationof such extraordinary corporate transaction, you shall receive an amount,in cash, with respect to each share subject to this option (whether ornot the right to purchase such share has then accrued) and for which youhave not then made payment or limited stock appreciation rights electionsas aforesaid, at least equal to the excess of the fair market value ofsuch share, on the date of such extraordinary corporate transaction, overthe option price. The fair market value of common shares of the Companyon the date of an extraordinary corporate transaction shall be the simplearithmetic average of the mean (adjusted to the next higher cent to eliminateany fractional cent) between the high and low prices for the Company'scommon shares, as reported in a summary of composite transactions for stockslisted on the New York Stock Exchange, for each of the most recent tendays preceding such date for which there were such reported transactions.This option and the limited stock appreciation rights providedfor herein shall be exercisable during your lifetime only by you or yourguardian or legal representative and may not be sold, transferred (otherthan under terms specified herein), pledged or otherwise assigned by you,expressly or by operation of law, except in the event of your death, andthen only to the extent and subject to the provisions and conditions hereinset forth. Any attempted sale, transfer, pledge or other disposition thereofby you shall be void and shall constitute valid grounds for cancellationof this option and the limited stock appreciation rights provided for hereinby the Company.
You may transfer this option or a portion hereof in accordancewith the terms and conditions described in Appendix B. As described inAppendix B, upon the transfer of any portion of this option, certain featuresof this option become null and void as to the transferred portion.
You are also prohibited from selling your option sharesif you are in possession of "confidential, material, non-public information"about Sears or its affiliated companies.
This option is granted for the purpose of affording selectedkey employees an opportunity to acquire a proprietary interest in the Companythrough stock ownership. However, any shares purchased pursuant heretowill be your sole property, and the Company recognizes that you may findit necessary to sell all or part of such shares for various reasons.
This option and the limited stock appreciation rightsprovided for herein shall be of no force or effect and no rights hereundershall exist after the Expiration Date.  Sears, Roebuck and Co.
ALAN J. LACYChairman and Chief Executive Officer      Appendix ACertain Definitions
A "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group(within the meaning of Section 13 (d)(3) or 14(d)(2) of the SecuritiesExchange Act of 1934, as amended [the "Exchange Act"] (a "Person") of beneficialownership (within the meaning of Rule 13d-3 promulgated under the ExchangeAct) of 20% or more of either (i) the then outstanding common shares ofthe Company (the "Outstanding Company Common Shares") or (ii) the combinedvoting power of the then outstanding voting securities of the Company entitledto vote generally in the election of directors (the "Outstanding CompanyVoting Securities");provided, however, that the following acquisitionsshall not constitute a Change of Control: (i) any acquisition directlyfrom the Company (excluding an acquisition by virtue of the exercise ofa conversion privilege); (ii) any acquisition by the Company or any ofits subsidiaries; (iii) any acquisition by any employee benefit plan (orany related trust) sponsored or maintained by the Company of any of itssubsidiaries; or (iv) any acquisition by any corporation pursuant to areorganization, merger or consolidation, if, following such reorganization,merger or consolidation, the conditions described in clauses (i), (ii)and (iii) of (c) below are satisfied; or
(b) Individuals who, as of the date hereof, constitutethe Board of Directors of the Company (the "Board") (as of the date hereof,the "Incumbent Board") cease for any reason to constitute at least a majorityof the Board; provided, however, that any individual becoming a directorsubsequent to the date hereof whose election, or nomination for electionby the Company's shareholders, was approved by a vote of at least a majorityof the directors then comprising the Incumbent Board shall be consideredas though such individual were a member of the Incumbent Board, but excluding,for this purpose, any such individual whose initial assumption of officeoccurs as a result of either an actual or threatened election contest (assuch terms are used in Rule 14a-11 of Regulation 14A promulgated underthe Exchange Act) or other actual or threatened solicitation of proxiesor consents by or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a "BusinessCombination", which shall mean a reorganization, merger or consolidation,in each case, unless, following such reorganization, merger or consolidation,(i) more than 60% of, respectively, the then outstanding common sharesof the corporation resulting from such reorganization, merger of consolidationand the combined voting power of the then outstanding voting securitiesof such corporation entitled to vote generally in the election of directorsis then beneficially owned, directly or indirectly, by all or substantiallyall of the individuals and entities who were the beneficial owners, respectively,of the Outstanding Company Common Shares and Outstanding Company VotingSecurities immediately prior to such reorganization, merger or consolidationin substantially the same proportions as their ownership, immediately priorto such reorganization, merger or consolidation, of the Outstanding CompanyCommon Shares and Outstanding Company Voting Securities, as the case maybe, (ii) no Person (excluding the Company, any of its subsidiaries, anyemployee benefit plan (or related trust) sponsored or maintained by theCompany, any of its subsidiaries or such corporation resulting from suchreorganization, merger or consolidation and any Person beneficially owning,immediately prior to such reorganization, merger or consolidation, directlyor indirectly, 20% or more of the Outstanding Company Common Shares orOutstanding Company Voting Securities, as the case may be) beneficiallyowns, directly or indirectly, 20% or more of, respectively, the then outstandingcommon shares of the corporation resulting from such reorganization, mergeror consolidation or the combined voting power of the then outstanding votingsecurities of such corporation entitled to vote generally in the electionof directors and (iii) at least a majority of the members of the boardof directors of the corporation resulting from such reorganization, mergeror consolidation were members of the Incumbent Board at the time of theexecution of the initial agreement providing for such reorganization, mergeror consolidation: or
(d) Approval by the shareholders of the Company of (i)a complete liquidation or dissolution of the Company or (ii) the sale orother disposition of all or substantially all of the assets of the Company,other than to a corporation, with respect to which following such saleor other disposition, (A) more then 60% of, respectively, the then outstandingcommon shares of such corporation and the combined voting power of thethen outstanding voting securities of such corporation entitled to votegenerally in the election of directors is then beneficially owned, directlyor indirectly, by all or substantially all of the individuals and entitieswho were the beneficial owners, respectively, of the Outstanding CompanyCommon Shares and Outstanding Company Voting Securities immediately priorto such sale or other disposition in substantially the same proportionas their ownership, immediately prior to such sale or other disposition,of the Outstanding Company Common Shares and Outstanding Company VotingSecurities, as the case may be, (B) no Person (excluding the Company, anyof its subsidiaries, and any employee benefit plan (or related trust) sponsoredor maintained by the Company, any of its subsidiaries or such corporationand any Person beneficially owning, immediately prior to such sale or otherdisposition, directly or indirectly, 20% or more of the Outstanding CompanyCommon Shares or Outstanding Company Voting Securities, as the case maybe) beneficially owns, directly or indirectly, 20% or more of, respectively,the then outstanding common shares of such corporation and the combinedvoting power of the then outstanding voting securities of such corporationentitled to vote generally in the election of directors and (C) at leasta majority of the members of the board of directors of such corporationwere members of the Incumbent Board at the time of the execution of theinitial agreement or action of the Board providing for such sale or otherdisposition of assets of the Company.
For purposes of the foregoing definition of "Change ofControl", a "subsidiary" of the Company shall mean any corporation in whichthe Company, directly or indirectly, holds a majority of the voting powerof such corporation's outstanding shares of capital stock.        Appendix B Stock Option Transferability Feature
The terms and conditions of the transferability featureof this option are as follows:(1) Only vested options may be transferred.
(2) The whole option or any portion of at least 1,000optioned shares hereof may be transferred. However, the transferor mayonly make five transfers of any one option.
(3) The transferor can transfer only to (a) any child,stepchild, grandchild, parent, stepparent, grandparent, spouse, formerspouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,daughter-in-law, brother-in-law, sister-in-law of the transferor, includingany person so related to the transferor by legal adoption ("Immediate FamilyMembers"), (b) any person sharing your household (other than a tenant),(c) a trust or trusts for the exclusive benefit of such Immediate FamilyMembers, or (d) a partnership or limited liability company in which ImmediateFamily Members are the only partners or members, as the case may be.
(4) If the transferor dies before the transferee exercisesthe option, the transferor's estate will be liable for applicable taxes.
(5) Upon exercise of the transferred option (or portionthereof), delivery of shares by the Company to the transferee is contingenton the payment of all applicable tax withholding by or on behalf of thetransferor.
(6) Upon the transfer of all or any portion of this option,the following features of the option will become null and void as theyrelate to the transferred portion: (a) the right to subsequent transfers,(b) the right to additional grants by paying the purchase price with previously-ownedshares (i.e. the reload feature), (c) the deferral of gains from the exerciseof the option pursuant to the terms of the Sears, Roebuck and Co. DeferredCompensation Plan, and (d) the right to have shares withheld from the optionexercise to cover tax withholding (i.e., tax withholding rights).Sears, Roebuck and Co. may modify, amend, suspend, or terminatethis feature at any time.      SEARS, ROEBUCK AND CO.Hoffman Estates, Illinois
This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933
October, 2001
Senior Executive Option Grant Supplement

The options granted under the Sears, Roebuck and Co. (the"Company") 2000 Employees Stock Plan (the "Plan") on October 10, ("theoption") to purchase common shares of the Company at $37.94 per share andsubject to the provisions and conditions hereinafter set forth. The sharessubject to this option will become available for purchase in three installments,each for one-third of said total number of shares, such installments toaccrue, respectively, on the tenth day of October in each of the years2002, 2003 and 2004.
You may exercise your right to purchase all or any ofthe shares included in any such installment on or after the date on whichsuch installment accrues, but in any event not later than February 14,2011 (the "Expiration Date"), by making payment in full for the shareswhich you so elect to purchase, at the price per share herein prescribed.
Your payment may be made by check or by tendering commonshares of the Company, or by means of a combination of a check and commonshares of the Company, subject to the provisions set forth herein. Onlywhole common shares (and not fractional shares) of the Company may be tenderedin payment of all or a portion of the purchase price, you must have ownedany such shares tendered in payment for at least six months prior to thedate of exercise and the certificate(s) for any such shares tendered inpayment must be accompanied by duly executed instruments of transfer ina form acceptable to the Company. If all or part of the payment is in theform of common shares of the Company, such shares shall be valued at theirfair market value on the date of exercise. The fair market value of commonshares of the Company on the date of exercise shall be the mean (adjustedto the next higher full cent to eliminate any fractional cent) betweenthe high and low prices per share for the Company's common shares as reportedin a summary of composite transactions for stocks listed on the New YorkStock Exchange on the date of exercise or, if the New York Stock Exchangeis not open for trading on such date, the average of the means betweenthe high and low prices per share for the Company's common shares, as soreported, on the nearest date before and the nearest date after such dateon which the New York Stock Exchange is open for trading (adjusted to thenext higher full cent to eliminate any fractional cent). The excess, ifany, of the purchase price for the shares which you elect to purchase underthis option over the fair market value of the shares, if any, which youtender in payment of the purchase price must be paid by check, made payableto "Salomon Smith Barney."
The exercise of this option shall be effective on thedate when payment in full for the shares being purchased is actually receivedby Salomon Smith Barney; provided that no payment shall be accepted whichis received by Salomon Smith Barney after the close of trading on the ExpirationDate. The Company shall not be obligated to deliver any stock certificatesunless and until (i) there has been compliance with any federal or statelaws or regulations or national securities exchange requirements whichthe Company may deem applicable; (ii) all legal matters in connection withthe sale and delivery of the shares have been approved by the Company'scounsel; and (iii) your check in payment for the shares has cleared.
You are also hereby granted additional installments topurchase common shares of the Company under this option on the terms setforth in this paragraph each time you elect to pay all or a portion ofthe purchase price upon any exercise of this option prior to October 10,2008 by tendering common shares of the Company as set forth above. Suchadditional option rights permit you to purchase, in the aggregate, a numberof shares equal to the number of shares so tendered in payment, at a priceper share equal to the fair market value of a common share of the Companyon the date of your exercise of this option (subject to a minimum priceper share equal to the price per share specified for the purchase of sharesunder this option in respect of which such additional rights are granted).Such additional option rights shall be exercisable in three annual installments(with the first installment accruing one year from the date of exerciseof this option, the number of shares subject to each of the first two installmentsbeing equal to one-third of the aggregate number of shares subject to suchadditional option rights (adjusted to the next lower number of whole sharesto eliminate any fractional shares) and the number of shares subject tothe third installment being equal to the aggregate number of shares subjectto such additional option rights less the aggregate number of shares subjectto the first two installments), shall expire on the Expiration Date setforth herein, and shall otherwise be on terms and conditions substantiallysimilar to those set forth herein.
In addition, any gain related to any portion of this optionexercised as set forth in the previous paragraph by paying the purchaseprice by tendering common shares of the Company, may be deferred in accordancewith the terms of the Sears, Roebuck and Co. Deferred Compensation Plan.
Upon the occurrence from time to time prior to the ExpirationDate of a Change of Control (as defined in Appendix A), notwithstandingany other provision of this option:(i) Each installment of this option which hasnot theretofore accrued shall immediately accrue and become exercisable,providedhowever, that no installment of this option may be exercised untilsix months after the date of grant of this option.
(ii) During the sixty-day period from and after the Changeof Control, you are hereby granted the right ("limited stock appreciationrights") to elect to surrender, in whole or in part, any exercisable optionright which has accrued under this option and receive payment therefor,from the Company or one of its subsidiaries, in cash, with respect to eachshare subject to the surrendered option right in an amount equal to theexcess of the fair market value of such share on the date of surrenderover the option price. The fair market value of common shares of the Companyon the date of surrender shall be the mean (adjusted to the next higherfull cent to eliminate any fractional cent) between the high and low pricesper share for the Company's common shares as reported in a summary of compositetransactions for stocks listed on the New York Stock Exchange on the datethe Stock Option Office receives the notice referred to below of your electionto exercise such right or, if the New York Stock Exchange is not open fortrading on such date, the average of the means between the high and lowprices per share for the Company's common shares, as so reported, on thenearest date before and the nearest date after such date on which the NewYork Stock Exchange is open for trading (adjusted to the next higher fullcent to eliminate any fractional cent). You may exercise such electionby notifying the Stock Option Office, in writing, of the number of shareswith respect to which you wish to exercise limited stock appreciation rights.Notification of your election must be received in the Stock Option Officeno later than the end of the aforesaid sixty-day period and prior to theExpiration Date. In no event may any such election be made until six monthsafter the date of grant of this option.provided, however,that in the case of anyinstallment of this option which has accrued, or a limited stock appreciationright which is exercisable, solely as a result of a Change of Control dueto approval by the shareholders of the Company of a Business Combination(as defined in Appendix A), any exercise by you shall be conditioned upon,and deemed effective immediately prior to, consummation of the BusinessCombination (except that the fair market value of common shares of theCompany shall continue to be determined, in accordance with the provisionsset forth above, on the date the Stock Option Office receives the electionto exercise all or any portion of such limited stock appreciation rights),and provided further, that notwithstanding the provisions of this paragraph,you may at any time exercise any option rights in accordance with the otherprovisions of this option.
This option will not be treated as an incentive stockoption for federal income tax purposes. Therefore, under existing lawsand regulations, the difference between the price paid for the shares purchasedhereunder and the market value thereof on the date this option is exercised,or any amounts received in cash upon the exercise of limited stock appreciationrights or otherwise with respect to this option, will be subject to federalincome tax at ordinary rates and to FICA tax and to their respective withholdingrequirements, and may be subject to state and local taxes and withholdingrequirements. The payment of all such federal, state and local taxes isyour personal responsibility. However, the Company, at its discretion,may require you to deposit with it an amount equal to any required withholding.You may elect that all or any portion of any such withholding requiredto be deposited upon exercise of this option shall be satisfied by havingthe Company withhold a portion of the whole shares issuable pursuant toyour exercise of this option, subject to the provisions set forth below.Such shares shall be valued at their fair market value on the date of exercise.In addition, if you are an officer of the Company subject to Section 16(b)of the Securities Exchange Act of 1934 (the "Exchange Act"), your electionto have shares withheld to satisfy such tax withholding requirements maybe subject to certain restrictions. Your Officers' Stock Manual will includea detailed explanation of these restrictions.
The Company reserves and shall have the right, by writtennotice to you, to change the provisions of this option in any manner thatit may deem necessary or advisable to carry out the purpose of its grantas a result of any change in applicable laws or regulations or any futureregulation, ruling or judicial decision; provided that any such changeshall be applicable only to shares for which payment or limited stock appreciationrights elections shall not then have been made as herein provided.
If you cease to be employed by the Company or any of itssubsidiaries (except in the event of retirement, permanent and total disability("Disability") or death, as hereinafter provided), this option shall terminateas to the shares for which you shall not then have made payment or limitedstock appreciation rights elections as aforesaid, except that within threemonths after the date you cease to be so employed, but in no event laterthan the Expiration Date, you may pay for and receive all or any of theshares comprising the installment or installments that shall have accruedat the date you cease to be so employed and for which you shall not thenhave made payment or limited stock appreciation rights elections as aforesaid.
In the event of your normal retirement or, with Companyapproval, early retirement, you may, within five years of your retirement,but in no event later than the Expiration Date, pay for and receive suchnumber of Company shares as is determined by multiplying the total numberof Company common shares granted pursuant to this option by a fraction,the numerator of which is the number of calendar months which have elapsedfrom the date of grant of this option through the date of your terminationof employment (rounded up to the nearest whole number, but in no eventshall such numerator be greater than the denominator) and the denominatorof which is the number of calendar months that have elapsed from the dateof grant through the date on which this option is scheduled to vest ("ProratedShares") and for which you shall not then have made payment or limitedstock appreciation rights elections as aforesaid. In the event of yourDisability or death, while employed by the Company or any of its subsidiaries,or during the period in which this option continues to be exercisable aftertermination of employment, you, or in the case of death, your legal representative(including any person designated in your will to have the right), may withinfive years after the date of your Disability or death, but in no eventlater than the Expiration Date, pay for and receive such number of sharesthat shall have continued to vest during such period; provided that inthe event such Disability or death shall occur within twelve months ofthe date of grant of this option, you shall receive such number of Companyshares as is determined by multiplying the total number of Company commonshares granted pursuant to this option by a fraction, the numerator ofwhich is the number of calendar months which have elapsed from the dateof grant of this option through the date of your Disability or death (roundedup to the nearest whole number but in no event shall such numerator begreater than the denominator) and the denominator of which is 12 and forwhich you shall not then have made payment or limited stock appreciationrights elections as aforesaid. Any shares received under this paragraphshall continue to vest in accordance with the terms of your option grant.In lieu, in whole or in part, of any such exercise of your option rights,you (or your legal representative as set forth above in the event of yourdeath) may make elections with respect to any limited stock appreciationrights which were exercisable at the date you so ceased to be employed,or at the date of such Disability, normal retirement or, with Company approval,early retirement, or death, as the case may be, but in no event after theexpiration of the aforesaid sixty-day period from and after a Change ofControl or after the Expiration Date.
In the event that the Company (in connection with thedisposition of all or a portion of the stock of any subsidiary of the Company,the sale of stock by any subsidiary or otherwise) no longer includes, oranticipates that it will no longer include, your employer in the Company'sconsolidated federal income tax return, the Company will terminate yourrights under this option as to shares or rights not theretofore vested.Shares that have vested as of the date of such divestiture shall be subjectto the standard termination provisions outlined in this document.
In the event of a stock dividend or stock split of issuedcommon shares of the Company, the Company shall, and in the event of acombination or other reduction in the number of issued common shares ofthe Company, or spin-off or other distribution of any assets of the Companyor any subsidiary or all or any portion of the interest of the Companyin any subsidiary to the shareholders of the Company, the Company may,make such adjustments, if any, in the number of unpurchased shares subjectto this option, the exercise price per share and the limited stock appreciationrights with respect thereto, as it may in good faith determine to be appropriateand equitable.
In the event of a merger, consolidation, reorganization,sale or exchange of substantially all assets, or dissolution of the Company(an "extraordinary corporate transaction"):(i) your rights under this option shall terminateas to shares or rights not theretofore purchased or exercised except tothe extent provided by the Company or in the terms of the merger, consolidation,reorganization, or plan for dissolution or sale or exchange of the assets;
(ii) appropriate and equitable provision shall be made,by the Company, in the terms of the merger, consolidation, reorganizationor plan for dissolution or sale or exchange of the assets, or otherwise,with respect to your rights under this option; and
(iii) for purposes of the foregoing clause (ii), in thecase of any extraordinary corporate transaction which is consummated sixmonths or more after the date of grant of this option, such appropriateand equitable provision shall mean that either (a) appropriate and equitableprovision shall be made for the continuation and adjustment of the rightsunder this option or (b) the Company shall be obligated to make adequateprovision (including without limitation (1) to the extent required, obtainingany necessary approvals or consents by the shareholders, the Board of Directorsor any committee of the Board of Directors of the Company or any governmentalauthority, and (2) if you are subject to Section 16(b) of the ExchangeAct, such action as may be required to assure that any amounts receivedby you are not subject to recovery pursuant to Section 16(b)) to assurethat either (x) each installment of this option shall have accrued andbeen exercisable for such period of time prior to consummation of suchextraordinary corporate transaction so as to afford you a reasonable opportunityprior to such consummation during which you may elect to exercise any ofyour rights under each installment of this option, or (y) upon consummationof such extraordinary corporate transaction, you shall receive an amount,in cash, with respect to each share subject to this option (whether ornot the right to purchase such share has then accrued) and for which youhave not then made payment or limited stock appreciation rights electionsas aforesaid, at least equal to the excess of the fair market value ofsuch share, on the date of such extraordinary corporate transaction, overthe option price. The fair market value of common shares of the Companyon the date of an extraordinary corporate transaction shall be the simplearithmetic average of the mean (adjusted to the next higher cent to eliminateany fractional cent) between the high and low prices for the Company'scommon shares, as reported in a summary of composite transactions for stockslisted on the New York Stock Exchange, for each of the most recent tendays preceding such date for which there were such reported transactions.This option and the limited stock appreciation rights providedfor herein shall be exercisable during your lifetime only by you or yourguardian or legal representative and may not be sold, transferred (otherthan under terms specified herein), pledged or otherwise assigned by you,expressly or by operation of law, except in the event of your death, andthen only to the extent and subject to the provisions and conditions hereinset forth. Any attempted sale, transfer, pledge or other disposition thereofby you shall be void and shall constitute valid grounds for cancellationof this option and the limited stock appreciation rights provided for hereinby the Company.
You may transfer this option or a portion hereof in accordancewith the terms and conditions described in Appendix B. As described inAppendix B, upon the transfer of any portion of this option, certain featuresof this option become null and void as to the transferred portion.
You are also prohibited from selling your option sharesif you are in possession of "confidential, material, non-public information"about Sears or its affiliated companies.
This option is granted for the purpose of affording selectedkey employees an opportunity to acquire a proprietary interest in the Companythrough stock ownership. However, any shares purchased pursuant heretowill be your sole property, and the Company recognizes that you may findit necessary to sell all or part of such shares for various reasons.
This option and the limited stock appreciation rightsprovided for herein shall be of no force or effect and no rights hereundershall exist after the Expiration Date.      Appendix ACertain Definitions
A "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group(within the meaning of Section 13 (d)(3) or 14(d)(2) of the SecuritiesExchange Act of 1934, as amended [the "Exchange Act"] (a "Person") of beneficialownership (within the meaning of Rule 13d-3 promulgated under the ExchangeAct) of 20% or more of either (i) the then outstanding common shares ofthe Company (the "Outstanding Company Common Shares") or (ii) the combinedvoting power of the then outstanding voting securities of the Company entitledto vote generally in the election of directors (the "Outstanding CompanyVoting Securities");provided, however, that the following acquisitionsshall not constitute a Change of Control: (i) any acquisition directlyfrom the Company (excluding an acquisition by virtue of the exercise ofa conversion privilege); (ii) any acquisition by the Company or any ofits subsidiaries; (iii) any acquisition by any employee benefit plan (orany related trust) sponsored or maintained by the Company of any of itssubsidiaries; or (iv) any acquisition by any corporation pursuant to areorganization, merger or consolidation, if, following such reorganization,merger or consolidation, the conditions described in clauses (i), (ii)and (iii) of (c) below are satisfied; or
(b) Individuals who, as of the date hereof, constitutethe Board of Directors of the Company (the "Board") (as of the date hereof,the "Incumbent Board") cease for any reason to constitute at least a majorityof the Board; provided, however, that any individual becoming a directorsubsequent to the date hereof whose election, or nomination for electionby the Company's shareholders, was approved by a vote of at least a majorityof the directors then comprising the Incumbent Board shall be consideredas though such individual were a member of the Incumbent Board, but excluding,for this purpose, any such individual whose initial assumption of officeoccurs as a result of either an actual or threatened election contest (assuch terms are used in Rule 14a-11 of Regulation 14A promulgated underthe Exchange Act) or other actual or threatened solicitation of proxiesor consents by or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a "BusinessCombination", which shall mean a reorganization, merger or consolidation,in each case, unless, following such reorganization, merger or consolidation,(i) more than 60% of, respectively, the then outstanding common sharesof the corporation resulting from such reorganization, merger of consolidationand the combined voting power of the then outstanding voting securitiesof such corporation entitled to vote generally in the election of directorsis then beneficially owned, directly or indirectly, by all or substantiallyall of the individuals and entities who were the beneficial owners, respectively,of the Outstanding Company Common Shares and Outstanding Company VotingSecurities immediately prior to such reorganization, merger or consolidationin substantially the same proportions as their ownership, immediately priorto such reorganization, merger or consolidation, of the Outstanding CompanyCommon Shares and Outstanding Company Voting Securities, as the case maybe, (ii) no Person (excluding the Company, any of its subsidiaries, anyemployee benefit plan (or related trust) sponsored or maintained by theCompany, any of its subsidiaries or such corporation resulting from suchreorganization, merger or consolidation and any Person beneficially owning,immediately prior to such reorganization, merger or consolidation, directlyor indirectly, 20% or more of the Outstanding Company Common Shares orOutstanding Company Voting Securities, as the case may be) beneficiallyowns, directly or indirectly, 20% or more of, respectively, the then outstandingcommon shares of the corporation resulting from such reorganization, mergeror consolidation or the combined voting power of the then outstanding votingsecurities of such corporation entitled to vote generally in the electionof directors and (iii) at least a majority of the members of the boardof directors of the corporation resulting from such reorganization, mergeror consolidation were members of the Incumbent Board at the time of theexecution of the initial agreement providing for such reorganization, mergeror consolidation: or    
(d) Approval by the shareholders of the Company of (i)a complete liquidation or dissolution of the Company or (ii) the sale orother disposition of all or substantially all of the assets of the Company,other than to a corporation, with respect to which following such saleor other disposition, (A) more then 60% of, respectively, the then outstandingcommon shares of such corporation and the combined voting power of thethen outstanding voting securities of such corporation entitled to votegenerally in the election of directors is then beneficially owned, directlyor indirectly, by all or substantially all of the individuals and entitieswho were the beneficial owners, respectively, of the Outstanding CompanyCommon Shares and Outstanding Company Voting Securities immediately priorto such sale or other disposition in substantially the same proportionas their ownership, immediately prior to such sale or other disposition,of the Outstanding Company Common Shares and Outstanding Company VotingSecurities, as the case may be, (B) no Person (excluding the Company, anyof its subsidiaries, and any employee benefit plan (or related trust) sponsoredor maintained by the Company, any of its subsidiaries or such corporationand any Person beneficially owning, immediately prior to such sale or otherdisposition, directly or indirectly, 20% or more of the Outstanding CompanyCommon Shares or Outstanding Company Voting Securities, as the case maybe) beneficially owns, directly or indirectly, 20% or more of, respectively,the then outstanding common shares of such corporation and the combinedvoting power of the then outstanding voting securities of such corporationentitled to vote generally in the election of directors and (C) at leasta majority of the members of the board of directors of such corporationwere members of the Incumbent Board at the time of the execution of theinitial agreement or action of the Board providing for such sale or otherdisposition of assets of the Company.
For purposes of the foregoing definition of "Change ofControl", a "subsidiary" of the Company shall mean any corporation in whichthe Company, directly or indirectly, holds a majority of the voting powerof such corporation's outstanding shares of capital stock.          Appendix B Stock Option Transferability Feature
The terms and conditions of the transferability featureof this option are as follows:(1) Only vested options may be transferred.
(2) The whole option or any portion of at least 1,000optioned shares hereof may be transferred. However, the transferor mayonly make five transfers of any one option.
(3) The transferor can transfer only to (a) any child,stepchild, grandchild, parent, stepparent, grandparent, spouse, formerspouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,daughter-in-law, brother-in-law, sister-in-law of the transferor, includingany person so related to the transferor by legal adoption ("Immediate FamilyMembers"), (b) any person sharing your household (other than a tenant),(c) a trust or trusts for the exclusive benefit of such Immediate FamilyMembers, or (d) a partnership or limited liability company in which ImmediateFamily Members are the only partners or members, as the case may be.
(4) If the transferor dies before the transferee exercisesthe option, the transferor's estate will be liable for applicable taxes.
(5) Upon exercise of the transferred option (or portionthereof), delivery of shares by the Company to the transferee is contingenton the payment of all applicable tax withholding by or on behalf of thetransferor.
(6) Upon the transfer of all or any portion of this option,the following features of the option will become null and void as theyrelate to the transferred portion: (a) the right to subsequent transfers,(b) the right to additional grants by paying the purchase price with previously-ownedshares (i.e. the reload feature), (c) the deferral of gains from the exerciseof the option pursuant to the terms of the Sears, Roebuck and Co. DeferredCompensation Plan, and (d) the right to have shares withheld from the optionexercise to cover tax withholding (i.e., tax withholding rights).Sears, Roebuck and Co. may modify, amend, suspend, or terminatethis feature at any time.    **STOCK OPTION GRANT**
The full terms of your stock option grant are describedin the attached Option Grant Supplement. The 2000 Employee Stock Plan Prospectusis available on the Sears intranet under the HR Index quick link . If youprefer a hard copy, please call (847) 286-6685. We have provided selectedinformation in this certificate for your convenience.
You may exercise your vested stock options by contactingSalomon Smith Barney's Executive Services Team at (877)295-2028. You mayalso log on to the Sears Financial BenefitsWeb site at www.88sears.comto view your account, use stock option calculators, download forms, andreview a glossary of common stock plan terms, plan highlights and the InsiderTrading policy.
If any of the events listed below occur *before*your options vest, then the time available for exercise will be reduced,your options will only vest to the extent noted below and any remainingunvested options will terminate. If any occur *after* your optionsvest, then the time available for exercise will be reduced as follows:-  Retirement : In the event of your normal or company-approvedearly retirement , a portion of your previously unvested options will continueto vest according to the normal vesting schedule. The =number of sharesthat will continue to vest will be determined for each installment as follows:
 Original number granted but notvested on date of event x # of calendar months from grant date throughthe date of the event*# of calendar months from the grant date until regularlyscheduled vesting*rounded up to the nearest whole number, butthe numerator can not be larger than the denominator
You will have up to 5 years after your retirement to purchaseany of the shares that vested before your retirement, as well as the portionthat vest following your retirement as described above.
Disability or Death: In the event of your permanentand total disability or death while employed by Sears (or in the 3 monthsfollowing a termination during which your options remain exercisable),then you or your legal representative will have 5 years from the date ofyour disability or death to exercise your vested options.If your disability or deathoccurs more than 12 months from the grant date, all of your options willcontinue to vest according to the normal schedule.
If your disability or deathoccurs within 12 months of the grant date, a portion of your unvested shareswill continue to vest according to the normal vesting schedule. The newnumber of shares will be determined for each installment as follows:
 Original number granted but notvested on date of event x # of calendar months from grant date throughthe date of event*12
*rounded up to the nearest whole number, but the numeratorcan not be larger than the denominator-  Termination: If your employment with Sears ceasesfor any other reason, then you will have 3 months from the date your employmentceases to exercise any options that were vested as of the date your employmentceased. If Sears disposes of all or part of a Sears subsidiary for whichyou work, you may be deemed to have been terminated.
None of these events increases your time for exercise. Youroptions are never exercisable after their expiration date.
The difference between the market value of the sharesyou receive on exercise and the exercise price you pay will be subjectto federal income tax at normal rates, employment tax, and any other stateand local taxes. Any distributions to you are subject to withholding ofthese taxes. Unless Sears specifies otherwise, you may satisfy the withholdingobligations by cash payment or surrender of shares to which you are entitledunder this grant. In addition, if you are an officer of the Company subjectto Section 16(b) of the Securities Exchange Act of 1934 (the "ExchangeAct"), your election to have shares withheld to satisfy such tax withholdingrequirements may be subject to certain restrictions. Your Officers' StockManual will include a detailed explanation of these restrictions.
Your Option Grant Supplement and the 2000 Employee StockPlan Prospectus include additional provisions that may affect your rightsunder this option, including provisions relating to amendments to youraward, to any change in control of Sears or other extraordinary corporatetransaction, and to similar matters.