Document:

EX-4.6:

 

Exhibit 4.6

FORM OF KMART HOLDING CORPORATION

RESTRICTED SHARE AGREEMENT

     RESTRICTED SHARE AGREEMENT, entered into as of March 24, 2005, between Kmart Holding
Corporation, a Delaware corporation (“Holding”), and Aylwin Lewis (the “Executive”), an employee of
Kmart Management Corporation, a Michigan corporation (the “Company”);

     WHEREAS, pursuant to the Agreement and Plan of Merger, dated as of November 16, 2004 (the
“Merger Agreement”), by and between Sears, Roebuck and Co., a New York corporation (“Sears”), and
Holding, Sears and Holding shall each become a wholly-owned subsidiary of Sears Holdings
Corporation, a Delaware Corporation (“Sears Holdings”) (the “Merger”);

     WHEREAS, immediately prior to the Merger, Holding desires to grant restricted shares of
Holding’s common stock, par value $.01 (the “Common Stock”), to the Executive;

     NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other
good and valuable consideration, the parties hereto do hereby agree as follows:

     1. Capitalized Terms. Capitalized terms not defined herein shall have the definitions
ascribed to such terms in the employment agreement, dated as of the 18th day of October, 2004, by
and among the Company, Holding, and the Executive (the “Employment Agreement”)

     2. Grant. The Executive is hereby granted, effective immediately prior to the
Effective Time, as defined in Section 1.7 of the Merger Agreement (the “Grant Date”), and subject
to the terms and conditions of this Agreement, restricted Common Stock having a Fair Market Value
of $1,000,000 (the “Restricted Shares”). “Fair Market Value” shall mean the closing price of the
Company’s common stock on the NASDAQ on the last trading day on which Holding Common Stock is
traded prior to the day on which the Effective Time occurs.

     3. Shareholder Approval. This grant of Restricted Shares is subject to the approval
by Holding’s shareholders, in a manner satisfying the requirements of Section 162(m)(4)(C) of the
Internal Revenue Code of 1986, as amended, of the grant and of the performance goals set forth in
Section 5(b) below. To the extent that such approval is not obtained, the Restricted Shares shall
be forfeited by the Executive, and ownership transferred back to Holding.

     4. Issuance of Stock. The Restricted Shares shall be held in the custody of Holding
or its designee for the Executive’s benefit. The Restricted Shares shall be subject to the
restrictions described herein. The Restricted Shares shall bear appropriate legends with respect
to the restrictions described herein.

 

 

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     5. Vesting; Effect of Termination of Employment.

     (a) Subject to Section 3 above, the Restricted Shares shall be eligible to become vested with
respect to three installments, each of ___shares [three equal installments (based on the number
of shares of Common Stock in each installment, although some rounding will probably be necessary)]
(each an “Installment”) of Common Stock, as set forth below.

     (b) Each Installment shall vest as of the later of (i) the last day of the first Fiscal Year,
of Fiscal Years 2005 through 2007, during which the Performance Goal is met and (ii) the last day
of Fiscal Years 2005, 2006, and 2007, in the case of the first, second, and third Installments,
respectively; provided that the Executive is employed by the Company or a subsidiary or
affiliate thereof as the relevant vesting date. If the Restricted Stock does not vest on or before
the last day of Fiscal Year 2007, it shall thereupon be forfeited. The “Performance Goal” will be
considered to have been met if, for any of Fiscal Years 2005 through 2007, either the Company’s
earnings before interest, taxes, depreciation and amortization, as reported in its audited
financial statements for such Fiscal Year, equals or exceeds $100,000,000, or the Company realizes
gross proceeds from sales of real estate equal to or greater than $50,000,000.

     (c) Notwithstanding the foregoing, in the event the Executive’s employment is terminated
during the Employment Term as a result of the Executive’s Disability or death, any Installment of
the Restricted Shares that has not yet vested shall become immediately vested and free of
restriction as of the date of such termination of employment.

     6. Restrictions.

     (a) No portion of the Restricted Shares or rights granted hereunder may be sold, transferred,
assigned, pledged or otherwise encumbered or disposed of by the Executive until such portion of the
Restricted Shares becomes vested in accordance with Section 5 of this Agreement, and any purported
sale, transfer, assignment, pledge, encumbrance or disposition shall be void and unenforceable
against Holding. The period of time between the Grant Date and the date all Restricted Shares
become vested is referred to herein as the “Restriction Period.”

     (b) If the Executive’s employment with the Company terminates for any reason which does not
result in vesting of the Restricted Shares as provided in Section 5(c) above, the balance of the
Restricted Shares subject to the provisions of this Agreement which have not vested at the time of
the Executive’s termination of employment shall be forfeited by the Executive, and ownership
transferred back to Holding.

     7. Executive Shareholder Rights. During the Restriction Period, the Executive shall
have all the rights of a shareholder with respect to the Restricted Shares except for the right to
transfer the Restricted Shares, as set forth in Section 6 of this Agreement. Accordingly, the
Executive shall have the right to vote the Restricted Shares and to receive any cash dividends paid
to or made with respect to the Restricted Shares, provided, however, that dividends
paid, if any, with respect to those Restricted Shares that have not vested at the time of the
dividend payment shall be held in the custody of Holding and shall be subject to the same

 

 

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restrictions that apply to the corresponding Restricted Shares; provided,
further, that if such a restriction on dividends would be subject to the tax imposed under
the provisions of Section 409A of the Code, such dividends shall be paid to the Executive
immediately and shall not be subject to the same restrictions that apply to the corresponding
Restricted Shares.

     8. Changes in Stock. At the Effective Time the outstanding Restricted Shares shall be
exchanged for the same number of restricted shares of Sears Holdings and shall remain subject to
the remaining terms and conditions hereof, and thereafter “Sears Holdings” shall be substituted for
“Holding” where applicable hereunder. In the event of (a) a stock dividend, stock split, reverse
stock split, share combination, or recapitalization or similar event of or by Holding (each, a
“Share Change”), or (b) a merger, consolidation, acquisition of property or shares, separation,
spinoff, reorganization, stock rights offering, liquidation, disaffiliation, or similar event of or
by Holding (each, a “Corporate Transaction”), in each case, affecting the Common Stock, the
Committee or the Board may in its discretion make such substitutions or adjustments as it deems
appropriate and equitable to adjust the number and kind of Restricted Shares. In the case of
Corporate Transactions, (x) unless otherwise determined by the Committee, if the Corporate
Transaction results in shareholders of Common Stock receiving cash, securities, property, or any
combination thereof in exchange for each share of Common Stock, such consideration being exchanged
for each share of Common Stock shall be substituted for each Restricted Share subject to this
Agreement, and (y) the Committee may in its discretion make such alternative or additional
substitutions or adjustments as it deems appropriate and equitable, including, without limitation,
(i) the cancellation of the Restricted Shares in exchange for payments of cash, property or a
combination thereof having an aggregate value equal to the value of the Restricted Shares, as
determined by the Committee or the Board in its sole discretion (it being understood that in the
case of a Corporate Transaction with respect to which shareholders of Common Stock receive
consideration other than equity securities of the ultimate surviving entity, any such determination
by the Committee that the value of the Restricted Shares shall for this purpose be deemed to equal
the value of the consideration being paid for each share of Common Stock pursuant to such Corporate
Transaction shall conclusively be deemed valid); and (ii) the substitution of other property
(including, without limitation, cash or other securities of Holding and securities of entities
other than Holding) for the Restricted Shares. The determination of the Committee regarding any
adjustment shall be final and conclusive.

     9. Taxes. No later than the date as of which an amount first becomes includible in
the gross income of the Executive for federal income tax purposes with respect to any Restricted
Shares, the Executive shall pay to Holding, or make arrangements satisfactory to Holding regarding
the payment of, all federal, state, local and foreign taxes that are required by applicable laws
and regulations to be withheld with respect to such amount. The Executive may direct Holding, to
the extent permitted by law, to deduct any such taxes from any payment otherwise due to the
Executive, including the delivery of the Restricted Shares that gives rise to the withholding
requirement.

     10. Notices. Any notices required or permitted hereunder shall be addressed to
Holding at its corporate headquarters, attention: General Counsel, or to the Executive at the
address then on record with Holding, as the case may be, and deposited, postage prepaid, in the

 

 

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United States mail. Either party may, by notice to the other given in the manner aforesaid,
change his/her or its address for future notices.

     11. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to its conflict of laws principles.

     12. Successor. This Agreement shall bind and inure to the benefit of Holding, its
successors and assigns, and the Executive and his or her personal representatives and assigns.

     13. Amendment. This Agreement may be amended or modified at any time by an instrument
in writing signed by the parties hereto.

     14. Certificates. Certificates representing the Restricted Shares as originally or
from time to time constituted shall bear the following legend:

     The Shares represented by this stock certificate have been granted as restricted stock under a
Restricted Share Agreement between the registered holder of these Shares and Holding. The Shares
represented by this stock certificate may not be sold, exchanged, assigned, transferred, pledged,
hypothecated or otherwise encumbered or disposed of until the restrictions set forth in the
Restricted Stock Agreement between the registered holder of these Shares and Holding shall have
lapsed.

     As soon as administratively practicable after the lapsing of the restrictions with respect to
any Restricted Shares, Holding shall deliver to the Executive or his or her personal
representative, in book-entry or certificate form, the formerly Restricted Shares that do not bear
any restrictive legend making reference to this Agreement. Such Shares shall be free of
restrictions, except for any restrictions required under Federal securities laws.

     15. Laws and Regulations. No shares of Common Stock shall be issued under this
Agreement unless and until all legal requirements applicable to the issuance of such shares have
been complied with to the satisfaction of the Committee. The Committee shall have the right to
condition any issuance of shares of Common Stock to the Executive hereunder on the Executive’s
undertaking in writing to comply with such restrictions on the subsequent disposition of such
shares as the Committee shall deem necessary or advisable as a result of any applicable law or
regulation.

     16. Registration. As of the Grant Date, Holding shall, at its expense, cause issuance
of the Restricted Shares and the resale thereof to be registered under the Securities Act of 1933,
as amended, and registered or qualified under applicable state law, to be freely resold. Holding
shall thereafter use its best efforts to maintain the effectiveness of such registration and
qualification for so long as the Executive holds the Restricted Shares (or any portion thereof) or
any of the shares of Common Stock that were previously Restricted Shares, or until such earlier
date as such Restricted Shares and shares of Common Stock, as applicable, may otherwise be freely
sold under applicable law.

 

 

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     17. Condition. This Agreement is expressly conditioned upon the completion of the
transactions contemplated by the Merger Agreement and the occurrence of the Effective Time, as
defined above, and the failure to consummate the Merger in accordance with the Merger Agreement
shall render this Agreement void and shall release the parties hereto of any and all obligations
hereunder.

     18. Miscellaneous.

     (a) Holding shall not be required (i) to transfer on its books any Restricted Shares which
shall have been sold or transferred in violation of any of the provisions set forth in this
Agreement, or (ii) to treat as owner of such shares or to accord the right to vote as such owner or
to pay dividends to any transferee to whom such shares shall have been so transferred.

     (b) This Agreement shall not be construed so as to grant the Executive any right to remain in
the employ of Holding.

     (c) This Agreement may be executed in counterparts, which together shall constitute one and
the same original.

 

 

     IN WITNESS WHEREOF, Holding has caused this Agreement to be duly executed by its officer
thereunder duly authorized and the Executive has hereunto set his hand, all as of the day and year
first set forth above.

	 	 	 
	

	 	KMART HOLDING CORPORATION
	 
	 	 
	

	 	 
	

	 	Name:
	

	 	Title:
	 
	 	 
	ACCEPTED:
	 	 
	 
	 	 
	The undersigned hereby acknowledges having read this Restricted Share Agreement and hereby agrees
to be bound by all provisions set forth herein.
	 
	 	 
	

	 	 
	

	 	ExecutiveEX-4.7:

 

Exhibit 4.7

FORM OF SEARS HOLDINGS CORPORATION

NONQUALIFIED STOCK OPTION AGREEMENT

          NONQUALIFIED STOCK OPTION AGREEMENT, entered into as of [ ], 200[ ], between Sears Holdings
Corporation, a Delaware corporation (the “Company”), and Alan J. Lacy (the “Executive”);

          WHEREAS, Sears, Roebuck & Co., a New York corporation, and Kmart Holding Corporation, a
Delaware corporation, and the Executive have entered into an employment agreement dated as of the
16th day of November, 2004 (the “Employment Agreement”), which has been assumed by the Company,
pursuant to which, among other things, the Company has determined that, as an inducement material
to the Executive’s agreement to enter into employment with the Company, in satisfaction of certain
of the Company’s obligations under Section 3(b)(iii) of the Employment Agreement, the Executive
should be granted by the Company a nonqualified option to purchase shares of its common stock (the
“Option”);

          WHEREAS, the Company desires to grant such Option to the Executive;

          NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other
good and valuable consideration, the parties hereto do hereby agree as follows:

	1.  	Capitalized Terms. Capitalized terms not defined herein shall have the definitions
ascribed to such terms in the Employment Agreement.

	2.  	Grant. Pursuant to Section 3(b)(iii) of the Employment Agreement, the Executive is
hereby granted as of the Effective Date (the “Grant Date”) and subject to the terms and
conditions of this Agreement, a nonqualified stock option (the “Option”) to purchase an
aggregate of 200,000 shares of the Company’s common stock, par value $0.01 (“Common Stock”).
Shares of Common Stock subject to the Option shall be referred to herein as “Option Shares”.

	3.  	Equity Plan. At such time, if any, as the Company shall have adopted (and, if
required, there shall have been approved by the Company’s shareholders) an equity incentive
plan under which stock options may be granted (the “Plan”), the Option and this Agreement
shall be subject to the terms of such Plan, to the extent the terms of such Plan are not
inconsistent with the terms of this Agreement and the applicable provisions of the Employment
Agreement.

	4.  	Option Term. Subject to earlier termination as provided herein, the Option shall
expire on the tenth anniversary of the Grant Date (the “Expiration Date”).

	5.  	Purchase Price. The purchase price per share of Common Stock with respect to the
Option shall be [the closing price of a share of the Company’s common stock on the New York
Stock Exchange or the NASDAQ (as to be agreed by the parties) on the Grant Date,
provided that such a means of determining the exercise price will not result in the
imposition of taxes under Section 409A of the Code].

 

 

	6.  	Vesting/Exercisability. The Option shall vested and become exercisable with respect
to 67,500 shares of Common Stock on each of the first four (4) anniversaries of the Grant
Date, provided that the Executive is employed by or rendering services to the Company
or a subsidiary or affiliate thereof as of each such date. The Option may be exercised either
for the total number of shares of Common Stock vested, or for less than the total number in
multiples of 100 shares of Common Stock.

	7.  	No Rights as a Shareholder. The Executive or other permitted holder of the Option
shall have none of the rights of a shareholder of Common Stock with respect to the shares of
Common Stock covered by the Option until the Option Shares are issued or transferred to such
holder upon exercise of the Option.

	8.  	Method of Exercise. Upon the exercise of the Option, the purchase price may be paid
(a) in cash or cash equivalents, or (b) by tendering to the Company shares of Common Stock
already owned by the Executive, which, in the case of shares of Common Stock purchased by the
Executive pursuant to the exercise of an option granted by the Company, have been held by the
Executive for no less than six months following the date of such purchase, in any case having
a total Fair Market Value (as defined in the Plan and, if no Plan, based on the closing price
of a share of the Company’s common stock on the New York Stock Exchange or the NASDAQ (as to
be agreed by the parties) on the date of exercise) equal to the aggregate purchase price, (c)
to the extent permitted by law, by a “cashless exercise” procedure approved by the
Compensation Committee of the Board of Directors of the Company or any other committee of the
board of directors of the Company performing similar functions (the “Committee”), or (d) by a
combination of the foregoing methods. The Option shall be exercised by written notice of
election in such form as shall be determined by the Committee and delivered in person or by
regular mail to the Company at its principal executive office.

	9.  	Withholding. The Company may require that the Executive pay to the Company at the
time of exercise of any portion of the Option the amount necessary to satisfy the Company’s
liability to withhold federal, state or local income tax or any other employment taxes
incurred by reason of the exercise of the Option. The Executive may satisfy the foregoing
requirement by (a) tendering to the Company shares of Common Stock already owned by the
Executive, which, in the case of shares of Common Stock purchased by the Executive pursuant to
the exercise of an option granted by the Company, have been held by the Executive for no less
than six months following the date of such purchase, or (b) by electing to have the Company
withhold from delivery Option Shares, provided that, in either case, such shares have
a Fair Market Value equal to the minimum amount of tax required to be withheld. Such shares
of Common Stock shall be valued at their Fair Market Value (as defined above) on the date as
of which the amount of tax to be withheld is determined.

	10.  	Effect of Termination of Employment.

	 	(a)  	If the employment of the Executive with the Company and its subsidiaries and
affiliates is terminated by reason of his death or Disability, or by the Company
without Cause or by the Executive for Good Reason, the Option shall become

2

 

	 	   	immediately vested and exercisable in full as of the date of such termination of
employment and any portion of the Option that is or becomes vested and exercisable
pursuant to this Section 10(a) as of the date of the Executive’s termination of
employment shall be exercisable by the Executive (or other Option holder, as
applicable) for the period ending on the third anniversary of such termination of
employment, but no later than the Expiration Date.

	 	(b)  	If the employment of the Executive with the Company and its subsidiaries and
affiliates is terminated by the Company for Cause, the Option shall immediately be
forfeited and cancelled in its entirety as of the date of such termination of
employment.
	 
	 	(c)  	If the employment of the Executive with the Company and its subsidiaries and
affiliates is terminated other than as provided under Sections 10(a) and 10(b) above,
any vested portion of the Option as of the date of termination of employment shall
remain exercisable for 90 days, but no later than the Expiration Date, and the
remainder of the Option shall immediately be forfeited and cancelled in its entirety as
of the date of such termination of employment.

	11.  	Adjustment. In the event of (a) a stock dividend, stock split, reverse stock split,
share combination, or recapitalization or similar event of or by the Company (each, a “Share
Change”), or (b) a merger, consolidation, acquisition of property or shares, separation,
spinoff, reorganization, stock rights offering, liquidation, disaffiliation, or similar event
of or by the Company (each, a “Corporate Transaction”), in each case, affecting the Common
Stock, the Committee or the Board may in its discretion make such substitutions or adjustments
as it deems appropriate and equitable to (i) adjust the number and kind of shares subject to
the Stock Option, (ii) adjust the exercise price per share of the Stock Option. In the case
of Corporate Transactions, (x) unless otherwise determined by the Committee, if the Corporate
Transaction results in shareholders of Common Stock receiving cash, securities, property, or
any combination thereof in exchange for each share of Common Stock, such consideration being
exchanged for each share of Common Stock shall be substituted for each share of Common Stock
subject to this Agreement, and (y) the Committee may in its discretion make such alternative
or additional substitutions or adjustments as it deems appropriate and equitable, including,
without limitation, (A) the cancellation of the Stock Option in exchange for payments of cash,
property or a combination thereof having an aggregate value equal to the value of the Stock
Option, as determined by the Committee or the Board in its sole discretion (it being
understood that in the case of a Corporate Transaction with respect to which shareholders of
Common Stock receive consideration other than equity securities of the ultimate surviving
entity, any such determination by the Committee that the value of the Stock Option shall for
this purpose be deemed to equal the excess, if any, of the value of the consideration being
paid for each share of Common Stock pursuant to such Corporate Transaction over the exercise
price per share of the Stock Option shall conclusively be deemed valid) and (B) the
substitution of other property (including, without limitation, cash or other securities of the
Company and securities of entities other than the Company) for the Stock Option. The
determination of the Committee regarding any adjustment will be final and conclusive.

3

 

	12.  	Transferability of Option. The Option shall not be transferable other than (a) by
will or the laws of descent and distribution or (b) to the Participant’s family members,
whether directly or indirectly or by means of a trust or partnership or otherwise or (c) as
otherwise determined by the Committee. For purposes of this Agreement, “family member” shall
have the meaning given to such term in General Instructions A.1(a)(5) to Form S-8 under the
Securities Act of 1933, as amended, and any successor thereto. The Option shall be
exercisable during the Executive’s lifetime only by the Executive or by his guardian or legal
representative or the permitted transferees pursuant to clause (a), (b) and (c) of this
Section 12.

	13.  	Laws and Regulations. No shares of Common Stock shall be issued under this Option
unless and until all legal requirements applicable to the issuance of such shares of Common
Stock have been complied with to the satisfaction of the Committee. The Committee shall have
the right to condition any issuance of shares to the Executive hereunder on the Executive’s
undertaking in writing to comply with such restrictions on the subsequent disposition of such
shares as the Committee shall deem necessary or advisable as a result of any applicable law or
regulation.

	14.  	Registration. As of the Grant Date, the Company shall, at its expense, cause
issuance of the Option, the exercise of the Option and the resale of the shares of Common
Stock subject to the Option to be registered under the Securities Act of 1933, as amended, and
registered or qualified under applicable state law, to be freely resold. The Company shall
thereafter maintain the effectiveness of such registration and qualification for so long as
the Executive holds the Option (or any portion thereof) or any of the Option Shares, or until
such earlier date as such Option Shares may otherwise be freely sold under applicable law.
The Company shall take all corporate action necessary to reserve for issuance a sufficient
number of shares of common stock for delivery with respect to the Options.

	15.  	Notices. Any notices required or permitted hereunder shall be addressed to the
Company at its corporate headquarters, attention: General Counsel, or to the Executive at the
address then on record with the Company, as the case may be, and deposited, postage prepaid,
in the United States mail. Either party may, by notice to the other given in the manner
aforesaid, change his/her or its address for future notices.

	16.  	Governing Law. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to its conflict of laws principles.

	17.  	Successor. This Agreement shall bind and inure to the benefit of the Company, its
successors and assigns, and the Executive and his or her personal representatives and assigns.

	18.  	Amendment. This Agreement may be amended or modified at any time by an instrument in
writing signed by the parties hereto.

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	19.  	Miscellaneous.

	 	(a)  	This Agreement shall not be construed so as to grant the Executive any right to
remain in the employ of the Company.
	 
	 	(b)  	This Agreement may be executed in counterparts, which together shall constitute
one and the same original.

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          IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officer
thereunder duly authorized and the Executive has hereunto set his hand, all as of the day and year
first set forth above.

	 	 	 
	

	 	SEARS HOLDINGS CORPORATION
	 
	 	 
	 
	 	 
	

	 	 
	

	 	Name:
	

	 	Title:

ACCEPTED:

The undersigned hereby acknowledges having read this Nonqualified Stock Option Agreement and hereby
agrees to be bound by all provisions set forth herein.

	 	 	 
	 
	 	 
	

	 	 
	

	 	Executive

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