Document:

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                                                                    EXHIBIT 10.1

            THIS AGREEMENT CONTAINS A WAIVER OF CERTAIN OF YOUR LEGAL
                       RIGHTS. YOU ARE ADVISED TO CONSULT
                       WITH AN ATTORNEY PRIOR TO SIGNING.

                        RETIREMENT AGREEMENT AND RELEASE

                  This Retirement Agreement and Release ("Agreement") is made
and is effective as of May 6, 2005 (the "Retirement Date"), by and between
BRADLEY B. BUECHLER (hereinafter referred to as "Employee") and SPARTECH
CORPORATION, a Delaware corporation, which includes, for purposes of this
Agreement, its subsidiaries and related organizations and, collectively, all of
its and their officers, directors, employees, trustees, agents, representatives,
predecessors, successors and assigns, and compensation plans and programs
sponsored or established by any of the foregoing (hereinafter collectively
referred to as the "Corporation").

                   WHEREAS, Employee was an employee of the Corporation since
1981 and resigned from employment in order to commence retirement from the
Corporation effective on the Retirement Date; and

                  WHEREAS, the parties to this Agreement are also parties to an
Amended and Restated Employment Agreement dated as of November 1, 2002 (the
"Employment Agreement") and upon the Payment Date of this Agreement (as "Payment
Date" is defined below) this Agreement shall supersede and replace in its
entirety the Employment Agreement; and

                  WHEREAS, by this Agreement, the parties desire to provide for
a mutually agreeable transition to the Employee's retirement from employment
with the Corporation and from the Corporation's Board of Directors.

                  NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and intending to be legally bound hereby, it is
understood and agreed as follows:

1.       RETIREMENT AND RETIREMENT PAYMENTS AND BENEFITS

         On the Retirement Date, the Employee ceased to be an employee or
officer of the Corporation and ceased to be a member of the Board of Directors
of the Corporation. Subject to applicable withholding for taxes and payroll
taxes as described below:

         (a) Initial Retirement Payment. On the eighth day after the Corporation
receives a fully executed copy of this Agreement and, if the execution by the
Employee of this Agreement has not then been revoked (the "Payment Date"), the
Corporation will pay to the Employee, in a

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lump sum payment, $2,711,174 in full satisfaction of the Company's obligations
under Section 5(a) of the Employment Agreement.

         (b) Deferred Retirement Payment. As set forth in Section 4(b) of the
Employment Agreement, at the same time as the Corporation pays other employees
of the Corporation eligible for an annual bonus for the fiscal year ending in
2005, the Corporation shall pay to the Employee, in a lump sum payment, an
amount determined by, first, multiplying 0.90% by the Corporation's earnings
before income taxes as reported in the Corporation's consolidated financial
statements for the fiscal year ending in 2005, adjusted to exclude profit,
income or loss on extraordinary or nonrecurring and unusual items (such as the
sale of a significant amount of assets or securities other than in the ordinary
course of business, one time employee separation costs, including the amount set
forth in Section 1(a) above, and significant litigation costs and recoveries) as
determined by the Corporation's auditors based on generally accepted accounting
principles and then multiplying such amount by a fraction, the numerator of
which is the number of days from the first day of the fiscal year ending in 2005
to the Retirement Date (including each such day) and the denominator is 365.

         (c) Compensation and Benefits.

                  (i) Accrued Vacation and Other Accrued Compensation. On the
Payment Date, the Corporation shall pay the Employee in a single lump sum the
aggregate amount of any accrued but unused vacation pay, accrued and unpaid base
salary and any reimbursement of business travel taken and customer entertainment
provided before the Retirement Date which has not then been reimbursed. The
parties agree that the lump sum value of the accrued and unused vacation pay is
$35,686.

                  (ii) Amounts Payable Under Benefit Plans and Programs. The
Corporation will pay or cause to be paid in a timely fashion any amount due to
be paid as of the Retirement Date or which would be paid as of the Retirement
Date upon proper and timely application therefor to provide after the Retirement
Date under any Corporation sponsored benefit plan or program. For purposes of
this subparagraph, the Corporation shall transfer to the Employee ownership of
Policy Number 150218609 issued by the Equitable Life Insurance Society of the
United States in complete satisfaction of any obligation of the Corporation
under any and all deferred compensation and split dollar insurance arrangements
which may have been in effect at any time during the Employee's employment with
the Corporation, including, but not limited to, deferred compensation and/or
split dollar obligations of the Corporation arising from or under Section 2(d)
of the Employment Agreement or obligations which may, or could be argued to,
have arisen from any discussion, negotiation, representation or action of either
party with respect to or in contemplation of a deferred compensation or
insurance arrangement in replacement of the arrangement described in Section
2(d) of the Employment Agreement.

                  (iii) Coverage Under Employee Benefit Plans. Until the third
anniversary of the Retirement Date, the Corporation shall provide coverage (or
cause comparable coverage to be provided if the Corporation determines in good
faith that its then employee benefit plans cannot provide such coverage) to the
Employee and, if the Employee so elects, to Employee's dependents, under the
Corporation's health benefit program and life insurance program generally

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available to other salaried employees of the Corporation, as such programs are
in effect from time to time, on the same terms and conditions and subject to the
same employee contribution rates, times and terms as the Corporation provides
such programs to other employees of the Corporation, provided, however, if the
Employee secures health and/or life coverage through subsequent employment which
is comparable coverage and on terms and conditions reasonably comparable to the
programs then offered by the Corporation, the Corporation's obligation to
continue its health and/or life coverage, as the case may be, shall cease. The
Employee will not receive credit for benefit, vesting or early retirement
eligibility purposes under any employee benefit plan or program of the
Corporation after the Retirement Date.

                  (iv) Stock Options. Solely for the purpose of determining the
expiration dates of stock options granted to the Employee under the
Corporation's 2004 Equity Compensation Plan and under the Corporation's 2001
Stock Option Plan which vested as of the Retirement Date in accordance with
their respective terms as set on the date of grant, the Employee's separation
from service shall be deemed a "Retirement" as defined in connection with each
such plan. Without limiting the foregoing, stock options that are not vested as
of the Retirement Date under the terms of the option agreements between the
Corporation and the Employee evidencing such stock options shall not, and shall
never become, vested or exercisable. With respect to stock options vested as of
Retirement Date, the Employee shall have the exercise rights and the Employee's
obligations with respect to stock options vested as of the Retirement Date
attendant to a Retirement, including, but not limited to, the automatic
expiration of the options should the Employee take actions which are
inconsistent with Retirement or detrimental to the interests or business of the
Corporation.

         (d) Transitional Matters. In connection with the Employee's transition
to retirement from employment with the Corporation, the Corporation shall
provide the following:

                  (i) Transfer of unencumbered title to the Employee, as soon as
practicable as the required documents can be prepared and filed, the automobile
provided by the Corporation to the Employee in connection with his employment
with the Corporation (with any applicable transfer taxes being paid by the
Corporation);

                  (ii) Reasonable use of the Corporation's aircraft in
accordance with the terms of the Corporation's policies relating thereto until
June 7, 2005, in accordance with the terms of the Corporation's policies
relating thereto; and

                  (iii) Transfer of unencumbered title to the Employee to any
and all Corporation-owned property located in the office of the Employee at the
Corporation's headquarters, including, but not limited to, furniture, computers
(but excluding computer files containing Corporation information or records),
memorabilia and other personal items of the Corporation. Without limiting the
foregoing, the intent of the foregoing transfer is to be in addition to the
personal property of the Employee, wherever located.

         (e) Fees of Professional Advisors. The Corporation shall reimburse the
Employee for amounts paid by the Employee for reasonable attorneys' fees,
accountants' fees, financial planner fees, tax advisor fees and the cost of such
other professional service providers as the

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Employee deems appropriate in connection with reviewing this Agreement and his
transition to retirement in an aggregate amount not to exceed $25,000.

         (f) ERISA Rights. Nothing in this Agreement is intended to surrender or
waive any right the Employee may have under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), including, but not limited to, any
vested and accrued balances under Corporation's employee benefit plans, which
accrued benefits shall be payable when and in accordance with the terms of the
respective plans.

         (g) Applicable Taxes. Notwithstanding any provision of this Agreement,
prior to the delivery of any thing of value to the Employee, the Corporation
shall withhold from any cash payment under this Agreement the amount determined
in good faith by the Corporation to be required to be withheld for applicable
federal, state and/or local taxes or to be paid by the Employee as federal,
state or local payroll taxes for all things of value to be delivered under this
Agreement. If any thing of value to be delivered under this Agreement is to be
delivered in a form other than cash, withholding for applicable taxes shall be
withheld from cash payments before delivery of non-cash things of values.

2.       RELEASE OF LIABILITY AND COVENANT NOT TO SUE

         (a) Employee, on behalf of himself, his heirs, dependents, and
administrators, absolutely, irrevocably and unconditionally releases and forever
discharges the Corporation from any and all claims, known and unknown, under
federal, state or municipal law (including all common law claims) and all
federal, state (including Missouri and each other state in which the Corporation
transacts business) and local statutes, ordinances and regulations including,
but not limited to, claims relating to breach of contract, breach of promise,
misrepresentation, wrongful discharge, discrimination on account of age, race,
sex, religion, national origin, military status, disability or other such
characteristics protected by law or retaliation for the exercise of any right,
including refusal to participate in any action, that he may have against the
Corporation relating to, or arising out of, his employment with, or separation
from employment with the Corporation, whether now apparent or yet to be
discovered or which may hereafter develop based on events that have transpired
from the beginning of time to the date of his execution of this Agreement,
whether or not any action, claim, complaint, grievance or charge has been filed
by Employee or on his behalf (collectively "Civil Rights Provisions"). Further,
Employee specifically releases the Corporation from any and all claims arising
under the following Civil Rights Provisions, in each case as amended and in
effect:

                  (i)      Title VII of the Civil Rights Act of 1964, as
                           amended;

                  (ii)     the Americans With Disabilities Act of 1990; as
                           amended

                  (iii)    the Age Discrimination in Employment Act, as amended;
                           and

                  (iv)     any same or similar state or local law, ordinance or
                           regulation prohibiting such discrimination in
                           employment.

The Employee specifically recognizes that a portion of the amount set forth in
Section 1 above is in full satisfaction of any claim the Employee may or could
make against the Corporation in connection with the Employment Agreement, the
Corporation's bonus plans, stock option

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programs or any other compensation and deferred compensation plan or program of
the Corporation applicable to senior or executive employees or employees
generally, and the foregoing release is intended to release each and all such
obligations and plans. Without limiting the foregoing, if the Employee believes
or comes to believe he is or may be due any amount from the Corporation which is
not set forth in this Agreement, each such amount is forfeit and forever
discharged from payment by the Corporation.

The foregoing shall not prevent the Employee from filing charges with the Equal
Employment Opportunity Commission but the Employee agrees he shall not
financially benefit from such charges.

         (b) If Employee violates this Agreement by filing a claim against or
suing the Corporation, Employee agrees to pay all costs and expenses of
defending against such claims incurred by the Corporation or in prosecuting any
counterclaim or cross claim based on this Agreement, including reasonable
attorney's fees and all other costs and expenses associated therewith.

3.       WAIVER OF RELIEF

         This Agreement encompasses all relief, no matter how called, whether
now apparent or yet to be discovered, including but not limited to: wages, front
pay, back pay, compensatory damages, pension or retirement benefits, punitive
damages, liquidated damages, damages for pain, suffering, mental anguish and
loss of enjoyment of life, and costs and attorney's fees.

4.       NO ADMISSION OF LIABILITY

         Execution of this Agreement and compliance with its terms, as provided
above, do not constitute an admission by the Corporation that (i) it has treated
the Employee or any other person unfairly or unlawfully or (ii) that it engaged
in any breach of contract or violation of any Civil Rights Provision or other
employment discrimination statute, or any other legal provision, regulation,
ordinance order or rule of common law.

5.       RETURN OF PROPERTY, CONFIDENTIALITY AND NON-DISPARAGEMENT COMMITMENTS

         (a) Employee states that he has returned to the Corporation all records
relating to the Corporation and its business in whatever medium and agrees not
to disclose or divulge, directly or indirectly, any business secret or other
confidential or proprietary information of the Corporation to any person, firm,
partnership, venture or corporation, except as required by law.

         (b) Employee and Corporation agree that he and it will not, in any way,
disparage one another to any person(s) or organization(s), including, without
limitation, any employee of the Corporation.

         (c) The Corporation will respond to all reference inquiries concerning
the Employee by confirming the dates of his employment with the Corporation,
unless the parties mutually agree to another statement.

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6.       LITIGATION COOPERATION

         Employee agrees to cooperate with the Corporation in the prosecution or
defense of claims asserted by or against the Corporation. Such cooperation shall
include meeting with representatives of the Corporation or the Corporation's
attorneys, or both, divulging to the Corporation any information that the
Corporation may request for possible use in litigation, arbitration, or other
legal proceeding, and testifying on behalf of the Corporation at the
Corporation's request. If called upon by the Corporation for cooperation under
this Section 6, the Corporation shall reimburse the Employee for his reasonable
out-of-pocket expenses in connection with such cooperation.

7.       NON-COMPETITION AGREEMENT AND NON-SOLICITATION AGREEMENTS

The Employee agrees that:

         (a) Until after the second anniversary of the Retirement Date, he shall
refrain, as a principal, partner, co-venturer, employee, agent, servant or
independent contractor, from any business activity which is engaged in a
business which competes with a business in which the Corporation is engaged as
of the Retirement Date, including, but not limited to, the production of
engineered thermoplastic materials, polymeric compounds and molded and profile
products.

         (b) Until after the second anniversary of the Retirement Date, he shall
refrain from soliciting for employment with any business of any type whatsoever
individuals who are employees of the Corporation on the Retirement Date.

         (c) Until after the second anniversary of the Retirement Date, he shall
refrain from soliciting business from any direct or indirect customer of the
Corporation who is a customer of the Corporation on the Retirement Date, which
has been a customer of the Corporation within one year prior to the Retirement
Date or to which the Corporation has plans to propose business on the Retirement
Date.

         (d) Until after the third anniversary of the Retirement Date, he shall
refrain from taking any action to advance a position with respect to the
Corporation that has not been specifically approved by the Board of Directors of
the Corporation, including, but not limited to, acquiring or accumulating shares
of the Corporation with a view to acquiring effective control of the Corporation
and commencing, participating or assisting, directly or indirectly, in a
solicitation of proxies. Without limiting the foregoing, the Employee will be
deemed to have taken an action that advances a position with respect to the
Corporation that has not been specifically approved by the Board of Directors of
the Corporation if he takes such action individually or becomes a consultant to,
employee of, partner or co-venturer with, or agent of a fund, trust, person,
firm or corporation that has or intends to take a position with respect to the
Corporation that has not been specifically approved by the Board of Directors.

         (e) Any breach or threatened breach of any one or more of the
provisions this Section 7 would cause immediate, material and irreparable harm
to the Corporation and that money

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damages would not provide an adequate remedy to the Corporation. The Corporation
shall have all of the rights and remedies available under law or equity,
including, but not limited to, injunctive relief, available to any party
enforcing this covenant not to compete. Each of the rights and remedies shall be
independent of the other and shall be severally enforceable including, but not
limited to, the right to have the covenants specifically enforced by any court
of competent jurisdiction and the right to require Employee to account for and
pay over to the Corporation all benefits derived or received by him as a result
of any such breach of covenant and Employee shall not raise a defense to the
granting of any such relief that the Corporation has an adequate remedy at law.

8.       ENTIRE AGREEMENT

This Agreement constitutes the entire agreement and understanding of the parties
and supersedes all prior negotiations, understandings and agreements, proposed
or otherwise, written or oral, concerning the subject matters hereof, including
but not limited to the Employment Agreement. Furthermore, no modification of
this Agreement shall be binding unless in writing signed by each of the parties
hereto.

9.       SEVERABILITY

         Should any provision of this Agreement be declared illegal or
unenforceable by any court of competent jurisdiction and if such provision
cannot be modified to be enforceable (including the general release language),
such provision shall immediately become null and void, leaving the remainder of
this Agreement in full force and effect. However, if any portion of the general
release language in Section 3 or 4 is ruled unenforceable for any reason, the
Corporation and Employee agree to use their best efforts to negotiate in good
faith an enforceable general release.

10.      GOVERNING LAW

         This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware, the state in which the
Corporation is incorporated, without regard to its principles or provisions of
conflicts of laws. Any action brought under this Agreement shall be brought in a
court of competent jurisdiction with venue in St. Louis County, Missouri.

11.      JUDICIAL ENFORCEMENT

         This Agreement may be specifically enforced in judicial proceedings
brought in equity in a court of competent jurisdiction.

12.      VOLUNTARY AND UNDERSTANDING EXECUTION

         Employee agrees and acknowledges that he has read this Agreement and
fully understands the terms and conditions of this Agreement, including the
release of claims and waiver of rights, that he has consulted with his attorney
and that he enters into this Agreement knowingly, voluntarily, free from duress
and as a result of his own free will.

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13.      CONSIDERATION AND REVOCATION PERIODS

         (a) EMPLOYEE ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY THIS WRITING AND
PREVIOUSLY BY THE CORPORATION TO CONSULT WITH AN ATTORNEY OF HIS CHOOSING
CONCERNING HIS RIGHTS IN CONNECTION WITH HIS TERMINATION FROM EMPLOYMENT AND THE
TERMS AND CONDITIONS OF THIS AGREEMENT, INCLUDING THE RELEASE OF ALL CLAIMS
CONTAINED HEREIN.

         (b) EMPLOYEE ACKNOWLEDGES THAT HE HAS BEEN ADVISED THAT, WITH REGARD TO
THE RELEASE OF CLAIMS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT, AS
AMENDED, HE HAS A LEGAL RIGHT TO USE ALL OR ANY PART OF TWENTY-ONE (21) DAYS TO
CONSIDER, IN CONSULTATION WITH HIS ATTORNEY, WHETHER TO SIGN THIS AGREEMENT AND
THAT, DURING SUCH PERIOD OF CONSIDERATION, THE CORPORATION SHALL NOT REVOKE ITS
OFFER TO ENTER INTO THIS AGREEMENT ON THE TERMS AND CONDITIONS SET FORTH HEREIN.

         (c) EMPLOYEE ACKNOWLEDGES THAT HE HAS BEEN ADVISED THAT, IF HE SIGNS
THIS AGREEMENT, HE CAN THEREAFTER REVOKE HIS EXECUTION OF THIS AGREEMENT TO THE
EXTENT OF THE RELEASE OF CLAIMS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT
ON OR BEFORE THE CLOSE OF BUSINESS ON THE SEVENTH DAY AFTER HIS EXECUTION HEREOF
BY DELIVERING A WRITTEN REVOCATION TO THE CORPORATION, ATTENTION, GENERAL
COUNSEL, SPARTECH CORPORATION, 120 CENTRAL AVENUE, SUITE 1700, ST. LOUIS,
MISSOURI 63105.

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         IN WITNESS WHEREOF, the aforesaid parties have hereunto set their hands
and seals as of the date written below.

WITNESS                                       BRADLEY B. BUECHLER

/s/ TIMOTHY K. KELLETT                        /s/ BRADLEY B. BUECHLER
------------------------------------          --------------------------------

Date:  5/24/05                                Date:  5/24/05
------------------------------------               ---------------------------

                                              SPARTECH CORPORATION
ATTEST:

/s/ JEFFREY D. FISHER, Secretary              By:  /s/ JACKSON W. ROBINSON
------------------------------------             -----------------------------
                                                    Jackson W. Robinson

                                              Title:  Chairman of the Board

                                              Date:  5/26/05
                                                   ---------------------------

                                      -9-exv10w1

 

Exhibit 10.1

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

     This Employment Agreement between Sears Holdings Corporation (the “Company”) and Alan J. Lacy
(the “Executive”) dated September 7, 2005 (the “Agreement”) amends and restates the Employment
Agreement by and among Sears, Roebuck & Co., a New York corporation, Kmart Holding Corporation, a
Delaware corporation and Alan J. Lacy (the “Executive”) dated as of the 16th day of November, 2004.

     1. Effective Date. The “Effective Date” shall mean September 30, 2005.

     2. Employment Period. The Company hereby agrees to continue to employ the Executive,
and the Executive hereby agrees to serve the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending March 23, 2010 (the
“Employment Period”).

     3. Terms of Employment. (a) Position and Duties. (i) During the Employment
Period, the Executive shall serve as the Vice Chairman of the Company and a member of the Office of
the Chairman with such duties and responsibilities as are reasonably assigned by the Chairman of
the Company to such positions. The Executive shall report directly and exclusively to the Board of
Directors of the Company (the “Board”). The Executive shall also serve as Chairman of Sears Canada
and shall continue to serve on the Board during the Employment Period, subject to election by the
shareholders of the Company, without additional consideration.

          (ii) During the Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote substantially all of his business
attention and time to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the Executive’s
reasonable best efforts to perform faithfully and efficiently such responsibilities. During the
Employment Period, it shall not be a violation of this Agreement for the Executive to (A) subject
to the approval of the Board, serve on corporate, civic or charitable boards or committees, (B)
deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly interfere with the
performance of the Executive’s responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that any such activities
have been conducted by the Executive prior to the Effective Time and set forth on Schedule
A hereto, the continued conduct of such activities (or the conduct of activities similar in
nature and scope thereto) subsequent to the Effective Time shall not thereafter be deemed to
interfere with the performance of the Executive’s responsibilities to the Company.

     (b) Compensation (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary (“Annual Base Salary”) at a rate of not less than
$1,000,000 payable in accordance with the Company’s normal payroll policies.

 

 

          (ii) Annual Bonus. With respect to the 2005 fiscal year of the Company, the Executive
shall continue to be eligible to receive an annual bonus (the “2005 Bonus”) with a target of
$2,250,000. The actual Annual Bonus shall be based on the attainment of performance objectives as
determined by the Compensation Committee of the Board (the “Committee”), and it is understood that
Committee will reduce the resulting bonus (which could be higher or lower than $2,250,000) to a
pro-rata amount to reflect the period of time during the fiscal year that the Executive served as
the Company’s Chief Executive Officer. Thereafter, no Annual Bonus will be paid to the Executive.
The 2005 Bonus shall be paid to the Executive when bonuses for 2005 are generally paid to
executives of the Company, but no later than March 15, 2006.

          (iii) Equity-Based Grants. The Executive has received a grant of 75,000 restricted
shares of the Company (the “Restricted Shares”) and a grant of options to purchase 200,000 shares
of the Company’s common stock (the “Stock Options”), and such grants shall continue to be governed
by the provisions of their respective grant documents.

          (iv) Other Employee Benefit Plans. During the Employment Period, the Executive
and/or the Executive’s family, as the case may be, shall be eligible for participation in and shall
receive all benefits under savings and retirement plans that are tax-qualified under Section 401(a)
of the Internal Revenue Code of 1986, as amended (the “Code”), in plans that are supplemental to
any such tax-qualified plans, and welfare benefit plans, practices, policies and programs provided
by the Company (including, without limitation, medical, prescription, dental, vision, disability,
salary continuance, group life and supplemental group life, accidental death, travel accident
insurance, sick leave and vacation plans, practices, policies and programs), but not any severance
plan, practice, policy or program, on a basis that is no less favorable than those generally
applicable or made available to other senior executives of the Company. The Executive shall be
eligible for participation in fringe benefits and perquisite plans, practices, policies and
programs (including, without limitation, expense reimbursement plans, practices, policies and
programs) on a basis that is no less favorable than those generally applicable or made available to
other senior executives of the Company.

     4. Termination of Employment. (a) Death or Disability. The Executive’s
employment shall terminate automatically upon the Executive’s death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has occurred during
the Employment Period (pursuant to the definition of Disability set forth below), it may provide
the Executive with written notice in accordance with Section 10(b) of this Agreement of its
intention to terminate the Executive’s employment. In such event, the Executive’s employment with
the Company shall terminate effective on the 30th day after receipt of such notice by the Executive
(the “Disability Effective Date”), provided that, within the 30 days after such receipt,
the Executive shall not have returned to full-time performance of the Executive’s duties. For
purposes of this Agreement, “Disability” shall mean the absence of the Executive from the
Executive’s duties with the Company on a full-time basis for 180 consecutive days as a result of
incapacity due to mental or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the Executive or the
Executive’s legal representative.

2

 

     (b) Cause. The Company may terminate the Executive’s employment during the Employment
Period either with or without Cause. For purposes of this Agreement, “Cause” shall mean:

          (i) the Executive is convicted of, or pleads guilty or nolo contendere to a charge of
commission of, a felony; or

          (ii) the Executive has engaged in willful gross neglect or willful gross misconduct in
carrying out his duties, which results in material economic harm to the Company or in reputational
harm causing quantifiable material injury to the Company.

For purposes of this provision, no act or failure to act, on the part of the Executive, shall be
considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive’s action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Board or the Chairman of the Company or based
upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not
less than two-thirds of the entire membership of the Board at a meeting of the Board called and
held for such purpose (after reasonable notice is provided to the Executive and the Executive is
given an opportunity, together with counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Executive is guilty of the conduct described in clause (ii)
above, and specifying the particulars thereof in detail.

     (c) Good Reason. The Executive’s employment may be terminated by the Executive with
or without Good Reason. For purposes of this Agreement, “Good Reason” shall mean in the absence of
a written consent of the Executive:

          (i) the assignment to the Executive, after the Effective Date, of any duties inconsistent with
the Executive’s position (including status, offices, titles and reporting requirements), authority,
duties or responsibilities as contemplated by Section 3(a) of this Agreement, or any other action
by the Company, after the Effective Date, which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial or
inadvertent action not taken in bad faith and which is remedied by the Company within 30 days after
receipt of notice thereof given by the Executive;

          (ii) any failure by the Company to comply with any of the provisions of Section 3(b) of this
Agreement, other than an isolated, insubstantial or inadvertent failure not occurring in bad faith
and which is remedied by the Company within 30 days after receipt of notice thereof given by the
Executive;

          (iii) any requirement by the Company that the Executive’s services be rendered primarily at a
location or locations other than Hoffman Estates, Illinois;

          (iv) any failure by the Company to comply with Section 9(c) of this Agreement;

3

 

          (v) any failure to elect or reelect the Executive to the Board.

For purposes of this provision, “Good Reason” shall cease to exist for an event on the ninetieth
day after the Executive first has knowledge of such event, unless the Executive has given the
Company written notice thereof prior to such date. Anything in this Agreement to the contrary
notwithstanding, a termination by the Executive for any reason pursuant to a Notice of Termination
given during the 30-day period immediately following June 30, 2006 shall be deemed to be a
termination for Good Reason for all purposes of this Agreement.

     (d) Notice of Termination. Any termination by the Company for Cause, or by the
Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto
given in accordance with Section 10(b) of this Agreement. For purposes of this Agreement, a
“Notice of Termination” means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination date (which date shall
be not more than 30 days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such
fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

     (e) Date of Termination. “Date of Termination” means (i) if the Executive’s
employment is terminated by the Company for Cause, or by the Executive with or without Good Reason,
the date of receipt of the Notice of Termination or any later date specified therein within 30 days
of such notice, as the case may be, (ii) if the Executive’s employment is terminated by the Company
other than for Cause or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the Executive’s employment is terminated by
reason of death or Disability, the Date of Termination shall be the date of death of the Executive
or the Disability Effective Date, as the case may be.

     (f) Resignation. Upon termination of the Executive’s employment for any reason, the
Executive agrees to resign, as of the Date of Termination, to the extent applicable, from any
positions that the Executive holds with the Company and its affiliated companies, the Board (and
any committees thereof) and the Board of Directors (and any committees thereof) of any of the
affiliated companies.

     5. Obligations of the Company upon Termination. (a) Good Reason; Other Than for
Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the
Executive’s employment other than for Cause, death or Disability or the Executive shall terminate
employment for Good Reason:

          (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date
of Termination (except that the amount described in clause B below

4

 

shall be paid when annual bonuses are paid to senior executives generally, but no later than
March 15, 2006) the aggregate of the following amounts:

     A. the sum of (1) the Executive’s accrued Annual Base Salary and any accrued
vacation pay through the Date of Termination, and (2) the Executive’s business
expenses that have not been reimbursed by the Company as of the Date of Termination
that were incurred by the Executive prior to the Date of Termination in accordance
with the applicable Company policy (the sum of the amounts described in clauses (1)
and (2), shall be hereinafter referred to as the “Accrued Obligations”); and

     B. if the Date of Termination occurs prior to the date that the Executive has
received payment of the 2005 Bonus (described in Section 3(b)(ii)), the 2005 Bonus
shall be paid to the Executive; and

     C. the amount equal to $7.5 million; and

          (ii) the Executive shall receive two additional years of age and service credit under all
welfare benefit plans, programs, agreements and arrangements of the Company; and

          (iii) any equity-based awards granted to the Executive, including the Restricted Shares and
the Stock Options shall vest and become free of restrictions immediately, any stock options granted
to the Executive, including the Stock Options, shall be exercisable for a period of three years
after his termination of employment, without regard to any provisions relating to earlier
termination of the stock options based on termination of employment (the “Equity Benefits”); and

          (iv) for the two-year period following the Date of Termination, the Company shall continue to
provide medical and dental benefits to the Executive and his eligible dependents as if the
Executive remained an active employee of the Company, and the Executive and his eligible dependents
shall be eligible to participate in the Company’s post-retirement welfare benefit programs in
effect for senior executives of the Company (collectively “Welfare Benefits”). The applicable
period of health benefit continuation under the Consolidated Omnibus Budget Reconciliation Act of
1985 (“COBRA”) shall begin on the Date of Termination; and

          (v) to the extent not theretofore paid or provided, the Company shall timely pay or provide to
the Executive any other amounts or benefits required to be paid or provided or which the Executive
is eligible to receive under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies through the Date of Termination (such other amounts and
benefits shall be hereinafter referred to as the “Other Benefits”). As used in this Agreement, the
term “affiliated companies” shall include any company controlled by, controlling or under common
control with the Company.

In the event of the Executive’s termination during the Employment Period by the Company other than
for Cause or Disability or by the Executive for Good Reason, each of the Executive and the Company
agree to execute a mutual general release in favor of the other party, substantially in

5

 

the form attached hereto as Exhibit A. The payments and provision of benefits to the
Executive required by Section 5(a) (other than the Accrued Obligations and Other Benefits) shall be
conditioned upon the Executive’s delivery (and non-revocation prior to the expiration of the
revocation period contained in the release) of such release in favor of the Company, subject to the
Company’s delivery to the Executive of such release in favor of the Executive.

     (b) Death. If the Executive’s employment is terminated by reason of the Executive’s
death during the Employment Period, this Agreement shall terminate without further obligations to
the Executive’s legal representatives under this Agreement, other than for (i) payment of Accrued
Obligations, (ii) the timely payment or provision of Other Benefits, (iii) if applicable, payment
of the unpaid portion of the 2005 Bonus, (iv) the Welfare Benefits and (v) the Equity Benefits.
Accrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a
lump sum in cash within 30 days of the Date of Termination and the 2005 Bonus shall be paid to the
Executive’s estate or beneficiary, as applicable, on the date specified in Section 5(a)(i). With
respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section
5(b) shall include death benefits for which the Company pays as in effect on the date of the
Executive’s death and the continued provision of the Welfare Benefits. The applicable period of
health benefit continuation under COBRA shall begin on the Date of Termination.

     (c) Disability. If the Executive’s employment is terminated by the Company by reason
of the Executive’s Disability during the Employment Period, this Agreement shall terminate without
further obligations to the Executive, other than for (i) payment of Accrued Obligations, (ii) the
timely payment or provision of Other Benefits, (iii) if applicable, payment of the unpaid portion
of the 2005 Bonus, (iv) the Welfare Benefits and (v) the Equity Benefits. Accrued Obligations
shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination and the 2005 Bonus shall be paid to the Executive’s estate or
beneficiary, as applicable, on the date specified in Section 5(a)(i). With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section 5(c) shall
include, and the Executive shall be entitled after the Disability Effective Date to receive,
disability and the continued provision of Welfare Benefits. The applicable period of health
benefit continuation under COBRA shall begin on the Date of Termination.

     (d) Cause; Other than for Good Reason. If the Executive’s employment shall be
terminated by the Company for Cause or the Executive terminates his employment without Good Reason
during the Employment Period, this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (i) the Accrued Obligations through the
Date of Termination and (ii) Other Benefits, in each case to the extent theretofore unpaid.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination.

     6. Full Settlement. The Company’s obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may
have against the Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement and, such amounts shall

6

 

not be reduced whether or not the Executive obtains other employment. The Company agrees to
pay as incurred, to the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest by the Company, any of its affiliates or
their respective predecessors, successors or assigns, the Executive, his estate, beneficiaries or
their respective successors and assigns of the validity or enforceability of, or liability under,
any provision of this Agreement (including as a result of any contest by the Executive about the
amount of any payment pursuant to this Agreement); provided, that the Executive prevails on
at least one material claim.

     7. Certain Additional Payments by the Company. (a) Anything in this Agreement to the
contrary notwithstanding, in the event it shall be determined that any payment or distribution by
the Company or any of its affiliates to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section 7) (a “Payment”)
would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the “Code”) or any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of
all taxes (including any interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.

     (b) Subject to the provisions of Section 7(c), all determinations required to be made under
this Section 7, including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be
made by Deloitte & Touche LLP or such other nationally recognized certified public accounting firm
reasonably acceptable to the Executive as may be designated by the Company (the “Accounting Firm”)
which shall provide detailed supporting calculations both to the Company and the Executive within
15 business days of the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 7, shall
be paid by the Company to the Executive or directly to the Internal Revenue Service, in the sole
discretion of the Company, within five days of the later of (i) the due date for the payment of any
Excise Tax, and (ii) the receipt of the Accounting Firm’s determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made (“Underpayment”), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its remedies pursuant to
Section 7(c) and the Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.

7

 

     (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten business days after
the Executive is informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive shall:

          (i) give the Company any information reasonably requested by the Company relating to such
claim,

          (ii) take such action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the Company,

          (iii) cooperate with the Company in good faith in order effectively to contest such claim, and

          (iv) permit the Company to participate in any proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 7(c), the Company shall control all proceedings taken in connection with such
contest, and, at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of such claim and may,
at its sole option, either pay the tax claimed to the appropriate taxing authority on behalf of the
Executive and direct the Executive to sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as
the Company shall determine; provided, however, that, if the Company pays such
claim and directs the Executive to sue for a refund, the Company shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such payment or with respect to any imputed
income in connection with such payment; and provided, further, that any extension
of the statute of limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company’s control of the contest shall be limited to issues
with respect to which the Gross-Up Payment would be payable hereunder, and the Executive shall be
entitled to

8

 

settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.

     (d) If, after the receipt by the Executive of a payment by the Company of an amount on the
Executive’s behalf pursuant to Section 7(c), the Executive becomes entitled to receive any refund
with respect to such claim, the Executive shall (subject to the Company’s complying with the
requirements of Section 7(c)) promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable thereto). If, after payment by the
Company of an amount on the Executive’s behalf pursuant to Section 7(c), a determination is made
that the Executive shall not be entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then the amount of such payment shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.

     8. Confidential Information; Non-Solicit of Employees; Non-Compete. (a) The
Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by the Executive during
the Executive’s employment by the Company or any of its affiliated companies and which shall not be
or become public knowledge (other than by acts by the Executive or representatives of the Executive
in violation of this Agreement). After termination of the Executive’s employment with the Company,
the Executive shall not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it or as may be required by applicable law,
court order, a regulatory body or arbitrator or other mediator.

     (b) In consideration of the grant of the Stock Options and the Company’s obligations under
Section 5 hereof:

          (i) During the one-year period following the Executive’s termination of employment during the
Employment Period for any reason (the “Restricted Period”), the Executive will not, directly or
indirectly, on behalf of the Executive or any other person, become associated with, whether as a
principal, partner, employee, consultant or shareholder (other than as a holder of 5% or less of
the outstanding voting shares of any publicly traded company), a Competitor. For purposes of this
Section 8(b) a “Competitor” shall mean any entity that is actively engaged in any retail business
with more than $1 billion in annual revenue from such retail business; provided,
however, that if the Executive terminates employment for any reason pursuant to a Notice of
Termination given during the 30-day period immediately following June 30, 2006, a “Competitor”
shall mean only Wal-Mart Stores, Inc., The Home Depot, Inc., Target Corporation, J. C. Penney
Company, Inc., Lowe’s Companies, Inc., Best Buy Co., Inc., Circuit City Stores, Inc., or Kohl’s
Corporation, or any successor thereto.

          (ii) During the Restricted Period, the Executive shall not, directly or indirectly, solicit or
encourage any person to leave his or her employment with the Company or assist in any way with the
hiring of any Sears employee by any other business.

9

 

     (c) The Executive acknowledges that the Company would be irreparably injured by a violation of
this Section 8 and the Executive or the Company, as applicable, agrees that the Company or the
Executive, as applicable, in addition to any other remedies available to it for such breach or
threatened breach, shall be entitled, without posting a bond, to a preliminary injunction,
temporary restraining order, or other equivalent relief, restraining the Executive or the Company
(including its executive officers and directors), as applicable, from any actual or threatened
breach of this Section 8.

     9. Successors. (a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive. This Agreement shall
inure to the benefit of and be enforceable by the Executive’s legal representatives, heirs or
legatees.

     (b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns.

     (c) The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place. As
used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor
to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.

     10. Miscellaneous. (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to principles of conflict of
laws. If, under any such law, any portion of this Agreement is at any time deemed to be in
conflict with any applicable statute, rule, regulation or ordinance, such portion shall be deemed
to be modified or altered to conform thereto. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their respective successors
and legal representatives.

     (b) All notices and other communications hereunder shall be in writing and shall be given by
hand delivery to the other parties or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:

	 	 	 
	If to the Executive:

	 	At the most recent address
	 

	 	on file at the Company.
	 
	 	 
	If to the Company:

	 	Sears Holdings Corp.
	 

	 	3333 Beverly Road
	 

	 	Hoffman Estates, Illinois 60179
	 

	 	Attention: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance
herewith. Notice and communications shall be effective when actually received by the addressee.

10

 

     (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement.

     (d) The Company may withhold from any amounts payable under this Agreement such Federal,
state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or
regulation.

     (e) The Executive’s or the Company’s failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to terminate employment
for Good Reason pursuant to Section 4(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this Agreement, except as set
forth in Section 4(c).

     (f) Except as otherwise expressly provided herein, from and after the Effective Time, this
Agreement shall supersede any other employment, severance or change of control agreement between
the parties and between the Executive and Sears, with respect to the subject matter hereof
(including without limitation, the Executive Non-Disclosure and Non-Solicitation of Employees
Agreement and the Executive Severance/Non-Compete Agreement between the Executive and Sears, each
dated as of November 26, 2001). Any provision of this Agreement that by its terms continues after
the expiration of the Employment Period or the termination of the Executive’s employment shall
survive in accordance with its terms.

11

 

     IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and the Company has
caused these presents to be executed in its name on its behalf, all as of the day and year first
above written.

	 	 	 	 	 
	 	 	ALAN J. LACY
	 
	 	 	 	 
	 	 	/s/ Alan J. Lacy
	 	 	 
	 
	 	 	 	 
	 	 	SEARS HOLDINGS CORP.
	 
	 	 	 	 
	 

	 	By
	 	/s/ Andrea L. Zopp
	 

	 	 	 	 
	 

	 	Name:
	 	Andrea L. Zopp
	 

	 	Title:
	 	Senior Vice President, General Counsel and Secretary

 

 

EXHIBIT A

     For and in consideration of the payments and other benefits described in the employment
agreement dated as of September 7, 2005 (the “Agreement”) between Alan J. Lacy
(“Executive”), and Sears Holdings Corp. (the “Company”) and for other good and
valuable consideration, Executive hereby releases the Company, its divisions, affiliates,
subsidiaries, parents, branches, predecessors, successors, assigns, officers, directors, trustees,
employees, agents, shareholders, administrators, representatives, attorneys, insurers and
fiduciaries, past, present and future (the “Released Parties”) from any and all claims of
any kind arising out of, or related to, his employment with the Company, its affiliates and
subsidiaries (collectively, with the Company, the “Affiliated Entities”), his separation
from employment with the Affiliated Entities or derivative of Executive’s employment, which
Executive now has or may have against the Released Parties, whether known or unknown to Executive,
by reason of facts which have occurred on or prior to the date that Executive has signed this
Release. Such released claims include, without limitation, any and all claims under federal, state
or local laws pertaining to employment, including, without limitation, the Age Discrimination in
Employment Act, Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000e
et. seq., the Fair Labor Standards Act, as amended, 29 U.S.C. Section 201 et. seq.,
the Americans with Disabilities Act, as amended, 42 U.S.C. Section 12101 et. seq. the
Reconstruction Era Civil Rights Act, as amended, 42 U.S.C. Section 1981 et. seq., the
Rehabilitation Act of 1973, as amended, 29 U.S.C. Section 701 et. seq., the Family and
Medical Leave Act of 1992, 29 U.S.C. Section 2601 et. seq., and any and all state or local
laws regarding employment discrimination and/or federal, state or local laws of any type or
description regarding employment, including but not limited to any claims arising from or
derivative of Executive’s employment with the Affiliated Entities, as well as any and all claims
under state contract or tort law.

     Executive has read this Release carefully, acknowledges that Executive has been given at least
21 days to consider all of its terms and has been advised to consult with any attorney and any
other advisors of Executive’s choice prior to executing this Release, and Executive fully
understands that by signing below Executive is voluntarily giving up any right which Executive may
have to sue or bring any other claims against the Released Parties, including any rights and claims
under the Age Discrimination in Employment Act. Executive also understands that Executive has a
period of seven days after signing this Release within which to revoke his agreement, and that
neither the Company nor any other person is obligated to make any payments or provide any other
benefits to Executive pursuant to the Agreement until eight days have passed since Executive’s
signing of this Release without Executive’s signature having been revoked, other than the Accrued
Obligations and the Other Benefits (in each case, as defined in the Agreement). Finally, Executive
has not been forced or pressured in any manner whatsoever to sign this Release, and Executive
agrees to all of its terms voluntarily.

A-1

 

     For and in consideration of the obligations upon Executive as set forth in the Agreement, and
for other good and valuable consideration, the Company hereby (on its own behalf and that of the
other Affiliated Entities, the divisions and predecessors and successors of the Affiliated Entities
and the directors and officers of the Company in their capacity as such (collectively, the
“Releasing Entities”)) releases Executive and his heirs, executors, successors and assigns
(the “Executive Released Parties”) of and from all debts, obligations, promises, covenants,
collective bargaining obligations, agreements, contracts, endorsements, bonds, controversies,
suits, claims or causes of every kind and nature whatsoever, arising out of, or related to, his
employment with the Affiliated Entities, his separation from employment with the Affiliated
Entities or derivative of Executive’s employment, which the Releasing Entities now have or may have
against the Executive Released Parties, whether known or unknown, by reason of facts which have
occurred on or prior to the date that the Company has signed this Release; provided,
however, that nothing contained in this Release shall release the Executive Released
Parties from any claim or form of liability arising out of acts or omissions by Executive which
constitute a violation of the criminal or securities laws of any applicable jurisdiction.

     Notwithstanding anything else herein to the contrary, this Release shall not affect: the
obligations of the Company or Executive set forth in the Agreement or other obligations that, in
each case, by their terms, are to be performed after the date hereof by the Company or Executive
(including, without limitation, obligations to Executive under any stock option, stock award or
agreements or obligations under any pension plan or other benefit or deferred compensation plan,
all of which shall remain in effect in accordance with their terms); obligations to indemnify
Executive respecting acts or omissions in connection with Executive’s service as a director,
officer or employee of the Affiliated Entities; or any right Executive may have to obtain
contribution in the event of the entry of judgment against Executive as a result of any act or
failure to act for which both Executive and any of the Affiliated Entities are jointly responsible.

     This Release, and the attached covenants, are final and binding and may not be changed or
modified except in a writing signed by both parties.

	 	 	 	 	 
	 
	 	 	 	 
	 

	 	 
	 	 
	 

	 	Date
	 	ALAN J. LACY
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 
	 	 
	 

	 	Date
	 	SEARS HOLDINGS CORP.

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