Document:

2008 Annual Incentive Plan

 EXHIBIT 10.1 
 SEARS HOLDINGS CORPORATION 
 2008 ANNUAL INCENTIVE PLAN 
 SECTION 1 
 GENERAL

 1.1. Purpose. The Sears Holdings Corporation 2008 Annual Incentive Plan (the “AIP”) is a performance-based
incentive program. The purpose of the AIP is to reward eligible employees of Sears Holdings Corporation (the “Company”), Sears Holdings Management Corporation, Sears, Roebuck and Co., Kmart Holding Corporation and their participating
subsidiaries (collectively referred to as “Employers”), for sustained Company fiscal performance. The AIP is established under, and constitutes a part of, the Sears Holdings Corporation Umbrella Incentive Program (the “UIP”),
which UIP was previously approved by shareholders. Both (a) Awards (as defined in Section 9) structured to satisfy the requirements for “performance-based compensation” outlined in regulations issued under Section 162(m) of
the Internal Revenue Code (“Code”), and (b) Awards not so structured, may be issued hereunder. The effective date of the AIP is April 22, 2008, which is the date the Compensation Committee (as defined in Section 9) adopted
the AIP (the “Effective Date”). 
 1.2. Operation, Administration and Definitions. The operation and administration
of the AIP, including the Awards made under the AIP, shall be subject to the provisions of Section 7. Capitalized terms in the AIP shall be defined in the provision in which a term first appears or as set forth in Section 9. 
 1.3. Participating Employers. Each Employer whose eligible employee’s are covered by the AIP may be referred to herein as a
“Participating Employer”. Participating Employers are listed on Appendix A. 
 SECTION 2 
 PARTICIPATION 
 2.1.
Eligible Employee. Except as provided herein, the term “Eligible Employee” means all: (a) salaried employees and (b) “corporate hourly employees”, of any Employer, including the Company, which is a
Participating Employer. “Corporate hourly employees” refer to hourly employees employed at a Support Center. Subject to the terms and conditions of the AIP, the Senior Corporate Compensation Executive (as defined in Section 9) shall
determine Eligible Employee status, except as determined by the Compensation Committee in accordance with subsection 7.1. Eligible Employees are “Participants” in the AIP. 
 2.2. New Hires; Changes in Status; Promotions and Demotions. 
 (a) New Hires. The Senior Corporate Compensation Executive, the Compensation Committee, or an authorized representative of
either, as applicable, shall determine whether and when an employee who is a new hire is an Eligible Employee. The terms and conditions of any Award for such an individual shall be (i) based on the Target Annual Incentive for the new
hire’s incentive-eligible position and (ii) subject to a fraction, the numerator of which is the number of full days on active payroll (except as otherwise provided herein) during the Performance Period (as defined in subsection 3.1) that
the Eligible Employee was a Participant in the AIP and the denominator of which is the number of full days in the Performance Period. 

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 (b) Changes in Status. The Senior Corporate Compensation Executive or the Compensation
Committee, as applicable, shall determine whether and when an employee who has a change in status becomes or ceases to be an Eligible Employee during the Performance Period. The terms and conditions of any Award for such an individual shall be
(i) based on the Target Annual Incentive for the incentive-eligible position and (ii) subject to a fraction, the numerator of which is the number of full days on active payroll (except as otherwise provided herein) during the Performance
Period that the Eligible Employee was a Participant in the AIP and the denominator of which is the number of full days in the Performance Period. 
 (c) Promotion. If a Participant is promoted, the Award for such an individual shall be based on a pro-ration, whereby the Target Annual Incentive for the new position will apply to the remainder of the
Performance Period and the Target Annual Incentive for the immediately preceding incentive-eligible position will apply to the portion of the Performance Period immediately preceding the effective date of the promotion, subject to subsection 3.2.
Notwithstanding the foregoing, in no event will positive discretion be applied to any Award that has been designated as intended to meet the requirements of Code Section 162(m) (and the regulations issued thereunder) with respect to the
Performance Period or as of the payment date (as defined under subsection 5.1). 
 (d) Demotions. If a Participant is
demoted, the Award for such an individual shall be based on a pro-ration, whereby the Target Annual Incentive for the new incentive-eligible position (if any) will apply only to the remainder of the Performance Period and the Target Annual Incentive
for the immediately preceding incentive-eligible position will apply only to the portion of the Performance Period immediately preceding the effective date of the promotion, subject to subsection 3.2. 
 SECTION 3 
 ANNUAL INCENTIVE
AWARDS 
 3.1. Annual Incentive Awards. Except as provided herein, the Senior Corporate Compensation Executive shall
determine, in its sole discretion, the “Target Annual Incentive” (as defined herein) for each Participant. Notwithstanding the forgoing, the Compensation Committee shall approve the Target Annual Incentives and the Awards for Executives
(as defined in Section 9) under its purview. 
 (a) A “Target Annual Incentive” shall refer to the percentage
of a Participant’s rate of base pay during the Performance Period, which may be reflected as a percentage of base pay or flat dollar amount. 
 (b) The “Target Incentive Award” shall consist of a commitment by the Company to distribute, at the time specified in, and in accordance with the applicable provisions of, Section 5 below, a dollar
amount based on a Participant’s Target Annual Incentive and based on actual performance of the Company and the Participant, as compared to established performance goals described in Section 4 below. The Target Incentive Award shall be
subject to pro-ration (if applicable) and certification of the calculation of the final Award amount by the Senior Corporate Compensation Executive or the Compensation Committee, as applicable. 
  

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 (c) The “Annual Incentive Award” shall refer to the final annual portion of a Participant’s
Target Incentive Award payable on the payment date (as defined in subsection 5.1 below). 
 (d) Any Annual Incentive Award
shall be satisfied by a distribution in accordance with Section 5 and subject to Sections 6 and 7. 
 3.2. Adjustments based on
Status Changes during Performance Period. Notwithstanding anything in the AIP to the contrary, with respect to Awards that are not designated as intended to meet the requirements of “performance-based compensation” under Code
Section 162(m) (and the regulations issued thereunder) and prior to the settlement of any Award, if the Target Annual Incentive for a new incentive-eligible position (including if due to promotion or demotion) is lower or higher than the Target
Annual Incentive for a Participant’s immediately prior position, the Participant’s Target Incentive Award may be to adjusted by the Senior Corporate Compensation Executive or the Compensation Committee, as applicable, to ensure that the
overall target cash compensation (i.e., the sum of base pay and Target Annual Incentive) for the new position is comparable to the overall target cash compensation for the immediately prior position. 
 3.3. Performance Period. The “Performance Period” refers to the applicable Fiscal Year (as defined in Section 9). The amount
of an Award, if any, shall be determined following completion of the Performance Period in accordance with this Section 3 and Section 4. 
 3.4. Pro-ration. 
 (a) The Annual Incentive Award of a Participant who experiences a status change or
position change, shall be pro-rated based on the number of days worked on active payroll in each incentive-eligible position during the Performance Period. 
 (b) The Annual Incentive Award of a Participant who experiences a demotion or promotion, shall be pro-rated based on the Target Annual Incentives in effect during the Performance Period, subject to Sections 2.2 and
3.2 above. 
 (c) The Annual Incentive Award of a Participant who experiences an event described in Section 6, shall be
pro-rated based upon a fraction, the numerator of which is the number of days worked on active payroll in an incentive-eligible position during the Performance Period and the denominator of which is the number of days in the Performance Period.

 SECTION 4 
 GOALS
AND PERFORMANCE 
 4.1. Company Goals. The financial performance goals, which are approved by the Senior Corporate
Compensation Executive or the Compensation Committee, as applicable, shall include the following levels of performance. 
  

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 (a) EBITDA 
 (i) AIP EBITDA. Subject to adjustment, if any, in accordance with paragraph (iv) of this subsection 4.1(a), “AIP EBITDA” refers to earnings before interest, taxes, depreciation and amortization
for the Performance Period computed as operating income appearing on the Company’s statement of operations for the applicable reporting period, other than Sears Canada (referred to as the “Domestic Company”), less depreciation and
amortization and gains/(losses) on sales of assets. In addition, it is adjusted to exclude significant litigation or claim judgments or settlements (defined as matters which are $1 million or more) including the costs related thereto; the effect of
purchase accounting and changes in accounting methods; gains, losses and costs associated with acquisitions, divestitures and store closures; integration costs that are disclosed as merger related; and restructuring activities. If after the
Effective Date, the Domestic Company acquires assets or an entity that has associated EBITDA (measured using the same principles as those described in the preceding provisions of this paragraph (i)) in its last full fiscal year prior to the
acquisition, of greater than or equal to $100,000,000, any EBITDA associated with such assets or entity (after its acquisition) and during the Performance Period shall be disregarded in determining AIP EBITDA under this paragraph (i). 
 (ii) Threshold EBITDA. “Threshold EBITDA” reflects the minimum Company performance that must be achieved for any Annual
Incentive Award to be paid, which shall be equal to ninety percent (90%) of the Target EBITDA. 
 (iii) Target
EBITDA. Subject to adjustment, if any, in paragraph (iv) immediately below, “Target EBITDA” refers to the target level of EBITDA, for the Performance Period, established by the Compensation Committee consistent with Company
strategy, in accordance with paragraph (i) above of this subsection 4.1(a). 
 (iv) Adjustments to Target EBITDA.
The AIP EBITDA incentive target contemplates that the Domestic Company remains approximately the same size over the Performance Period. If, after the beginning of the Performance Period, Domestic Company divests itself of assets or an entity that
has associated EBITDA (measured using the same principles as those described in paragraph (i) above of this subsection 4.1(a)) in its last full fiscal year prior to the divestiture of greater than or equal to $100,000,000, Target EBITDA for the
Performance Period will be decreased by actual EBITDA of such assets or entity for the portion of such assets’ or entity’s last full fiscal year prior to the divestiture corresponding to the portion of the Performance Period (in which the
divestiture occurs) remaining after the divestiture occurs. 
 (b) Merchandise Margin. 
 (i) Merchandise Margin. The Merchandise Margin may also be taken into consideration. Merchandise Margin may apply as a Company goal
as well as a goal specific to a particular business unit. The applicability of this performance measure to a Participant will depend on his or her Assignment. “Merchandise Margin” refers to internal margin as reported 

  

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on the Company’s domestic internal operating statements, and generally consists of merchandise gross profit, vendor allowances/subsidy included in
margin, return-to-vendor markouts, allocated zero percent (0%) finance promotion costs, product quality costs and inventory shrink. 
 (ii) Threshold Merchandise Margin. “Threshold Merchandise Margin” reflects the minimum gross margin that must be achieved with respect to Awards that include as a measurement Merchandise Margin, which shall be equal to
ninety six point seven percent (96.7%) of the Target Merchandise Margin. 
 (iii) Target Merchandise Margin.
“Target Merchandise Margin” refers to the target level of Merchandise Margin, for the Performance Period, established by the Compensation Committee, consistent with Company strategy, in accordance with paragraph (i) above of this
subsection 4.1(b). 
 4.2. Company Performance. Company performance is determined based on certain financial measurements
including the following primary measurements: EBITDA and Merchandise Margin, which shall be applied to a Participant based upon his or her Assignment. 
 (a) EBITDA Performance. 
 (i) Threshold Payout. Subject to Participant
performance and Sections 5 and 6, if Threshold EBITDA is met, sixty percent (60%) of a Target Incentive Award shall be paid. 
 (ii) Target Payout. Subject to Participant performance and Sections 5 and 6, if Target EBITDA is met, one hundred percent (100%) of a Target Incentive Award shall be paid. 
 (iii) If EBITDA performance falls between the Threshold and the Target payout levels, the adjustment to an Award shall be determined by
straight-line interpolation. 
 (iv) Subject to Participant performance and Sections 5 and 6, if EBITDA performance exceeds
the Target, a percentage of the Target Incentive Award shall be paid equal to one hundred percent (100%) plus two percent (2%) for each one percent (1%) by which EBITDA performance exceeds Target EBITDA. There is no maximum payout
percentage. 
 (b) Merchandise Margin Performance. 
 (i) Threshold Payout. Subject to Participant performance and Sections 5 and 6, if Threshold Merchandise Margin is met, sixty
percent (60%) of a Target Incentive Award shall be paid. 
 (ii) Target Payout. Subject to Participant performance
and Sections 5 and 6, if Target Merchandise Margin is met, one hundred percent (100%) of a Target Incentive Award shall be paid. 
  

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 (iii) If Merchandise Margin performance falls between the Threshold and the Target payout levels, the
adjustment to an Award shall be determined by straight-line interpolation. 
 (iv) Subject to Participant performance and
Sections 5 and 6, if Merchandise Margin performance exceeds the Target, a percentage of the Target Incentive Award shall be paid equal to one hundred percent (100%) plus six point zero six percent (6.06%) for each one percent (1%) by
which Merchandise Margin performance exceeds Target Merchandise Margin. There is no maximum payout percentage. 
 (c) Other
Financial Performance Metrics. In addition to the performance measures described above, other financial measures have been established to measure the contribution or profit of different business units. The threshold and target amounts and
related payout percentages for these other financial measures are established utilizing the EBITDA or Merchandise Margin criteria, as described in subsection 4.1 above and this subsection 4.2. Notwithstanding the foregoing, for certain Participants
a different threshold performance percentage (than those provided for under subsection 4.1) may apply based upon such Participants’ business unit. The applicability of any other performance measure referred to in this paragraph (c) to a
Participant will depend on his or her Assignment. 
 4.3. Participant Performance. Except as provided in subsection 4.3(b)
below, the Senior Corporate Compensation Executive or the Compensation Committee, as applicable, shall have the discretion to apply an individual performance modifier to a Participant’s Annual Incentive Award, which enables the Award to be
modified, positively or negatively, based on individual Participant performance. 
 (a) Such individual modifier may be
applied to modify a Participant’s Annual Incentive Award as follows: 
  

					
	             Performance            
	 	 Rating
	 	 Modifier

	 Exceeds Expectation
	 	5	 	+ 0% to 25%
	 Above Average
	 	4	 	+ 0% to 15%
	 Average
	 	3	 	No adjustment
	 Below Average
	 	2	 	- 25%
	 Poor Performance
	 	1	 	- 100%

 (b) The individual modifier shall not apply to the portion of an Award
attributable to any portion of the Performance Period during which a Participant holds a position of Senior Vice President or higher, and in no event will positive discretion be applied to any Award for a Participant who is a “covered
employee” within the meaning of Code Section 162(m) (and the regulations issued thereunder) with respect to the Performance Period or as of the payment date (as defined under subsection 5.1). 
  

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 4.4. Additional Requirements. All Annual Incentive Awards awarded under the AIP are subject to the provisions
of Sections 5, 6 and 7. 
 SECTION 5 
 DISTRIBUTION 
 5.1. Time of
Payment. Subject to Sections 6 and 7, the Annual Incentive Awards that are payable under the AIP, based on the Awards and payout formulas described at Sections 3 and 4, shall be distributed immediately after the Compensation Committee has
certified the attainment of the performance goals and the Compensation Committee or the Senior Corporate Compensation Executive, as appropriate, has determined the amount to be paid to each Participant, which shall in no event be later than the date
which is two and one-half (2 1/2) months after the last day of the 2008 Fiscal Year. Notwithstanding anything herein to the
contrary, such distributions shall be made no later than required by Code Section 409A to avoid treatment of the AIP as a deferred compensation plan under Code Section 409A. The date as of which payment is made in accordance with this
subsection 5.1 is referred to herein as the “payment date.” 
 5.2. Form of Payment. An Annual Incentive Award
shall generally be satisfied by a single, lump sum cash payment to the Participant, provided, however, that, at the discretion of the Committee, the Company may elect, by such deadline as specified under uniform and nondiscriminatory rules
established by the Committee, to satisfy such Annual Incentive Award by payment of shares of Company common stock (“Stock”) in lieu of cash, or a combination of cash and shares of Stock. The number of shares of Stock shall be equal to
(i) the amount of the Award to be paid in stock in accordance with this subsection 5.2, divided by (ii) the Fair Market Value of a share of Stock, on the principal securities exchange or market on which the shares are then listed or
admitted, on the business day immediately preceding the date of distribution or, if the Stock is not traded on that date, on the next preceding date on which Stock was traded; provided that issuance of any shares of Stock in accordance with this
subsection 5.2 shall be contingent on the availability of shares of Stock under any shareholder-approved plan of the Company providing for the issuance of Stock in satisfaction of the Awards hereunder (which in no event shall be an employee stock
purchase plan). 
 5.3. Termination of Employment and Other Provisions. All distributions are subject to the provisions of
Sections 6 and 7, below. 
 SECTION 6 
 TERMINATION OF EMPLOYMENT; LEAVE OF ABSENCE; REINSTATEMENT 
 Any Award payable under this
Section 6 shall be payable in accordance with Section 5. 
 6.1. Termination of Employment. If a Participant incurs a
termination of employment before the payment date (as defined in Section 5.1 above), the effect of termination of employment on a Participant’s right to receive an Award under the AIP shall depend on the reason for the termination, as
described in this subsection 6.1. 
 (a) Voluntary Termination or Involuntary Termination. In the event that prior to
the payment date of an Award, a Participant (i) voluntarily terminates employment (for any reason other than due to permanent and total disability, as defined in the Company’s long-term disability program, regardless of whether the
Participant is covered by such program) or (ii) is involuntarily terminated for any reason (other than death) prior to the payment date of an Award, such Participant shall forfeit his or her Award, except as prohibited by law. 
  

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 (b) Disability. In the event that prior to the payment date of an Award, a Participant suffers
a permanent and total disability (as defined in the Company’s long-term disability program, regardless of whether the Participant is covered by such program) while employed by the Company or an Employer resulting in termination or retirement,
subject to Section 7 below, such Participant shall be entitled to a distribution of the Award that would otherwise be payable to the Participant under Sections 3 and 4 above, pro-rated based upon a fraction, the numerator of which is the number
of full days worked on active payroll in an incentive-eligible position during the Performance Period and the denominator of which is the number of days in the Performance Period. 
 (c) Death. In the event that a Participant dies while employed by a Participating Employer but prior to the payment date of his or
her Award, the estate of such Participant shall be entitled to a distribution of the Award, if any, payable in cash that would otherwise be payable to the Participant under Sections 3 and 4 above, pro-rated based upon a fraction, the numerator of
which is the number of full days worked on active payroll in an incentive-eligible position during the Performance Period and the denominator of which is the number of full days in the Performance Period (or the number of days remaining in the
Performance Period after the individual is assigned to an incentive-eligible position). 
 6.2. Leave of Absence. 

 (a) General. In the event that a Participant is on an unpaid leave of absence any time during the Performance Period
or at the time of the payment date, subject to paragraphs (b) and (c) immediately below and Section 7, such Participant shall be entitled to a distribution of the Award that would otherwise be payable to the Participant under Sections
3 and 4 above, pro-rated based upon a fraction, the numerator of which is the number of full days worked on active payroll in an incentive-eligible position during the Performance Period and the denominator of which is the number of days in the
Performance Period. 
 (b) Short-Term Disability. In the event that a Participant is on a leave of absence due to
short-term disability (including, for purposes of the AIP, paid maternity leave) any time during the Performance Period, subject to paragraphs (c) below and Section 7), the period of the leave of absence shall be treated as time on active
payroll and will be credited toward the determination of the Participant’s Award and the Participant shall be entitled to payment of the Award in accordance with Section 5, even if the Participant is on the short-term disability leave of
absence as of the payment date. 
 (c) Salary Continuation. In the event that a Participant is receiving salary
continuation under a severance or non-compete agreement or a Company-sponsored transition pay or severance pay plan as of the payment date, such Participant shall forfeit his or her Award. 
  

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 6.3. Reinstatement. If a Participant who forfeited his or her Award as a result of a
termination of employment is reinstated or rehired during the Performance Period, any Award attributable to the portion of the Performance Period prior to the termination of employment shall remain forfeited. Notwithstanding the foregoing, such a
Participant shall be eligible for an Award based on a fraction, the numerator of which is the number of days worked on active payroll in an incentive-eligible position on or after the date of reinstatement or rehire during the Performance Period and
the denominator of which is the number of days in the Performance Period. 
 SECTION 7 
 OPERATION AND ADMINISTRATION 
 7.1. Compensation Committee and Senior Corporate Compensation Executive. 
 (a) Compensation
Committee. Notwithstanding paragraph (b) immediately below, the Compensation Committee: 
 (i) Shall approve
the Target Annual Incentives and the Awards for Executives under its purview; 
 (ii) Notwithstanding paragraph
(b) below, with respect to Executives under its purview, shall have the authority and discretion to establish the terms, conditions, restrictions, and other provisions of such Awards, including without limitation the financial performance goals
and the performance measures for each such Executive’s Assignment in accordance with Section 4, and (subject to the restrictions imposed by Section 8) to amend, cancel, or suspend Awards, subject to the requirements of Code
Section 162(m), if applicable; 
 (iii) May make additional changes to the AIP that it deems appropriate for the
effective administration of the AIP; provided however, that these changes may not increase the benefits to which Participants may become entitled under the AIP nor change the pre-established measures or goals that have been approved, except as
explicitly provided in the AIP; and 
 (iv) Shall be responsible for all other duties and responsibilities allocated to the
Compensation Committee under the terms and conditions of the AIP. 
 (b) Senior Corporate Compensation Executive.
Except as provided in paragraph (a) immediately above, the Senior Corporate Compensation Executive: 
 (i) Shall
Determine the Target Annual Incentive for each Participant; 
 (ii) Shall have the authority to control and manage the
operation and administration of the AIP; 
 (iii) Shall be responsible for the day-to-day administration of the AIP, including
without limitation the exception process described in Section 7.2 below; 
 (iv) Subject to the other provisions of the
AIP, have the authority and discretion to determine the time or times of receipt of Awards, to establish the terms, conditions, restrictions, and other provisions of such Awards, and (subject to the restrictions imposed by Section 8) to amend,
cancel, or suspend Awards, subject to the requirements of Code Section 162(m), if applicable; and 
  

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 (v) Shall be responsible for all other duties and responsibilities allocated to the Senior Corporate
Compensation Executive under the terms and conditions of the AIP. 
 (c) Any determinations by the Compensation Committee or
the Senior Corporate Compensation Executive, as applicable, regarding this AIP are binding on all Participants. 
 (d) The
Senior Corporate Compensation Executive and the Compensation Committee, as appropriate, shall have the authority and discretion to interpret the AIP, to establish, amend, and rescind any rules and regulations relating to the AIP and to make all
other determinations that may be necessary or advisable for the administration of the AIP. 
 7.2. Incentive Exceptions. The
Senior Corporate Compensation Executive shall have the authority to receive and consider requests by Business Units of the Participating Employers for an exception to an established performance measures due to circumstances outside of the business
unit’s control. The Senior Corporate Compensation Executive may establish a procedure for reviewing and approving or rejecting an exception. Any exception determination shall be binding. In no event will positive discretion be applied, by the
Compensation Committee or the Senior Corporate Compensation Executive, to any Award that has been designated as intended to meet the requirements of Code Section 162(m) (and the regulations issued thereunder) with respect to the Performance
Period or as of the payment date (as defined under subsection 5.1).  
 7.3. Discretion. Notwithstanding
Section 7.2 or anything in the AIP to the contrary, with respect to Awards that are not designated as intended to meet the requirements of “performance-based compensation” under Code Section 162(m) (and the regulations issued
thereunder) and prior to the settlement of any Award, the Compensation Committee or the Senior Corporate Compensation Executive, as applicable, may change the pre-established measures and goals that have been approved for such Award and increase or
reduce the amount of such Award. 
 7.4. Tax Withholding. All distributions under the AIP are subject to withholding of all
applicable taxes. 
 7.5. Settlement of Awards. The obligation to make payments and distributions with respect to Awards may be
satisfied through cash payments, the delivery of shares of Stock, or a combination thereof, as provided under subsection 5.2, subject, in the case of settlement in shares, to the terms of the stock plan under which the Stock is issued. Satisfaction
of any such obligations under an Award, which is sometimes referred to as the “settlement” of the Award, may be subject to such conditions, restrictions and contingencies as the Senior Corporate Compensation Executive or the Compensation
Committee, as appropriate, shall determine. Each Employer shall be liable for payment of an Award due under the AIP with respect to any Participant to the extent that such benefits are attributable to the services rendered for that Employer by the
Participant. Any disputes relating to liability of an Employer for payment of an Award shall be resolved by the Senior Corporate Compensation Executive or the Compensation Committee, as appropriate. 
  

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 7.6. Transferability. Except as otherwise provided by the Senior Corporate Compensation Executive, Awards
under the AIP are not transferable except as designated by the Participant by will or by the laws of descent and distribution. 
 7.7.
Form and Time of Elections. Unless otherwise specified herein, any election required or permitted to be made by any Participant or other person entitled to benefits under the AIP, and any permitted modification, or revocation
thereof, shall be in writing filed with the Senior Corporate Compensation Executive at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the AIP, as the Senior Corporate Compensation
Executive shall require. 
 7.8. Action by Company or Employer. Any action required or permitted to be taken under the AIP by
the Company or any other Employer shall be by resolution of its board of directors, or by action of one or more members of the board of directors of such company (including a committee of the board) who are duly authorized to act for such board with
respect to the applicable action, or (except to the extent prohibited by applicable law or applicable rules of any securities exchange or similar entity) by a duly authorized officer of such company. 
 7.9. Gender and Number. Where the context admits, words in any gender shall include any other gender, words in the singular shall include
the plural and the plural shall include the singular. 
 7.10. Limitation of Implied Rights. 
 (a) Neither a Participant nor any other person shall, by reason of participation in the AIP, acquire any right in or title to any assets,
funds or property of the Company or any Employer whatsoever, including, without limitation, any specific funds, assets, or other property which the Company or any Employer, in its sole discretion, may set aside in anticipation of a liability under
the AIP. A Participant shall have only a contractual right to the cash, if any, payable under the AIP, unsecured by any assets of the Company or any Employer, and nothing contained in the AIP shall constitute a guarantee that the assets of the
Company or any Employer shall be sufficient to pay any benefits to any person. 
 (b) The AIP does not constitute a contract
of employment, and status as a Participant shall not give any Eligible Employee the right to be retained in the employ of the Company or any Employer, nor any right or claim to any benefit under the AIP, unless such right or claim has specifically
accrued and vested under the terms of the AIP. 
 7.11. Evidence. Evidence required of anyone under the AIP may be by
certificate, affidavit, document or other information, which the person charged with acting on such evidence considers pertinent and reliable, and which has been signed, made or presented by the proper party or parties. 
 7.12. Information to be Furnished. The Company and the Participating Employers shall furnish the Senior Corporate Compensation Executive
and the Compensation Committee with such data and information as it determines may be required for it to discharge its duties. 

  

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The records of the Company and the Participating Employers as to an employee’s or Participant’s employment, termination of employment, leave of
absence, reemployment, and compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the AIP must furnish the Senior Corporate Compensation Executive or the
Compensation Committee, as appropriate, such evidence, data or information as the Senior Corporate Compensation Executive or the Compensation Committee considers desirable to carry out the terms of the AIP, subject to any applicable privacy laws.

 SECTION 8 
 AMENDMENT AND TERMINATION 
 The Company may amend or terminate the AIP at any time and for any reason in its sole
discretion. Notwithstanding the foregoing, no amendment may be made, without the consent of the shareholders of the Company, that would cause any Awards intended to meet the requirements of “performance-based compensation” under Code
162(m) and the regulations thereunder, to cease to be deductible under Code Section 162(m). Further, notwithstanding anything herein to the contrary, (a) no amendment shall be made that would cause the AIP not to comply with the
requirements of Code Section 409A or any other applicable law or rule of any applicable securities exchange or similar entity, and (b) the AIP and any Award thereunder may be amended without Participant consent to the extent that the
Compensation Committee (or its authorized representative) determines such amendment necessary to cause the AIP or Award to comply with the requirements of Code Section 409A or any other applicable law or rule of any applicable securities
exchange or similar entity. 
 SECTION 9 
 DEFINED TERMS 
 9.1. In addition to the other definitions contained herein, the following
definitions shall apply: 
 (a) Assignment. The term “Assignment” refers to the performance measure(s) (under
subsection 4.2) that have been assigned by the Senior Corporate Compensation Executive or the Compensation Committee, as appropriate, to a Participant, based upon position or location and/or business unit. Assignment also includes the weight of each
performance measure assigned to the Participant. 
 (b) Award. The term “Award” or “Awards” refers
to any Annual Incentive Award(s) awarded under the AIP. 
 (c) Compensation Committee. The term “Compensation
Committee” refers to the Compensation Committee of the Board of Directors of Sears Holdings Corporation. 
 (d)
Code. The term “Code” means the Internal Revenue Code of 1986, as amended from time to time (and the regulations issued thereunder). A reference to any provision of the Code shall include reference to any successor provision of the
Code (and the regulations issued thereunder). 
  

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 (e) Executive. The term “Executive” refers to any employee of an Employer who holds a
position of senior vice president position or higher, or any employee who is an executive officer under Section 16(b) of the Securities and Exchange Act of 1934. 
 (f) Fair Market Value. The term “Fair Market Value” shall mean the reported closing price of a share of Stock on the
principal securities exchange or market on which the Stock is then listed or admitted to trading. 
 (g) Fiscal Year.
The capitalized term “Fiscal Year” refers to (i) with respect to Participants employed by the Company (including any Participating Employer other than Lands’ End, Inc.), the twelve (12) month period beginning on
February 3, 2008 and ending on January 31, 2009 (i.e., the Saturday closest to January 31 of calendar year 2009), and (ii) with respect to Participants employed by Lands’ End, Inc., the twelve (12) month period
beginning on February 2, 2008 and ending on January 30, 2009 (i.e., the Friday closest to January 31 of calendar year 2009). 
 (h) Senior Corporate Compensation Executive. The term “Senior Corporate Compensation Executive” refers to the Senior Vice President of Human Resources (i.e., the most senior human resources officer of
the Company), or if he or she has explicitly delegated his or her duties with respect to the AIP, as provided herein, then the Senior Corporate Compensation Executive shall refer to such authorized representative to whom the duties of administering
the AIP have been delegated. 
 (i) Support Center. For purposes of determining which employees are Eligible Employees
under the AIP, the term “Support Center” refers to the following corporate locations: (i) Hoffman Estates, Illinois, (ii) Troy, Michigan, (iii) Dodgeville, Wisconsin, (iv) Tucker, Georgia, (v) Dallas, Texas,
(vi) New York Design Center facilities in New York, (vii) SHIP in Longwood, Florida, and (viii) SRAC in Wilmington, Delaware. 
 SECTION 10 
 EXPIRATION OF AIP 
 The AIP shall expire, subject to earlier termination pursuant to Section 8, on the date on which all Annual Incentive Awards (if any) are paid in full in accordance with the provisions of the AIP. 
 [Remainder of page intentionally left blank.] 
  

 13 

 2008 AIP 
  
 IN WITNESS WHEREOF, the Compensation Committee of the Board of Directors of Sears Holdings Corporation has caused
this AIP to be executed effective as of the date first stated above, by the undersigned officer of Sears Holdings Corporation on this 5th day of May, 2008. 
  

			
	SEARS HOLDINGS CORPORATION
		
	By:	 	/s/ William R. Harker
		 	William R. Harker
		
	Title:	 	 SVP, HR, General Counsel
 and Corporate
Secretary

  

 14 

 SEARS HOLDINGS CORPORATION  
 2008 ANNUAL INCENTIVE PLAN 
 APPENDIX A 
 Participating Employers 
 (As of
April 22, 2008) 
  

	1.	Sears Holdings Corporation 

  

	2.	Sears Holdings Management Corporation 

  

	3.	Sears, Roebuck and Co. 

  

	 	•	 	 Excluding Orchard Supply Hardware Stores Corporation 

  

	4.	Kmart Holding CorporationExecutive Long Term Incentive Program

 EXHIBIT 10.2 
 SEARS HOLDINGS CORPORATION 
 2008 LONG-TERM INCENTIVE PROGRAM (LTIP) 
 SECTION 1 
 GENERAL

 1.1. Purpose. The Sears Holdings Corporation 2008 Long-Term Incentive Program (the “LTIP”) is a
performance-based program. The LTIP is designed to motivate the executive leadership of Sears Holdings Corporation (the “Company”) or Sears Holdings Management Corporation, Sears, Roebuck and Co., Kmart Holding Corporation and their
Subsidiaries (as defined in Section 8) (collectively referred to as “Subsidiaries”), to achieve significant, lasting change that successfully positions the Company for future growth. Performance goals under the LTIP align
Participants’ financial incentives with the financial goals of the Company. Awards (as defined in Section 8) under the LTIP are designed to vary commensurately with achieved performance. Both (a) Awards structured to satisfy
the requirements for “performance-based compensation” outlined in regulations issued under Section 162(m) of the Internal Revenue Code (“Code Section 162(m)”), and (b) Awards not so structured, may be issued
hereunder. The effective date of the LTIP is April 22, 2008, which is the date the Compensation Committee (as defined in Section 8) adopted the LTIP (the “Effective Date”). 
 1.2. Operation, Administration, and Definitions. The operation and administration of the LTIP, including the Awards made under the LTIP,
shall be subject to the provisions of Section 6 (relating to operation and administration). Capitalized terms in the LTIP shall be defined as set forth in the LTIP (including as defined in Section 8). The LTIP is established under, and
constitutes a part of, the Sears Holdings Corporation Umbrella Incentive Program (the “UIP”). 
 SECTION 2 
 PARTICIPATION 
 2.1.
Eligible Employee. The term “Eligible Employee” means those salaried employees of the Company or a Subsidiary who (a) hold a position of divisional vice president (or equivalent) or higher, as determined by the Senior
Corporate Compensation Executive (as defined in Section 8), and (b) are designated as Eligible Employees by the Senior Corporate Compensation Executive or the Compensation Committee, as applicable. Subject to the terms and conditions of
the LTIP, the Senior Corporate Compensation Executive or the Compensation Committee, as applicable, shall determine and designate, from time to time, from among the Eligible Employees, those persons who shall be granted one or more Awards under the
LTIP, and thereby become “Participants” in the LTIP. The Senior Corporate Compensation Executive shall make eligibility determinations under this Section 2 with respect to all Eligible Employees other than those who are executives for
whom compensation matters are under the purview of the Compensation Committee. 

 2008 LTIP 
  
 2.2. New Hires and Promotions to Eligible Employee Status. The Senior Corporate Compensation Executive or the
Compensation Committee, as applicable, may designate as Participants those employees whom the Senior Corporate Compensation Executive or the Compensation Committee, as applicable, determines have been newly hired or promoted into the group of
Eligible Employees identified in subsection 2.1(a) above, after the Effective Date, provided that the terms and conditions of Awards to such individuals shall be subject to (a) a fraction, the numerator of which is the number of full days
remaining in the Performance Period (as described in subsection 3.2) after the Eligible Employee’s date of hire, or promotion, as applicable, and the denominator is the number of full days in the Performance Period, and (b) if Awards to
such individuals are intended to meet the requirements of Code Section 162(m), such other adjustments as the Compensation Committee deems necessary or desirable to qualify such Awards as “performance-based compensation” for purposes
of Code Section 162(m). The term “performance-based compensation”, as referred to herein, shall have the meaning ascribed to it under Code Section 162(m) and the regulations thereunder. 
 2.3. Demotions from Eligible Employee Status. If a Participant is demoted below a position of divisional vice president, as of the date of
such demotion, the individual will no longer be a Participant, will be deemed to have forfeited any unvested portion of his or her Award, and will receive no LTIP distribution under Section 4. 
 2.4 Other Changes in Status. If a Participant is promoted after the Effective Date, the Senior Corporate Compensation Executive or the
Compensation Committee, as applicable, may make a second Target Cash Incentive Award (as defined in subsection 3.1) to such individual and the total amount payable to such individual shall be based on a pro-ration, whereby the Target Cash Incentive
Award for the new position will apply to the remainder of the Performance Period and the Target Cash Incentive Award for the immediately preceding incentive-eligible position will apply to the portion of the Performance Period immediately preceding
the effective date of the promotion. Notwithstanding the foregoing, in no event will positive discretion be applied to any Award that has been designated as intended to meet the requirements of Code Section 162(m) (and the regulations issued
thereunder) with respect to the Performance Period or as of the payment date (as defined in subsection 4.1). If a Participant is demoted, but is still an Eligible Employee, the Senior Corporate Compensation Executive or the Compensation Committee,
as applicable, may make a second Target Cash Incentive Award to such individual and the total Award for such an individual shall be based on a pro-ration, whereby the Target Cash Incentive for the new position will apply only to the remainder of the
Performance Period and the Target Cash Incentive for the immediately preceding position will apply only to the portion of the Performance Period immediately preceding the effective date of the promotion, and in either case an Award will only be paid
if the target for the full Performance Period is met. 
 SECTION 3 
 CASH INCENTIVE AWARDS 
 3.1. Target Cash Incentive Awards.
After the Effective Date, the Senior Corporate Compensation Executive or the Compensation Committee (at one or more meetings of the Compensation Committee), as applicable, may award “Target Cash Incentive Awards” (as defined in subsection
3.1(a) below) to each Participant designated by the Senior Corporate Compensation Executive or the Compensation Committee (at such meeting), as applicable, in an amount determined by the applicable entity in its sole discretion. In connection with
such Awards, the Senior Corporate Compensation Executive or the 

  

 2 

 2008 LTIP 
  
 
Compensation Committee, as applicable, shall establish “Target LTIP EBITDA” and “Threshold LTIP EBITDA” (each as defined in subsection
3.3 below), provided, however, that Threshold LTIP EBITDA shall be expressed as a percentage of Target LTIP EBITDA. The Senior Corporate Compensation Executive shall make the determinations referred to in this Section 3 with respect to all
Participants other than those who are executives for whom compensation matters are under the purview of the Compensation Committee. 
 (a) A Target Cash Incentive Award shall, at the date of grant, consist of a commitment by the Company to distribute, at the time specified in, and in accordance with the provisions of, Section 4 below, as applicable, an amount equal to
the Participant’s Target Cash Incentive Award multiplied by the applicable Award Multiple set forth in subsection 3.4 below, subject to approval of the final award amount by the Senior Corporate Compensation Executive or Compensation Committee,
as applicable, (the “Cash Incentive Award”) and to the provisions of subsection 6.4. 
 (b) A Cash Incentive Award
shall generally be satisfied by a distribution in cash to the Participant, provided, however, that, at the discretion of the Compensation Committee, the Company may elect, by such deadline as specified under uniform and nondiscriminatory rules
established by the Compensation Committee, to satisfy such Cash Incentive Award by payment of shares of Company common stock (“Stock”) in lieu of cash, or a combination of cash and shares of Stock. The number of shares of Stock shall be
equal to (i) the amount of the Award to be paid in stock in accordance with this paragraph (b), divided by (ii) the Fair Market Value of a share of Stock, on the principal securities exchange or market on which the shares are then listed
or admitted, on the business day immediately preceding the date of distribution or, if the Stock is not traded on that date, on the next preceding date on which Stock was traded; provided that issuance of any shares of Stock in accordance with this
subsection 3.1(b) shall be contingent on the availability of shares of Stock under any shareholder-approved plan of the Company providing for the issuance of Stock in satisfaction of the Awards hereunder (which in no event shall be an employee stock
purchase plan). 
 3.2. Performance Period. The “Performance Period” shall be the Company’s 2008, 2009 and 2010
Fiscal Years; provided that, in the case of an employee who is newly hired or promoted into the group of Eligible Employees after the Effective Date, the Performance Period shall be such shorter period as established by the Senior Corporate
Compensation Executive or the Compensation Committee, as applicable, subject to the requirements of Code Section 162(m), if applicable. The amount of the Cash Incentive Award shall be determined at the completion of the Performance Period in
accordance with subsection 3.1 above and subsection 4.1 below. 
 3.3. “LTIP EBITDA.” 
 (a) LTIP EBITDA. Subject to adjustment, if any, in accordance with subsection (d) of this subsection 3.3, “LTIP
EBITDA” refers to earnings before interest, taxes, depreciation and amortization for the Performance Period computed as operating income appearing on the Company’s statement of operations for the applicable reporting period, other than
Sears Canada (referred to as the “Domestic Company”), less depreciation and amortization 

  

 3 

 2008 LTIP 
  
 
and gains/(losses) on sales of assets. In addition, it is adjusted to exclude significant litigation or claim judgments or settlements (defined as matters
which are $1 million or more) including the costs related thereto; the effect of purchase accounting and changes in accounting methods; gains, losses and costs associated with acquisitions, divestitures and store closures; integration costs that are
disclosed as merger related; and restructuring activities. If after the Effective Date, the Domestic Company acquires assets or an entity that has associated EBITDA (measured using the same principles as those described in the preceding provisions
of this subsection 3.3(a)) in its last full fiscal year prior to the acquisition of greater than or equal to $100,000,000, any EBITDA associated with such assets or entity (after its acquisition) and during the Performance Period shall be
disregarded in determining LTIP EBITDA under this subsection 3.3(a). 
 (b) Target LTIP EBITDA. Subject to adjustment,
if any, in paragraph (d), “Target LTIP EBITDA” refers to the target level of LTIP EBITDA, established by the Compensation Committee in accordance with subsection 3.1 above, for the Performance Period. 
 (c) Threshold LTIP EBITDA. Subject to adjustment, if any, in paragraph (d), “Threshold LTIP EBITDA” refers to a level of
LTIP EBITDA, for the Performance Period, established by the Compensation Committee, which shall be equal to ninety percent (90%) of Target LTIP EBITDA and, if exactly achieved, shall generate an Award Multiple (described in subsection 3.4
below) of sixty percent (60%). 
 (d) Adjustments to Target LTIP EBITDA. The LTIP EBITDA incentive target contemplates
that the Domestic Company does not make any significant acquisitions or divestitures over the period of the LTIP. If after the Effective Date the Domestic Company divests itself of assets or an entity that has associated EBITDA (measured using the
same principles as those described in subsection 3.3(a)) in its last full fiscal year prior to the divestiture of greater than or equal to $100,000,000, Target LTIP EBITDA for the Company’s fiscal year in which the divestiture occurs will be
decreased by actual EBITDA of such assets or entity for the portion of such assets’ or entity’s last full fiscal year prior to the divestiture corresponding to the portion of the Company’s fiscal year (in which the divestiture occurs)
remaining after the divestiture occurs; and Target LTIP EBITDA for each of the following fiscal years of the Company, if any, in the Performance Period will be decreased by the actual EBITDA of such assets or entity for such assets’ or
entity’s last full fiscal year prior to the divestiture. 
 3.4. “Award Multiple.” The Award Multiple shall be
as outlined below: 
 (a) if LTIP EBITDA is one hundred percent (100%) of Target LTIP EBITDA, the Award Multiple shall be
one hundred percent (100%); 
 (b) if LTIP EBITDA is equal to Threshold LTIP EBITDA, the Award Multiple shall be sixty percent
(60%); 
  

 4 

 2008 LTIP 
  
 (c) if LTIP EBITDA is greater than Threshold LTIP EBITDA, but less than Target LTIP EBITDA, the Award
Multiple shall be a whole percentage between sixty percent (60%) and one hundred percent (100%), determined by interpolation on a straight line basis relative to such LTIP EBITDA, Threshold LTIP EBITDA and Target LTIP EBITDA amounts, and
rounded down to the nearest whole percentage; 
 (d) if LTIP EBITDA is less than Threshold LTIP EBITDA, the Award Multiple
shall be zero (0); and 
 (e) if LTIP EBITDA is greater than Target LTIP EBITDA, the Award Multiple shall be a percentage
equal to one hundred (100%) plus two percent (2%) for each one percent (1%) by which LTIP EBITDA exceeds Target LTIP EBITDA, and rounded down to the nearest whole percentage. 
 3.5. Limitation on Individual Awards. Notwithstanding anything herein to the contrary, the total Cash Incentive Award paid to any
Participant for the Performance Period pursuant to the LTIP shall in no event exceed $15 million. 
 3.6. Additional
Requirements. All Cash Incentive Awards awarded under the LTIP (and any Stock or cash otherwise distributable pursuant thereto) are subject to the provisions of Sections 4, 5 and 6. 
 SECTION 4 
 DISTRIBUTION 
 4.1. General. Subject to Sections 5 and 6, the cash or shares of Stock, if any, that
result from the payout formula described at Section 3 shall be distributed, in a single lump sum, as soon as practicable after the first Compensation Committee meeting occurring on or after the LTIP EBITDA results for the Company’s 2010
Fiscal Year are available to the Compensation Committee, which shall in no event be later than the date that is two and one-half (2 1/2) months after the last day of the 2010 Fiscal Year. Notwithstanding anything herein to the contrary, no distribution shall be made hereunder until after the Compensation Committee has certified the attainment of the performance goals
and, with respect to Participants under its purview, approved the amount to be paid to each Participant. The Senior Corporate Compensation Executive shall be responsible for approving the amount payable to all other Participants. The date as of
which payment is made in accordance with this subsection 4.1 is referred to herein as the “payment date.” 
 4.2.
Termination of Employment and Other Provisions. All distributions are subject to the provisions of Sections 5 and 6 below. 
 SECTION 5 
 TERMINATION OF EMPLOYMENT 
 The effect of termination of employment on a Participant’s right to receive a Cash Incentive Award (whether payable in cash or Stock) depends on the
reason for the termination, as described below. 
  

 5 

 2008 LTIP 
  
 5.1 Termination of Employment. 
 (a) Voluntary Termination or Involuntary Termination. In the event that a Participant (i) voluntarily terminates employment
(for any reason other than due to permanent and total disability, as defined in the Company’s long-term disability program, regardless of whether the Participant is covered by such program) or (ii) is involuntarily terminated for any
reason (other than death) prior to the payment date (as defined in subsection 4.1 above) of his or her Award, such Participant shall forfeit all of his or her Award. 
 (b) Disability. In the event that, prior to the payment date (as defined in subsection 4.1 above) of his or her Award, a
Participant suffers a permanent and total disability (as defined in the Company’s long term disability program, regardless of whether the Participant is covered by such program) while employed by the Company or a Subsidiary, resulting in
termination or retirement, subject to Section 6 below, such individual shall be entitled to a distribution in an amount equal to the Cash Incentive Award, if any, that would otherwise be payable to the Participant under subsection 3.1 above,
pro-rated through the date of termination in accordance with subsection 5.2 below; provided, however, that in no event shall a Participant receive any payment hereunder unless (i) LTIP EBITDA for the period from the inception of the Performance
Period through the last completed full month that occurs on or preceding the Participant’s date of termination is equal to or greater than Target LTIP EBITDA, pro-rated through the date of termination in accordance with subsection 5.2 below,
(ii) LTIP EBITDA is equal to or greater than Target LTIP EBITDA for the Performance Period, and (iii) as of his date of termination, the Participant had been employed by one or more of the Company or a Subsidiary, for at least twelve
(12) months of the Performance Period applicable to such individual. 
 (c) Death. In the event that a Participant
dies while employed by the Company or a Subsidiary and prior to the payment date for his or her Award, his or her Target Cash Incentive Award shall be pro-rated through the date of death, in accordance with subsection 5.2 below, and, subject to
Section 6 below, his or her estate shall be entitled to receive a Cash Incentive Award, equal to his or her prorated Target Cash Incentive Award and payable in cash; provided, however, that in no event shall a payment be made with respect to a
deceased Participant hereunder unless as of his date of death, (i) LTIP EBITDA for the period from the inception of the Performance Period through the last completed full month that occurs on or preceding the Participant’s date of death is
equal to or greater than Target LTIP EBITDA, prorated through the date of death in accordance with subsection 5.2 below, (ii) LTIP EBITDA is equal to or greater than Target LTIP EBITDA for the Performance Period, and (iii) he had been
employed by one or more of the Company or a Subsidiary, for at least twelve (12) months of the Performance Period applicable to such individual. 
 5.2. Pro-rations. Any pro-ration of a Cash Incentive Award, Target Cash Incentive Award, or Target LTIP EBITDA, as applicable, under this Section 5 shall be based on a fraction, the numerator of
which is the number of full months during the Performance Period in which the Participant was a Participant in the LTIP, and the denominator of which is the full number of months in the Performance Period, as adjusted at subsections 2.2 and 2.4, if
applicable. 
  

 6 

 2008 LTIP 
  
 SECTION 6 
 OPERATION AND ADMINISTRATION 
 6.1. Compensation Committee and Senior Corporate Compensation Executive.
The authority to control and manage the operation and administration of the LTIP shall be vested in the Compensation Committee and the Senior Corporate Compensation Executive, as provided herein. 
 (a) Compensation Committee. Notwithstanding paragraph (b) immediately below, the Compensation Committee: 
 (i) Shall approve the Target Cash Incentive Award and the Awards for Participants under its purview; 
 (ii) Notwithstanding paragraph (b) below, with respect to Participants under its purview, shall have the authority and discretion to
establish the terms, conditions, restrictions, and other provisions of such Awards, and (subject to the restrictions imposed by subsection 6.4 and Section 7) to amend, cancel, or suspend Awards; provided, however (and subject to the
requirements of Code Section 162(m), if applicable) that to the extent the Compensation Committee determines that the restrictions imposed by the LTIP preclude the achievement of the material purposes of the Awards in jurisdictions outside the
United States, the Compensation Committee shall have the authority and discretion to modify those restrictions as the Compensation Committee determines to be necessary or appropriate to conform to applicable requirements or practices of
jurisdictions outside of the United States; 
 (iii) May make additional changes that it deems appropriate for the effective
administration of the LTIP, subject to subsection 6.4 and provided that these changes may not increase the benefits to which Participants may become entitled under the LTIP, nor change the pre-established measures or goals that have been approved;
and 
 (iv) Shall be responsible for all other duties and responsibilities allocated to the Compensation Committee under the
terms and conditions of the LTIP. 
 (b) Senior Corporate Compensation Executive. Except as provided in paragraph
(a) immediately above, the Senior Corporate Compensation Executive: 
 (i) Shall Determine the Target Cash Incentive
Award and the Awards for Participants that are not under the Compensation Committee’s purview; 
 (ii) Notwithstanding
paragraph (a) above, shall have the authority and discretion to establish the terms, conditions, restrictions, and other provisions of such Awards, and (subject to the restrictions imposed by subsection 6.4 and Section 7) to amend, cancel,
or suspend Awards; 
  

 7 

 2008 LTIP 
  
 (iii) Shall have the authority to control and manage the operation and administration of the LTIP with
respect to Participants that are not under the Compensation Committee’s purview and except as otherwise provided in this LTIP; 
 (iv) Shall be responsible for the day-to-day administration of the LTIP except as otherwise provided in this LTIP; and 
 (v) Shall be responsible for all other duties and responsibilities allocated to the Senior Corporate Compensation Executive under the terms and conditions of the LTIP. 
 (c) The Compensation Committee and the Senior Corporate Compensation Executive, as appropriate, shall have the authority and discretion to
interpret the LTIP, to establish, amend, and rescind any rules and regulations relating to the LTIP and to make all other determinations that may be necessary or advisable for the administration of the LTIP. 
 (d) Any determinations by the Compensation Committee or the Senior Corporate Compensation Executive, as applicable, regarding this LTIP
are binding on all Participants. 
 6.2. Source of Awards. In the case of Awards under the LTIP that are settled in shares of
Stock, such shares shall be distributed under a stock plan adopted by the Company and approved by the shareholders thereof that provides for the issuance of Stock in satisfaction of Awards hereunder, (which in no event shall be an employee stock
purchase plan.) In the event of any conflict between this document and such stock plan, the provisions of the stock plan shall govern. 
 6.3. Delegation by Compensation Committee. Except to the extent prohibited by applicable law or the applicable rules of a securities exchange or similar entity, or would cause Awards designated as intended to constitute
performance-based compensation under Code Section 162(m) to not satisfy the requirements thereunder, the Compensation Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may
delegate all or any part of its responsibilities and powers to any person or persons selected by it. The Compensation Committee may revoke any such allocation or delegation at any time. 
 6.4. Negative Discretion. Notwithstanding anything in the LTIP to the contrary, prior to the settlement of any Cash Incentive Award, the
Compensation Committee (or the Senior Corporate Compensation Executive with respect to Participants who are not under the purview of the Compensation Committee) may (a) reduce the amount of such Award, or the number of shares of Stock or amount
of cash to be delivered in connection with such Award, and (b) with respect to Awards that are not designated as intended to meet the requirements of “performance based compensation” under Code Section 162(m) and the regulations
issued thereunder, may change the pre-established measures in goals that have been approved for such Award and increase the amount of such Award or the number of shares of stock or amount of cash to be delivered in connection with such Award.

  

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 2008 LTIP 
  
 6.5. General Restrictions. Delivery of shares of Stock under the LTIP, in satisfaction of a Cash Incentive
Award, shall be subject to the following: 
 (a) Notwithstanding any other provision of the LTIP, the Company shall have no
obligation to deliver any shares of Stock or make any other distribution of benefits under the LTIP unless such delivery or distribution complies with all applicable laws (including, without limitation, the requirements of the Securities Act of
1933), and the applicable requirements of any securities exchange or similar entity. 
 (b) To the extent that the LTIP
provides for issuance of Stock certificates to reflect the issuance of shares of Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any exchange or similar
entity. 
 6.6. Tax Withholding. All distributions under the LTIP are subject to withholding of all applicable taxes, and the
Senior Corporate Compensation Executive or the Compensation Committee, as applicable, may condition the delivery of any shares or other benefits under the LTIP on satisfaction of the applicable withholding obligations. To the extent permitted by the
Senior Corporate Compensation Executive or the Compensation Committee, as applicable, such withholding obligations may be satisfied (a) through cash payment by the Participant; (b) through the surrender of shares of Stock which the
Participant already owns (provided, however, that to the extent shares described in this paragraph (b) are used to satisfy more than the minimum statutory withholding obligation, as described below, then, except as otherwise provided by the
Senior Corporate Compensation Executive or the Compensation Committee, as applicable, payments made with shares of Stock in accordance with this paragraph (b) shall be limited to shares held by the Participant for not less than six months prior
to the payment date (or such other period of time as the Company’s accountants may require)); or (c) through the surrender of shares of Stock to which the Participant is otherwise entitled under the LTIP, provided, however, that such
shares under this paragraph (c) may be used to satisfy not more than the Company’s minimum statutory withholding obligation (based on minimum statutory withholding rates for Federal and state tax purposes, including payroll taxes, that are
applicable to such supplemental taxable income). 
 6.7. Settlement of Awards. The obligation to make payments and
distributions with respect to Awards may be satisfied through cash payments, the delivery of shares of Stock, or a combination thereof, as provided under subsections 3.1(b) and 4.1), subject, in the case of settlement in shares, to the terms of the
stock plan under which the Stock is issued. Satisfaction of any such obligations under an Award, which is sometimes referred to as the “settlement” of the Award, may be subject to such conditions, restrictions and contingencies as the
Senior Corporate Compensation Executive or the Compensation Committee, as applicable, shall determine. Each Subsidiary shall be liable for payment of an Award due under the LTIP with respect to any Participant to the extent that such benefits are
attributable to the services rendered for that Subsidiary by the Participant. Any disputes relating to liability of a Subsidiary for payment of an Award shall be resolved by the Senior Corporate Compensation Executive or the Compensation Committee,
as applicable. 
  

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 2008 LTIP 
  
 6.8. Transferability. Except as otherwise provided by the Compensation Committee, Awards under the LTIP are
not transferable except as designated by the Participant by will or by the laws of descent and distribution (including Awards originally determined by the Senior Corporate Compensation Executive). 
 6.9. Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any Participant or
other person entitled to benefits under the LTIP, and any permitted modification, or revocation thereof, shall be in writing filed with the Senior Corporate Compensation Executive or the Compensation Committee, as applicable, at such times, in such
form, and subject to such restrictions and limitations, not inconsistent with the terms of the LTIP, as the Senior Corporate Compensation Executive or the Compensation Committee, as applicable, shall require. 
 6.10. Agreement With Company. Any Award under the LTIP shall be subject to such terms and conditions, not inconsistent with the LTIP, as
the Senior Corporate Compensation Executive or the Compensation Committee, as applicable, shall, in its sole discretion, prescribe. The terms and conditions of any Award to any Participant shall be reflected in such form of written (including
electronic) document as is determined by the Compensation Committee. A copy of such document shall be provided to the Participant, and the Senior Corporate Compensation Executive or the Compensation Committee, as applicable, may, but need not,
require that the Participant sign a copy of such document. Such document is referred to as an “Award Agreement” regardless of whether any Participant signature is required. 
 6.11. Action by Company or Subsidiary. Any action required or permitted to be taken under the LTIP by the Company, Sears Holdings
Management Corporation, Sears Roebuck and Co., Kmart Holding Corporation or any Subsidiary, if any, of the foregoing shall be by resolution of its board of directors, or by action of one or more members of the board of directors of such company
(including a committee of the board) who are duly authorized to act for such board with respect to the applicable action, or (except to the extent prohibited by applicable law or applicable rules of any securities exchange or similar entity) by a
duly authorized officer of such company. 
 6.12. Gender and Number. Where the context admits, words in any gender shall
include any other gender, words in the singular shall include the plural and the plural shall include the singular. 
 6.13. Limitation
of Implied Rights. 
 (a) Neither a Participant nor any other person shall, by reason of participation in the LTIP,
acquire any right in or title to any assets, funds or property of the Company or any Subsidiary whatsoever, including, without limitation, any specific funds, assets, or other property which the Company or any Subsidiary, in its sole discretion, may
set aside in anticipation of a liability under the LTIP. A Participant shall have only a contractual right to the cash or Stock, if any, payable under the LTIP, unsecured by any assets of the Company or any Subsidiary, and nothing contained in the
LTIP shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person. 
  

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 2008 LTIP 
  
 (b) The LTIP does not constitute a contract of employment, and selection as a Participant shall not give any
participating employee the right to be retained in the employ of the Company or any Subsidiary, nor any right or claim to any benefit under the LTIP, unless such right or claim has specifically accrued under the terms of the LTIP. Except as
otherwise provided in the LTIP, no Award under the LTIP shall confer upon the holder thereof any rights as a shareholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights. 
 6.14. Evidence. Evidence required of anyone under the LTIP may be by certificate, affidavit, document or other information, which the
person charged with acting on such evidence considers pertinent and reliable, and which has been signed, made or presented by the proper party or parties. 
 6.15. Information to be Furnished to the Senior Corporate Compensation Executive or the Compensation Committee. The Company and the Subsidiaries shall furnish the Senior Corporate Compensation Executive
or the Compensation Committee, as applicable, with such data and information as it determines may be required for it to discharge its duties. The records of the Company and the Subsidiaries, as to an employee’s or Participant’s employment,
termination of employment, leave of absence, reemployment, and compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the LTIP must furnish the Senior Corporate
Compensation Executive or the Compensation Committee, as applicable, such evidence, data or information as such entity considers desirable to carry out the terms of the LTIP, subject to any applicable privacy laws. 
 6.16. Corporate Transaction. In the event of a corporate transaction involving the Company (including without limitation, any Stock
dividend, Stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, sale of assets or subsidiaries, combination or exchange of shares), the Compensation Committee may adjust Awards to
preserve but in no event increase the benefits or potential benefits of the Awards (including Awards originally determined by the Senior Corporate Compensation Executive); provided, however, that no such adjustment may be made to the extent
such adjustment would cause Awards that are designated as intended to constitute “performance-based compensation” under Code Section 162(m) and the regulations issued thereunder, to cease to qualify as “performance-based
compensation” under Code Section 162(m). Actions permitted under the preceding sentence by the Compensation Committee may include any adjustments that the Compensation Committee determines to be equitable (which may include, without
limitation, (a) replacement of Awards with other Awards which the Compensation Committee determines have comparable value and which are based on stock of a company resulting from the transaction, and (b) cancellation of the Award in return
for cash payment of the current value of the Award, determined as though the Award is fully vested at the time of the payment.) 
  

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 SECTION 7 
 AMENDMENT AND TERMINATION 
 The Board or Compensation Committee may, at any time, amend or terminate the LTIP, or any
Award, provided that no amendment or termination may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant
or beneficiary under any Award granted under the LTIP prior to the date such amendment is adopted by the Board (or the Compensation Committee, if applicable), and no amendment may be made, without the consent of the shareholders of the Company, that
would cause any Awards designated as intended to meet the requirements of “performance based compensation” under Code 162(m) and the regulations thereunder, to cease to be deductible under Code Section 162(m). Notwithstanding anything
herein to the contrary, (i) no amendment shall be made that would cause the LTIP not to comply with the requirements of Code Section 409A or any other applicable law or rule of any applicable securities exchange or similar entity, and
(ii) the LTIP and any Award thereunder may be amended without Participant consent to the extent that the Compensation Committee determines such amendment necessary to cause the LTIP or Award to comply with the requirements of Code
Section 409A or any other applicable law or rule of any applicable securities exchange or similar entity. 
 SECTION 8 

DEFINED TERMS 
 8.1. In
addition to the other definitions contained herein, the following definitions shall apply: 
 In addition to the other definitions contained
herein, the following definitions shall apply: 
 (a) Award. The term “Award” or “Awards” means any
Cash Incentive Award(s), whether settled in cash or Stock. 
 (b) Board. The term “Board” means the Board of
Directors of the Company. 
 (c) Code. The term “Code” means the Internal Revenue Code of 1986, as amended. A
reference to any provision of the Code shall include reference to any successor provision of the Code. 
 (d) Compensation
Committee. The term “Compensation Committee” refers to the Compensation Committee of the Board of Directors of Sears Holdings Corporation. 
 (e) Fair Market Value. The term “Fair Market Value” shall mean the reported closing price of a share of Stock on the principal securities exchange or market on which the Stock is then listed or
admitted to trading. 
 (f) Fiscal Year. The term “Fiscal Year” shall mean the twelve (12) month period
beginning on February 3, 2008, and thereafter the twelve (12) month period beginning on the Saturday closest to January 31 of each of calendar year 2009 and 2010. 
  

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 2008 LTIP 
  
 (g) Senior Corporate Compensation Executive. The term “Senior Corporate Compensation
Executive” refers to the Senior Vice President of Human Resources (i.e., the most senior human resources officer of the Company), or if he or she has explicitly delegated his or her duties with respect to the LTIP, as provided herein, then the
Senior Corporate Compensation Executive shall refer to such authorized representative to whom the duties of administering the LTIP have been delegated. 
 (h) Subsidiary. The term “Subsidiary” or “Subsidiaries” refers to any company during any period in which it is a “subsidiary corporation” (as that term is defined in
Section 424(f) of the Code) with respect to the Company. 
 SECTION 9 
 EXPIRATION OF LTIP 
 The LTIP shall expire, subject to earlier
termination pursuant to Section 7, on the date on which all Cash Incentive Awards (if any) are paid in full in accordance with the provisions of the LTIP (or, if earlier, on the date that the Compensation Committee determines that the LTIP
EBITDA is less than Threshold LTIP EBITDA.) 
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 IN WITNESS WHEREOF, the Compensation Committee of the Board of Directors of Sears Holdings Corporation has caused
this LTIP to be executed effective as of the date first stated above, by the undersigned officer of Sears Holdings Corporation on this 5th day of May, 2008. 
  

			
	SEARS HOLDINGS CORPORATION
		
	By: 	 	/s/ William R. Harker
		 	William R. Harker
		
	Title:	 	 SVP, HR, General Counsel
and Corporate Secretary

  

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