Document:

EX-10.6

 

Exhibit 10.6

SEARS HOLDINGS CORPORATION

NONQUALIFIED STOCK OPTION AGREEMENT

     
NONQUALIFIED STOCK OPTION AGREEMENT, entered into as of
March 28, 2005, between Sears Holdings Corporation, a
Delaware corporation (the “Company”), and Alan J.
Lacy (the “Executive”);

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

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

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

		
	1. 	
    Capitalized Terms. Capitalized terms not defined herein
    shall have the definitions ascribed to such terms in the
    Employment Agreement.
	 
	2. 	
    Grant. Pursuant to Section 3(b)(iii) of the
    Employment Agreement, the Executive is hereby granted as of
    March 28, 2005 (the “Grant Date”) and subject to
    the terms and conditions of this Agreement, a nonqualified stock
    option (the “Option”) to purchase an aggregate of
    200,000 shares of the Company’s common stock, par value
    $0.01 (“Common Stock”). Shares of Common Stock subject
    to the Option shall be referred to herein as “Option
    Shares”.
	 
	3. 	
    Equity Plan. At such time, if any, as the Company shall
    have adopted (and, if required, there shall have been approved
    by the Company’s shareholders) an equity incentive plan
    under which stock options may be granted (the “Plan”),
    the Option and this Agreement shall be subject to the terms of
    such Plan, to the extent the terms of such Plan are not
    inconsistent with the terms of this Agreement and the applicable
    provisions of the Employment Agreement.
	 
	4. 	
    Option Term. Subject to earlier termination as provided
    herein, the Option shall expire on the tenth anniversary of the
    Grant Date (the “Expiration Date”).
	 
	5. 	
    Purchase Price. The purchase price per share of Common
    Stock with respect to the Option shall be $131.11 per share,
    which is the closing price of a share of the Company’s
    common stock on the NASDAQ on the Grant Date.
	 
	6. 	
    Vesting/ Exercisability. The Option shall vested and
    become exercisable with respect to 50,000 shares of Common Stock
    on each of the first four (4) anniversaries of the Grant
    Date, provided that the Executive is employed by or rendering
    services to the Company or a subsidiary or affiliate thereof as
    of each such date. The Option may be exercised either for the
    total number of shares of Common Stock vested, or for less than
    the total number in multiples of 100 shares of Common Stock.
	 
	7. 	
    No Rights as a Shareholder. The Executive or other
    permitted holder of the Option shall have none of the rights of
    a shareholder of Common Stock with respect to the shares of
    Common Stock covered by the Option until the Option Shares are
    issued or transferred to such holder upon exercise of the Option.
	 
	8. 	
    Method of Exercise. Upon the exercise of the Option, the
    purchase price may be paid (a) in cash or cash equivalents,
    or (b) by tendering to the Company shares of Common Stock
    already owned by the Executive, which, in the case of shares of
    Common Stock purchased by the Executive pursuant to the exercise
    of an option granted by the Company, have been held by the
    Executive for no less than six months following the date of such
    purchase, in any case having a total Fair Market Value (as
    defined in

 

		
		
    the Plan and, if no Plan, based on the closing price of a share
    of the Company’s common stock on the New York Stock
    Exchange or the NASDAQ (as to be agreed by the parties) on the
    date of exercise) equal to the aggregate purchase price,
    (c) to the extent permitted by law, by a “cashless
    exercise” procedure approved by the Compensation Committee
    of the Board of Directors of the Company or any other committee
    of the board of directors of the Company performing similar
    functions (the “Committee”), or (d) by a
    combination of the foregoing methods. The Option shall be
    exercised by written notice of election in such form as shall be
    determined by the Committee and delivered in person or by
    regular mail to the Company at its principal executive office.
	 
	9. 	
    Withholding. The Company may require that the Executive
    pay to the Company at the time of exercise of any portion of the
    Option the amount necessary to satisfy the Company’s
    liability to withhold federal, state or local income tax or any
    other employment taxes incurred by reason of the exercise of the
    Option. The Executive may satisfy the foregoing requirement by
    (a) tendering to the Company shares of Common Stock already
    owned by the Executive, which, in the case of shares of Common
    Stock purchased by the Executive pursuant to the exercise of an
    option granted by the Company, have been held by the Executive
    for no less than six months following the date of such purchase,
    or (b) by electing to have the Company withhold from
    delivery Option Shares, provided that, in either case, such
    shares have a Fair Market Value equal to the minimum amount of
    tax required to be withheld. Such shares of Common Stock shall
    be valued at their Fair Market Value (as defined above) on the
    date as of which the amount of tax to be withheld is determined.

		
	10. 	
    Effect of Termination of Employment.

			
	 	(a) 	
    If the employment of the Executive with the Company and its
    subsidiaries and affiliates is terminated by reason of his death
    or Disability, or by the Company without Cause or by the
    Executive for Good Reason, the Option shall become immediately
    vested and exercisable in full as of the date of such
    termination of employment and any portion of the Option that is
    or becomes vested and exercisable pursuant to this
    Section 10(a) as of the date of the Executive’s
    termination of employment shall be exercisable by the Executive
    (or other Option holder, as applicable) for the period ending on
    the third anniversary of such termination of employment, but no
    later than the Expiration Date.
	 
	 	(b) 	
    If the employment of the Executive with the Company and its
    subsidiaries and affiliates is terminated by the Company for
    Cause, the Option shall immediately be forfeited and cancelled
    in its entirety as of the date of such termination of employment.
	 
	 	(c) 	
    If the employment of the Executive with the Company and its
    subsidiaries and affiliates is terminated other than as provided
    under Sections 10(a) and 10(b) above, any vested portion of
    the Option as of the date of termination of employment shall
    remain exercisable for 90 days, but no later than the
    Expiration Date, and the remainder of the Option shall
    immediately be forfeited and cancelled in its entirety as of the
    date of such termination of employment.

		
	11. 	
    Adjustment. In the event of (a) a stock dividend,
    stock split, reverse stock split, share combination, or
    recapitalization or similar event of or by the Company (each, a
    “Share Change”), or (b) a merger, consolidation,
    acquisition of property or shares, separation, spinoff,
    reorganization, stock rights offering, liquidation,
    disaffiliation, or similar event of or by the Company (each, a
    “Corporate Transaction”), in each case, affecting the
    Common Stock, the Committee or the Board may in its discretion
    make such substitutions or adjustments as it deems appropriate
    and equitable to (i) adjust the number and kind of shares
    subject to the Stock Option, (ii) adjust the exercise price per
    share of the Stock Option. In the case of Corporate
    Transactions, (x) unless otherwise determined by the
    Committee, if the Corporate Transaction results in shareholders
    of Common Stock receiving cash, securities, property, or any
    combination thereof in exchange for each share of Common Stock,
    such consideration being exchanged for each share of Common
    Stock shall be substituted for each share of Common Stock
    subject to this Agreement, and (y) the Committee may in its
    discretion make such alternative or additional substitutions or
    adjustments as it deems appropriate and equitable, including,
    without limitation, (A) the cancellation of the Stock
    Option in exchange for payments of cash, property or a
    combination thereof having an

2

 

		
		
    aggregate value equal to the value of the Stock Option, as
    determined by the Committee or the Board in its sole discretion
    (it being understood that in the case of a Corporate Transaction
    with respect to which shareholders of Common Stock receive
    consideration other than equity securities of the ultimate
    surviving entity, any such determination by the Committee that
    the value of the Stock Option shall for this purpose be deemed
    to equal the excess, if any, of the value of the consideration
    being paid for each share of Common Stock pursuant to such
    Corporate Transaction over the exercise price per share of the
    Stock Option shall conclusively be deemed valid) and
    (B) the substitution of other property (including, without
    limitation, cash or other securities of the Company and
    securities of entities other than the Company) for the Stock
    Option. The determination of the Committee regarding any
    adjustment will be final and conclusive.
	 
	12. 	
    Transferability of Option. The Option shall not be
    transferable other than (a) by will or the laws of descent
    and distribution or (b) to the Participant’s family
    members, whether directly or indirectly or by means of a trust
    or partnership or otherwise or (c) as otherwise determined
    by the Committee. For purposes of this Agreement, “family
    member” shall have the meaning given to such term in
    General Instructions A.1(a)(5) to Form S-8 under the Securities
    Act of 1933, as amended, and any successor thereto. The Option
    shall be exercisable during the Executive’s lifetime only
    by the Executive or by his guardian or legal representative or
    the permitted transferees pursuant to clause (a), (b) and
    (c) of this Section 12.
	 
	13. 	
    Laws and Regulations. No shares of Common Stock shall be
    issued under this Option unless and until all legal requirements
    applicable to the issuance of such shares of Common Stock have
    been complied with to the satisfaction of the Committee. The
    Committee shall have the right to condition any issuance of
    shares to the Executive hereunder on the Executive’s
    undertaking in writing to comply with such restrictions on the
    subsequent disposition of such shares as the Committee shall
    deem necessary or advisable as a result of any applicable law or
    regulation.
	 
	14. 	
    Registration. As of the Grant Date, the Company shall, at
    its expense, cause issuance of the Option, the exercise of the
    Option and the resale of the shares of Common Stock subject to
    the Option to be registered under the Securities Act of 1933, as
    amended, and registered or qualified under applicable state law,
    to be freely resold. The Company shall thereafter maintain the
    effectiveness of such registration and qualification for so long
    as the Executive holds the Option (or any portion thereof) or
    any of the Option Shares, or until such earlier date as such
    Option Shares may otherwise be freely sold under applicable law.
    The Company shall take all corporate action necessary to reserve
    for issuance a sufficient number of shares of common stock for
    delivery with respect to the Options.
	 
	15. 	
    Notices. Any notices required or permitted hereunder
    shall be addressed to the Company at its corporate headquarters,
    attention: General Counsel, or to the Executive at the address
    then on record with the Company, as the case may be, and
    deposited, postage prepaid, in the United States mail. Either
    party may, by notice to the other given in the manner aforesaid,
    change his/her or its address for future notices.
	 
	16. 	
    Governing Law. This Agreement shall be governed by and
    construed in accordance with the laws of the State of Delaware
    without regard to its conflict of laws principles.
	 
	17. 	
    Successor. This Agreement shall bind and inure to the
    benefit of the Company, its successors and assigns, and the
    Executive and his or her personal representatives and assigns.
	 
	18. 	
    Amendment. This Agreement may be amended or modified at
    any time by an instrument in writing signed by the parties
    hereto.

19. Miscellaneous.

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

3

 

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

		
	 	
    SEARS HOLDINGS CORPORATION
	 
	 	
    /s/ William C. Crowley
    
	 	
     

	 	
    Name: William C. Crowley
	 	
    Title: Executive Vice President and
	 	
    Chief Financial Officer

ACCEPTED:

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

		
	 	
    /s/ Alan J. Lacy
    
	 	
     

	 	
    ExecutiveEX-10.7

 

Exhibit 10.7

SEARS HOLDINGS CORPORATION

RESTRICTED SHARE AGREEMENT

     
RESTRICTED SHARE AGREEMENT, entered into as of March 28,
2005, between Sears Holdings Corporation, a Delaware corporation
(the “Company”), and Alan J. Lacy (the
“Executive”);

     
WHEREAS, Sears, Roebuck & Co., a New York corporation, and
Kmart Holding Corporation, a Delaware corporation, and the
Executive have entered into an employment agreement dated as of
the 16th day of November, 2004 (the “Employment
Agreement”), which has been assumed by the Company,
pursuant to which, among other things, the Company has
determined that, as an inducement material to the
Executive’s agreement to enter into employment with the
Company, in satisfaction of certain of the Company’s
obligations under Section 3(b)(iii) of the Employment Agreement,
and subject to the restrictions stated below, the Executive
should be granted shares of the Company’s common stock, par
value $.01 (the “Common Stock”);

     
WHEREAS, the Company desires to grant the Executive 75,000
shares of restricted Common Stock (the “Restricted
Shares”);

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

		
	1.  	
    Capitalized Terms. Capitalized terms not defined herein
    shall have the definitions ascribed to such terms in the
    Employment Agreement.
	 
	2.  	
    Grant. Pursuant to Section 3(b)(iii) of the
    Employment Agreement, the Executive is hereby granted, effective
    as of March 28, 2005 (the “Grant Date”) and
    subject to the terms and conditions of this Agreement, 75,000
    Restricted Shares.
	 
	3.  	
    Equity Plan. At such time, if any, as the Company shall
    have adopted (and, if required, there shall have been approved
    by the Company’s shareholders) an equity incentive plan
    under which restricted shares of Common Stock may be granted
    (the “Plan”), the Restricted Shares and this Agreement
    shall be subject to the terms of such Plan, to the extent the
    terms of such Plan are not inconsistent with the terms of this
    Agreement and the applicable provisions of the Employment
    Agreement.
	 
	4.  	
    Issuance of Stock. The Restricted Shares shall be held in
    the custody of the Company or its designee for the
    Executive’s benefit. The Restricted Shares shall be subject
    to the restrictions described herein. The Restricted Shares
    shall bear appropriate legends with respect to the restrictions
    described herein.
	 
	5.  	
    Vesting.

			
	 	(a) 	
    The Restricted Shares shall vest in full and become free of
    restrictions on June 30, 2006, provided that the Executive
    is employed by or rendering services to the Company or a
    subsidiary or affiliate thereof as of each such date.
	 
	 	(b) 	
    Notwithstanding the foregoing, any unvested Restricted Shares
    shall immediately vest in full, and become free of restriction
    upon the Executive’s termination of employment (i) by
    the Company without Cause, (ii) by the Executive for Good
    Reason, or (iii) by reason of the Executive’s death or
    Disability.

		
	6.  	
    Restrictions.

			
	 	(a) 	
    No portion of the Restricted Shares or rights granted hereunder
    may be sold, transferred, assigned, pledged or otherwise
    encumbered or disposed of by the Executive until such portion of
    the Restricted Shares becomes vested in accordance with
    Section 3 of this Agreement, and any purported sale,
    transfer, assignment, pledge, encumbrance or disposition shall
    be void and unenforceable against the Company. The period of
    time between the Grant Date and the date all Restricted Shares
    become vested is referred to herein as the “Restriction
    Period.”

 

			
	 	(b) 	
    If the Executive’s employment with the Company terminates
    for any reason which does not result in vesting of the
    Restricted Shares as provided in Section 3 above, the
    balance of the Restricted Shares subject to the provisions of
    this Agreement which have not vested at the time of the
    Executive’s termination of employment shall be forfeited by
    the Executive, and ownership transferred back to the Company.

		
	  7. 	
    Executive Shareholder Rights. During the Restriction
    Period, the Executive shall have all the rights of a shareholder
    with respect to the Restricted Shares except for the right to
    transfer the Restricted Shares, as set forth in Section 4
    of this Agreement. Accordingly, the Executive shall have the
    right to vote the Restricted Shares and to receive any cash
    dividends paid to or made with respect to the Restricted Shares,
    provided, however, that dividends paid, if any, with respect to
    that Restricted Shares which has not vested at the time of the
    dividend payment shall be held in the custody of the Company and
    shall be subject to the same restrictions that apply to the
    corresponding Restricted Shares; provided, further, that if such
    a restriction on dividends would be subject to the tax imposed
    under the provisions of Section 409A of the Code, such
    dividends shall be paid to the Executive immediately and shall
    not be subject to the same restrictions that apply to the
    corresponding Restricted Shares.
	 
	  8. 	
    Changes in Stock. In the event of (a) a stock
    dividend, stock split, reverse stock split, share combination,
    or recapitalization or similar event of or by the Company (each,
    a “Share Change”), or (b) a merger,
    consolidation, acquisition of property or shares, separation,
    spinoff, reorganization, stock rights offering, liquidation,
    disaffiliation, or similar event of or by the Company (each, a
    “Corporate Transaction”), in each case, affecting the
    Common Stock, the Committee or the Board may in its discretion
    make such substitutions or adjustments as it deems appropriate
    and equitable to adjust the number and kind of Restricted
    Shares. In the case of Corporate Transactions, (x) unless
    otherwise determined by the Committee, if the Corporate
    Transaction results in shareholders of Common Stock receiving
    cash, securities, property, or any combination thereof in
    exchange for each share of Common Stock, such consideration
    being exchanged for each share of Common Stock shall be
    substituted for each Restricted Share subject to this Agreement,
    and (y) the Committee may in its discretion make such
    alternative or additional substitutions or adjustments as it
    deems appropriate and equitable, including, without limitation,
    (i) the cancellation of the Restricted Shares in exchange
    for payments of cash, property or a combination thereof having
    an aggregate value equal to the value of the Restricted Shares,
    as determined by the Committee or the Board in its sole
    discretion (it being understood that in the case of a Corporate
    Transaction with respect to which shareholders of Common Stock
    receive consideration other than equity securities of the
    ultimate surviving entity, any such determination by the
    Committee that the value of the Restricted Shares shall for this
    purpose be deemed to equal the value of the consideration being
    paid for each share of Common Stock pursuant to such Corporate
    Transaction shall conclusively be deemed valid); and
    (ii) the substitution of other property (including, without
    limitation, cash or other securities of the Company and
    securities of entities other than the Company) for the
    Restricted Shares. The determination of the Committee regarding
    any adjustment shall be final and conclusive.
	 
	  9. 	
    Taxes. No later than the date as of which an amount first
    becomes includible in the gross income of the Executive for
    federal income tax purposes with respect to any Restricted
    Shares, the Executive shall pay to the Company, or make
    arrangements satisfactory to the Company regarding the payment
    of, all federal, state, local and foreign taxes that are
    required by applicable laws and regulations to be withheld with
    respect to such amount. The Executive may direct the Company, to
    the extent permitted by law, to deduct any such taxes from any
    payment otherwise due to the Executive, including the delivery
    of the Restricted Shares that gives rise to the withholding
    requirement.

		
	10. 	
    Notices. Any notices required or permitted hereunder
    shall be addressed to the Company at its corporate headquarters,
    attention: General Counsel, or to the Executive at the address
    then on record with the Company, as the case may be, and
    deposited, postage prepaid, in the United States mail. Either
    party may, by notice to the other given in the manner aforesaid,
    change his/her or its address for future notices.
	 
	11. 	
    Governing Law. This Agreement shall be governed by and
    construed in accordance with the laws of the State of Delaware
    without regard to its conflict of laws principles.

2

 

		
	12. 	
    Successor. This Agreement shall bind and inure to the
    benefit of the Company, its successors and assigns, and the
    Executive and his or her personal representatives and assigns.
	 
	13. 	
    Amendment. This Agreement may be amended or modified at
    any time by an instrument in writing signed by the parties
    hereto.
	 
	14. 	
    Certificates. Certificates representing the Restricted
    Shares as originally or from time to time constituted shall bear
    the following legend:

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

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

		
	15. 	
    Laws and Regulations. No shares of Common Stock shall be
    issued under this Agreement unless and until all legal
    requirements applicable to the issuance of such shares have been
    complied with to the satisfaction of the Committee. The
    Committee shall have the right to condition any issuance of
    shares of Common Stock to the Executive hereunder on the
    Executive’s undertaking in writing to comply with such
    restrictions on the subsequent disposition of such shares as the
    Committee shall deem necessary or advisable as a result of any
    applicable law or regulation.
	 
	16. 	
    Registration. As of the Grant Date, the Company shall, at
    its expense, cause issuance of the Restricted Shares and the
    resale thereof to be registered under the Securities Act of
    1933, as amended, and registered or qualified under applicable
    state law, to be freely resold. The Company shall thereafter
    maintain the effectiveness of such registration and
    qualification for so long as the Executive holds the Restricted
    Shares (or any portion thereof) or any of the shares of Common
    Stock that were previously Restricted Shares, or until such
    earlier date as such Restricted Shares and shares of Common
    Stock, as applicable, may otherwise be freely sold under
    applicable law.
	 
	17. 	
    Miscellaneous.

			
	 	(a) 	
    The Company shall not be required (i) to transfer on its
    books any Restricted Shares which shall have been sold or
    transferred in violation of any of the provisions set forth in
    this Agreement, or (ii) to treat as owner of such shares or
    to accord the right to vote as such owner or to pay dividends to
    any transferee to whom such shares shall have been so
    transferred.
	 
	 	(b) 	
    This Agreement shall not be construed so as to grant the
    Executive any right to remain in the employ of the Company.
	 
	 	(c) 	
    This Agreement may be executed in counterparts, which together
    shall constitute one and the same original.

3

 

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

		
	 	
    SEARS HOLDINGS CORPORATION
	 
	 	
    /s/ William C. Crowley
    
	 	
     

	 	
    Name: William C. Crowley
	 	
    Title: Executive Vice President and
	 	
    Chief Financial Officer

ACCEPTED:

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

		
	 	
    /s/ Alan J. Lacy
    
	 	
     

	 	
    Executive

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