Exhibit 10
Each executive officer and certain other senior
officers of the Registrant have executed or will
execute a Non-Compete/Change of Control Agreement,
substantially in the form attached hereto. The term
of the non-competition and other related provisions
for Xx. Xxxxxx X. Xxxxxxxx, Chairman of the Board of
Directors, President and Chief Executive Officer, is
three years; for members of the Executive Committee is
two years; and for all other officers is one year.
NON-COMPETE/CHANGE OF CONTROL AGREEMENT
Sears, Xxxxxxx and Co., including its subsidiaries
(collectively referred to as "Sears"), and ____
_________________ ("Executive"), intending to be
legally bound and for good and valuable consideration,
agree as follows:
1) Severance Pay. Should Executive be involuntarily
terminated from Sears for any reason, other than Cause
(as defined below), death, total and permanent disability,
or retirement at or after age 65, and other than a Change
of Control Termination (as defined below), Sears agrees
to pay severance to Executive in the form of two years
of salary continuation, which will include annual base
salary plus annual bonus target as determined by the year
in which termination occurs, less legal deductions. While
receiving salary continuation, Executive will be placed
on a leave of absence status and entitled to all benefits
for which Executive is eligible to participate.
Stock options will continue to vest during the salary
continuation period. Vested options will expire in
accordance with their respective grant letters.
After the first year, salary continuation payments
will be subject to mitigation by the amount of any
compensation and benefits to which the Executive is
entitled because of any employment, including self-
employment.
2) Change of Control. Sears shall pay to Executive
the severance described in Section 3, and Executive
shall be entitled to participate in the benefits
described in Section 3, if Executive's employment is
terminated under the circumstances described below
(a "Change of Control Termination"):
a) Executive's employment with Sears and all of its
subsidiaries is terminated:
i) On the day of, or within 24 months after,
occurrence of a Change of Control, as such term is
defined in Appendix A; or
ii) Prior to a Change of Control but at the request
of any third party participating in or causing the
Change of Control; or
(iii) Otherwise in connection with or in anticipation
of a Change of Control; and
b) Executive's termination of employment was not
i) On account of Executive's death or total and
permanent disability;
ii) For Cause (as defined below); or
iii) On account of Executive's retirement, or
Executive's resignation other than for Good Reason
(as defined below).
For the purpose of this Agreement, (a) "Cause" shall mean
(1) a material breach by Executive of those duties and
responsibilities that do not differ in any material
respect from Executive's duties and responsibilities
during the 90-day period immediately prior to termination
of employment, which breach is demonstrably willful and
deliberate on Executive's part, is committed in bad faith
or without reasonable belief that such breach is in the best
interests of Sears and is not remedied in a reasonable period
of time after receipt of written notice from Sears specifying
such breach, (2) the commission by Executive of a felony
involving moral turpitude, or (3) dishonesty or willful
misconduct in connection with Executive's employment, and
(b) "Good Reason" shall mean a significant reduction in
Executive's responsibilities, title or annual base salary,
or Executive's mandatory relocation to an office more than
50 miles from the primary location at which Executive is
required to perform Executive's duties immediately prior
to termination of employment, and which reduction in
responsibilities, title or annual base salary, or
relocation is not remedied in a reasonable period of
time after receipt of written notice from Executive
specifying that "Good Reason" exists for purposes of
this Agreement.
3) Change of Control Severance Pay. In the event of
a Change of Control Termination, Sears agrees to pay
Executive's base salary and annual bonus target, prorated
through the date of the Change of Control Termination,
plus severance pay in the form of an undiscounted lump
sum equal to (a) two years of Executive's base salary plus
(b) the product of two multiplied by Executive's annual
bonus target as determined by the year in which termination
occurs, less legal deductions. For two years following the
Change of Control Termination, Executive will be placed on
a leave of absence status and entitled to all benefits for
which Executive is eligible to participate.
4) Gross-Up Payment. If, for any reason, any part or
all of the amounts payable to Executive under this Agreement
(or otherwise, if such amounts are in the nature of
compensation paid or payable by Sears or any of its
subsidiaries after there has been a Change of Control)
are deemed to be "excess parachute payments" within the
meaning of Section 280G(b)(1) of the Internal Revenue Code
of 1986, as amended (the "Code"), Sears shall pay to such
Participant, in addition to any other amounts that he may
be entitled to receive pursuant to the Plan, an amount
which, after all federal, state, and local taxes (of
whatever kind) imposed on the participant with respect
to such amount are subtracted therefrom, is equal to the
excise taxes imposed on such excess parachute payments
pursuant to Section 4999 of the Code.
5) Protective Covenants. Executive acknowledges that
the above consideration, absent this Agreement, is
beyond what Sears is obligated to pay. Executive further
acknowledges that benefits payable to Executive under
Sears Long-Term Incentive Plan and any special grants
of restricted stock or stock options for retention
purposes are contingent on Executive's signing of this
Agreement, and that such benefits constitute additional
consideration beyond what Sears is obligated to pay.
In consideration of the opportunity for severance benefits
and Long-Term Incentive Plan payments specified above,
and other good and valuable consideration, Executive
agrees to the following:
a) The confidential and proprietary information and
trade secrets of Sears are among its most valuable
assets and include but are not limited to its customer
and vendor lists, databases, computer programs,
frameworks, models, its marketing programs, its sales,
financial, marketing, training and technical information,
and any other information, whether communicated orally,
electronically, in writing or in other tangible forms
concerning how Sears creates, develops, acquires or
maintains its products and its marketing plans,
targets its potential customers and operates its
retail and other businesses. Sears has invested,
and continues to invest, considerable amounts of
time and money in obtaining and developing the
goodwill of its customers, its other external
relationships, its data systems and data bases,
and all the information described above (hereinafter
collectively referred to as "Sears Confidential
Information"). Any misappropriation or unauthorized
disclosure of Sears Confidential Information in any
form would irreparably harm Sears. Executive will not,
except as Sears may otherwise consent or direct in
writing, reveal or disclose, sell, use, lecture upon
or publish any Sears Confidential Information.
Executive's obligation under this paragraph will
cease as to any information which has become publicly
known through a source other than the Executive.
b) For a period of two years from Executive's last
day of active employment, whether or not severance is
payable, Executive shall not, directly or indirectly
(through another business or person), engage in the
following activities or assist others in such activities,
anywhere in the United States or in any other jurisdiction
outside of the United States in which Sears conducts or
plans to conduct its business:
i) Hiring, recruiting, or attempting to recruit for any
person or business entity that is a Competitor (as
defined below) of Sears, any person employed by Sears; and,
ii) Being employed by, being connected to, or consulting
for any person who or business entity which is a
Competitor of Sears business or planned business at
the time of the termination of Executive's active
employment with Sears.
The provisions of paragraph 5(b) will apply should
Executive's employment be terminated by either party
for any reason (including but not limited to
resignation or retirement); provided, however, that
the provisions of paragraph 5(b)(ii) will not apply
should Executive's employment be terminated due to a
Change of Control Termination.
c) For the purposes of this Agreement, "Competitor"
shall be defined as any business and any branch,
office or operation thereof, which is in material
competition with Sears, including without limitation,
any direct marketing or electronic commerce business or
retail department, specialty, discount, furniture,
appliance, electronics, hardware, home improvement or
home services, auto parts/service or apparel business
with annual gross sales in excess of $500 million,
and any vendor with annual gross sales of services or
merchandise to Sears in excess of $100 million.
d) Executive will provide Sears with such information
as Sears may from time to time request to determine
Executive's compliance with this Agreement.
Executive authorizes Sears to contact Executive's
future employers and other entities with whom Executive
has any sort of business relationship to determine
Executive's compliance with this Agreement or to
communicate the contents of this Agreement to such
employers and entities. Executive releases Sears,
its agents and employees, from all liability for any
damage arising from any such contacts or communications.
e) The restrictions set forth above are necessary to
prevent the use and disclosure of Sears Confidential
Information and to otherwise protect the legitimate
business interests of Sears. The provisions of this
Agreement are reasonable.
f) Upon the termination of Executive's employment
by either party, Executive will, if requested by
Sears, execute a binding general waiver and release
of claims in a form provided by Sears.
g) Irreparable harm would result from any breach
by Executive of the provisions of this Agreement,
and monetary damages alone would not provide adequate
relief for any such breach. Accordingly, if
Executive breaches this Agreement, injunctive relief
in favor of Sears is proper. Moreover, any award of
injunctive relief shall not preclude Sears from seeking
or recovering any lawful compensatory damages which may
have resulted from a breach of this Agreement, including
a forfeiture of any payments not made and a return of any
payments already received.
h) Any waiver, or failure to seek enforcement or remedy
for any breach or suspected breach of any provision
of this Agreement by Sears in any instance shall not
be deemed a waiver of such provision in the future.
i) Executive may request (a) a waiver of the
non-competition provisions of this Agreement or
(b) that the time frame in paragraph 5(b) above,
commence during Executive's continued employment
with Sears, by written request to the Chief Executive
Officer of Sears or the equivalent. Such a request
will be given reasonable consideration and may be
granted, in whole or in part, or denied at Sears
absolute discretion.
6) If any provision(s) of this Agreement shall be found
invalid, illegal, or unenforceable, in whole or in part,
then such provision(s) shall be deemed to be modified or
restricted to the extent and in the manner necessary to
render the same valid and enforceable, or shall be deemed
excised from this Agreement, as the case may require, and
this Agreement shall be construed and enforced to the
maximum extent permitted by law, as if such provision(s)
had been originally incorporated herein as so modified or
restricted, or as if such provision(s) had not been
originally incorporated herein, as the case may be.
7) This Agreement will be governed under the internal
laws of the State of Illinois. Executive agrees that
the state and federal courts located in the State of
Illinois shall have exclusive jurisdiction in any
action, suit or proceeding based on or arising out of
this Agreement, and Executive hereby: (a) submits to
the personal jurisdiction of such courts; (b) consents
to the service of process in connection with any action,
suit, or proceeding against Executive; and (c) waives any
other requirement (whether imposed by statute, rule of court,
or otherwise) with respect to personal jurisdiction, venue
or service of process.
8) This Agreement does not constitute a contract of
employment, and Executive acknowledges that Executive's
employment with Sears is terminable at will by either
party with or without cause and with or without notice.
9) If any provision of this Agreement conflicts with
any other agreement, policy, plan, practice or other
Sears document, then the provisions of this Agreement
will control. This Agreement will supersede any prior
agreement between Executive and Sears with respect to
the subject matter contained herein, and may be amended
only by a writing signed by an officer of Sears.
SEARS, XXXXXXX AND CO.
______________________ by:___________________________
Executive
______________________ _________________________
Date Date
Appendix A
Certain Definitions
A "Change of Control" shall mean:
(a) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)
(2) of the Securities Exchange Act of 1934, as amended
[the "Exchange Act"]) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding
common shares of the Company (the "Outstanding Company
Common Shares") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided,
however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition
directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege);
(ii) any acquisition by the Company or any of its
subsidiaries; (iii) any acquisition by any employee
benefit plan (or any related trust) sponsored or
maintained by the Company or any of its subsidiaries;
or (iv) any acquisition by any corporation pursuant to
a reorganization, merger or consolidation, if,
following such reorganization, merger or consolidation,
the conditions described in clauses (i), (ii) and (iii)
of (c) below are satisfied; or
(b) Individuals who, as of the date hereof
constitute the Board of Directors of the Company
(the "Board")(as of the date hereof the "Incumbent
Board") cease for any reason to constitute at least
a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date
hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of
either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than
the Board; or
(c) Approval by the shareholders of the
Company of a "Business Combination," which shall
mean a reorganization, merger or consolidation, in
each case, unless, following such reorganization,
merger or consolidation, (i) more than 60% of,
respectively, the then outstanding common shares of
the corporation resulting from such reorganization,
merger or consolidation and the combined voting power
of the then outstanding voting securities of such
corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the
individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company
Common Shares and Outstanding Company Voting Securities
immediately prior to such reorganization, merger or
consolidation in substantially the same proportions
as their ownership, immediately prior to such
reorganization, merger or consolidation, of the
Outstanding Company Common Shares and Outstanding
Company Voting Securities, as the case may be, (ii)
no Person (excluding the Company, any of its
subsidiaries, any employee benefit plan (or
related trust) sponsored or maintained by the
Company, any of its subsidiaries or such corpora-
tion resulting from such reorganization, merger or
consolidation, and any Person beneficially owning,
immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 20% or more
of the Outstanding Company Common Shares or
Outstanding Company Voting Securities, as the
case may be) beneficially owns, directly or in-
directly, 20% or more of, respectively, the then
outstanding common shares of the corporation re-
sulting from such reorganization, merger or
consolidation or the combined voting power of the
then outstanding voting securities of such corpora-
tion entitled to vote generally in the election of
directors and (iii) at least a majority of the
members of the board of directors of the corpora-
tion resulting from such reorganization, merger or
consolidation were members of the Incumbent Board
at the time of the execution of the initial agree-
ment providing for such reorganization, merger or
consolidation; or
(d) Approval by the shareholders of the Company
of (i) a complete liquidation or dissolution of the
Company or (ii) the sale or other disposition of all
or substantially all of the assets of the Company,
other than to a corporation, with respect to which
following such sale or other disposition, (A) more
than 60% of, respectively, the then outstanding
common shares of such corporation and the combined
voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the
election of directors is then beneficially owned,
directly or indirectly, by all or substantially all
of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding
Company Common Shares and Outstanding Company Voting
Securities immediately prior to such sale or other
disposition in substantially the same proportion as
their ownership, immediately prior to such sale or
other disposition, of the Outstanding Company
Common Shares and Outstanding Company Voting
Securities, as the case may be, (B) no Person
(excluding the Company, any of its subsidiaries,
and any employee benefit plan (or related trust)
sponsored or maintained by the Company, any of its
subsidiaries or such corporation and any Person
beneficially owning, immediately prior to such
sale or other disposition, directly or indirectly,
20% or more of the Outstanding Company Common Shares
or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly,
20% or more of, respectively, the then outstanding
common shares of such corporation and the combined
voting power of the then outstanding voting
securities of such corporation entitled to vote
generally in the election of directors and (C) at
least a majority of the members of the board of
directors of such corporation were members of the
Incumbent Board at the time of the execution of the
initial agreement or action of the Board providing
for such sale or other disposition of assets of the
Company.
For purposes of the foregoing definition of "Change
of Control," a "subsidiary" of the Company shall
mean any corporation in which the Company,
directly or indirectly, holds a majority of the
voting power of such corporation's outstanding
shares of capital stock.
