Sears Holdings (SHLD)

Option Grants in Last Fiscal Year

        The following table summarizes all stock options granted during fiscal year 2005. Mr. Lacy was the only Named Executive Officer who received a stock option grant in fiscal year 2005. The table also shows the potential realizable value of the grant given two performance scenarios.

(1)

The option becomes exercisable in four equal annual installments beginning one year from the date of grant, March 28, 2005, and remains exercisable until the 10^th anniversary of the grant date. If Mr. Lacy's employment is terminated by Sears Holdings without cause, by Mr. Lacy in the 30 days following June 30, 2006 or by Mr. Lacy in certain circumstances that constitute "good reason", the option will vest in full and remain exercisable for three years. If Mr. Lacy's employment is terminated for cause, the option will immediately be forfeited and cancelled in its entirety. The option also vests in full upon Mr. Lacy's death or disability. The exercise price of the stock option is based on the closing market price on the date of the grant. The option agreement permits Mr. Lacy to elect to have shares withheld to satisfy withholding tax requirements. Mr. Lacy can pay the option exercise price by tendering Sears Holdings common shares.

(2)

These amounts represent assumed rates of appreciation only. There can be no assurance that the amounts reflected in these columns will be achieved or, if achieved, will exist at the time of any option exercise. The actual value realized may vary significantly from these estimated values and will ultimately depend upon the excess of the stock price over the exercise price on the date the option is exercised, and upon any applicable taxes and fees.

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