SEARS 401(k) SAVINGS PLAN
(As Amended and Restated Effective
As of January 1, 2000)
Mayer, Brown & Platt
Chicago
INDEX OF DEFINED TERMS
1.5 - Accounting Date
7.1 - Accounts
7.1(c) - After-Tax Account
4.2 - After-Tax Contributions
8.3 - Annual Additions
11.4 - Beneficiary
2.6 - Benefits Executive
1.1 - Code
1.1 - Common Stock
1.1 - Company
6.1 - Company Stock Fund
4.7 - Compensation
2.1(b) - Computation Period
8.9 - Contribution Percentage
8.7 - Deferral Percentage
11.1(c) - Distribution Date
1.1 - Effective Date
4.7 - Eligible Compensation
3.1 - Eligible Employee
1.2 - Employer
1.2 - Employers
5.1 - Employer Contribution
7.1(a) - Employer Contribution Account
1.3 - ERISA
Supp. A - ESOF
1.1 - ESOP
C-4 - ESOP Common Stock
C-4 - ESOP Loan
5.1 - Fair Market Value
2.1 - full-time employee
6.1 - Funds
10.2 - Hardship
8.11 - Highly Compensated
8.9 - Highly Compensated Group
Contribution Percentage
8.7 - Highly Compensated Group
Deferral Percentage
2.3 - Hour of Service
1.3 - Investment Committee
6.1 - Investment Funds
13.11(e) - Investment Manager
3.5 - Leased Employee
2.5 - Maternity or Paternity Absence
5.3 - Net Income of the Company
8.9 - Non-highly Compensated Group
Contribution Percentage
8.7 - Non-highly Compensated Group
Deferral Percentage
2.5 - One Year Break in Service
3.1 - Participant
2.1 - part-time, temporary or seasonal employee
1.9 - Phone System
1.9 - PIN
1.1 - Plan
1.3 - Plan Administrator
1.4 - Plan Year
7.1(b) - Pre-Tax Account
4.1 - Pre-Tax Contribution
7.1(d) - Qualified Matching Account
5.9 - Qualified Matching Contribution
1.3 - Recordkeeper
1.2 - Related Company
11.3(b) - Required Beginning Date
7.1(e) - Rollover Account
4.6 - Rollover Contribution
8.3 - Section 415 Affiliate
11.5 - Separation from service
1.3 - SIMCO
1.12 - Supplement
C-4 - Suspense Account
9.2 - Termination Date
1.3 - Trust
1.3 - Trust Agreement
1.3 - Trustee
2.1 - Year of Eligibility Service
SEARS 401(k) SAVINGS PLAN
(As Amended and Restated Effective As of January 1, 2000)
SECTION 1
General
1.1 History, Purpose and Effective Date. Sears, Roebuck
and Co. (the "Company"), a New York corporation, has established
the Sears 401(k) Savings Plan formerly known as the Sears 401(k)
Profit Sharing Plan (the "Plan"), formerly known as The Savings
and Profit Sharing Fund of Sears Employees, to encourage eligible
employees to save a portion of their earnings on a regular basis,
to accumulate capital for their future economic security, to
share in the profits of the Company, and to acquire a proprietary
interest in the Company. On December 20, 1989, an employee stock
ownership plan feature (the "ESOP") was added to the Plan. The
Plan consists of a profit sharing plan with a cash-or-deferred
arrangement which is intended to qualify under sections 401(a)
and 401(k) of the Internal Revenue Code of 1986, as amended (the
"Code"), and an employee stock ownership plan which is intended
to qualify (as a stock bonus plan) under sections 401(a) and
4975(e)(7) of the Code. The assets of the ESOP consist of the
stock and cash equivalents described in Supplement C and all
other amounts attributable to Employer Contributions and After-
Tax Contributions, including Employer Contributions and After-Tax
Contributions made with respect to Plan Years beginning before
January 1, 1990. The assets of the ESOP are invested primarily
in common shares of the Company ("Common Stock") which qualify as
"employer securities" within the meaning of section 409(l) of the
Code. Except as expressly designated herein, the following
provisions constitute an amendment, restatement and continuation
of the Plan as in effect immediately prior to January 1, 2000,
generally the "Effective Date" of the Plan as set forth herein.
If a different effective date is set forth herein with respect to
a particular provision, that date shall determine when the
amendment to the Plan is effective with respect to that
provision.
1.2 Related Companies and Employers. The term "Related
Company" means any corporation or trade or business during any
period during which it is, along with the Company, a member of a
controlled group of corporations or a controlled group of trades
or businesses, as described in sections 414(b) and 414(c),
respectively, of the Code. The Company and each Related Company
which adopts the Plan with the consent of the Company are
referred to below collectively as the "Employers" and
individually as an "Employer," provided that only a Related
Company that is a corporation may participate in the ESOP.
1.3 Plan Administration, Trust and Fiduciary
Responsibility. The authority to control and manage the non-
investment operations of the Plan is vested in the Company, as
more fully described in subsection 13.1. Except as otherwise
expressly provided herein, the Company shall have the rights,
duties and obligations of an "administrator" as that term is
defined in section 3(16)(A) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and of a "Plan
Administrator" as that term is defined in section 414(g) of the
Code. A committee comprised of one or more members appointed by
the Company to oversee the investment of the Plan's assets (the
"Investment Committee") has the authority and responsibility to
appoint or select trustees, custodians, investment managers and
insurance companies to handle Plan assets and to allocate assets
to each of them, to determine the advisability of establishing or
modifying any Investment Fund made available under the Plan, to
establish investment guidelines, proxy voting policies and
securities trading procedures, and to monitor the investment
performance of the fiduciaries responsible for the investment of
Plan assets. The Investment Committee has delegated some of the
foregoing authority and responsibility to Sears Investment
Management Co. ("SIMCO"). The Company, the Investment Committee
and SIMCO shall be "named fiduciaries", as described in section
402 of ERISA, with respect to their authority under the Plan.
All assets of the Plan will be held, managed and controlled by
one or more trustees (the "Trustee") acting under a "Trust"
established pursuant to a "Trust Agreement" which forms a part of
the Plan. The Company may also appoint an outside recordkeeper
("Recordkeeper") to maintain the records of Participants'
Accounts under the Plan and to handle other administrative
matters.
1.4 Plan Year. The term "Plan Year" means the twelve-
consecutive-month period beginning on each January 1 and ending
on the following December 31.
1.5 Accounting Dates. The term "Accounting Date" means
each day on which the New York Stock Exchange is open for
business, as determined by the Company in its sole discretion.
1.6 Applicable Laws. The Plan shall be construed and
administered in accordance with the internal laws of the State of
Illinois to the extent that such laws are not preempted by the
laws of the United States of America.
1.7 Gender and Number. Where the context permits, words in
any gender shall include any other gender, words in the singular
shall include the plural and the plural shall include the
singular.
1.8 Notices. Any notice or document required to be filed
with the Company under the Plan will be properly filed if
delivered or mailed, postage prepaid, to the Company (or its
delegate), at its principal executive offices. Any notice
required under the Plan may be waived by the person entitled to
notice.
1.9 Form of Election and Signature. Unless otherwise
specified herein, any election or consent permitted or required
to be made or given by any Participant or other person entitled
to benefits under the Plan, and any permitted modification or
revocation thereof, shall be made in writing or shall be given by
means of such interactive telephone and/or computer system as the
Plan Administrator may designate from time to time as the sole
vehicle for executing regular transactions under the Plan
(referred to generally herein as the "Phone System"). Each
Participant shall have a personal identification number or "PIN"
for purposes of executing transactions through the Phone System,
and entry by a Participant of his PIN (with his Social Security
Number) shall constitute his valid signature for purposes of any
transaction the Company determines should be executed by means of
the Phone System, including but not limited to, enrolling in the
Plan, electing contribution rates, making investment choices,
executing loan documents (if loans are permitted under the Plan),
and consenting to a withdrawal or distribution. Any election
made through the Phone System shall be considered submitted to
the Plan Administrator on the date it is electronically
transmitted, unless such transmission occurs after the applicable
cut off date, as determined by the Company in its sole
discretion, for the Phone System for that day, in which case it
will be considered submitted on the next day on which the New
York Stock Exchange is open for business.
1.10 Evidence. Evidence required of anyone under the Plan
may be by certificate, affidavit, document or other information
which the person acting on it considers pertinent and reliable,
and signed, made or presented by the proper party or parties.
1.11 Action by Employers. Any action required or permitted
to be taken by the Company or any other Employer which is a
corporation shall be by resolution of its Board of Directors or a
duly authorized committee thereof, or by a duly authorized
officer of the Employer. Any action required or permitted to be
taken by any Employer which is a partnership shall be by a
general partner of such partnership or by a duly authorized
officer thereof.
1.12 Plan Supplements. The provisions of the Plan as
applied to any Employer or any group of employees of any Employer
may be modified or supplemented from time to time by the Company
by the adoption of one or more "Supplements". Each Supplement
shall form a part of the Plan as of the Supplement's effective
date. In the event of any inconsistency between a Supplement and
the Plan document, the terms of the Supplement shall govern.
1.13 Defined Terms. Terms used frequently with the same
meaning are defined throughout the Plan. The Index of Defined
Terms attached hereto contains an alphabetical listing of all
such terms and the subsections in which they are defined.
SECTION 2
Eligibility Service
2.1 Year of Eligibility Service.
(a) Effective on and after January 1, 2000, each employee,
regardless of whether he is a full-time, part-time,
seasonal or temporary employee, who has not already
been credited with a Year of Eligibility Service under
paragraph (b) below (or who has been so credited but
who after the Effective Date is treated as a new hire
pursuant to subsection 2.3) will have a Year of
Eligibility Service at the end of the first Computation
Period during which he completes 1,000 Hours of Service
(without having to be employed on the last day of such
Computation Period), with "Computation Period" for
purposes of this paragraph (a) meaning the initial 12-
month period beginning on the date the employee is
first credited with an Hour of Service and each Plan
Year beginning after such date. For purposes of this
paragraph (a), if an employee who terminates employment
with the Employers and related Companies is reemployed,
the Plan year containing his reemployment date will
constitute a Computation Period, and if such employee
is reemployed in a Computation Period that is different
than the Computation Period in which he terminated
employment, the twelve-month period beginning with his
reemployment date will also be a Computation Period (in
addition to the Plan Years beginning after his
reemployment date).
(b) Prior to January 1, 2000, an employee was credited with
a "Year of Eligibility Service" in accordance with the
following, subject to the provisions of subsection 2.3:
(i) A full-time employee had a Year of Eligibility
Service on the anniversary of his date of hire by
the Employers and Related Companies unless he was
absent from their service for more than 12 months;
in the case of a full-time employee who was absent
from service with the Employers and Related
Companies for more than 12 months, a Year of
Eligibility Service equaled an aggregate of 365
days of employment with the Employers and Related
Companies.
(ii) A part-time, seasonal or temporary employee had a
Year of Eligibility Service at the conclusion of a
Computation Period during which he completed at
least 1,000 Hours of Service (without the
necessity of being still employed on the last day
of such period). A "Computation Period" for this
purpose was the initial 12-consecutive-month
period commencing on the date an employee was
first credited with an Hour of Service and each
subsequent 12-month period commencing on the
anniversary of the date he was first credited with
an Hour of Service. An individual's Computation
Period remained the same, notwithstanding an
absence from employment, unless such individual
was treated as a new employee pursuant to
subsection 2.3 (describing the rule of parity).
(c) Notwithstanding the provisions of paragraph (a) above,
the following transition rules will apply to an
employee hired before January 1, 2000 who has not
completed a Year of Eligibility Service before January
1, 2000 (and who is not treated as a new hire under
subsection 2.3):
(i) Such a full-time employee will have a Year of
Eligibility Service on the anniversary of his date
of hire by the Employers and Related Companies if
his employment is uninterrupted (or is interrupted
by an absence of less than 12 months); or, if his
employment is interrupted by an absence greater
than 12 months but not long enough to cause him to
be treated as a new hire under subsection 2.3, he
will be treated under paragraph 2.2(b) as an
individual who has changed employment status; and
(ii) Such a part-time, seasonal or temporary employee
hired before January 1, 2000 will have a Year of
Eligibility Service at the end of the Computation
Period described in subparagraph 2.1(b)(ii) which
overlaps the Effective Date if he is credited with
at least 1,000 Hours of Service in such
Computation Period, or, if he is not credited with
at least 1,000 Hours of Service in such
Computation Period, at the end of the first Plan
Year beginning on or after the Effective Date in
which he is credited with at least 1,000 Hours of
Service.
For purposes of this Section 2, a "full-time employee" is an
employee who is regularly scheduled to work a full work week as
determined by the rules established for his work location, and a
"part-time, seasonal or temporary employee" is an employee who is
not regularly scheduled to work a full week.
2.2 Changes in Employment Status and Application of
Different Service Crediting Rules to the Determination of
Eligibility for Periods Prior to January 1, 2000. For Purposes
of subsections 2.1(b) and 2.1(c) in the event that an individual
changes status from a full-time to a part-time, seasonal or
temporary employee or vice-versa (whether in connection with a
termination of employment or otherwise) the following rules shall
apply, subject to the provisions of subsection 2.3.
(a) an employee who moves from part-time, seasonal or
temporary status to full-time status shall be credited
with the greater of (A) the period of elapsed-time
service that would be credited under subparagraph
2.1(b)(i) during the Computation Period in which the
transfer occurs or (B) the service creditable under
subparagraph 2.1(b)(ii) as of the date of transfer; and
(b) An employee who moves from full-time to part-time,
seasonal or temporary status shall receive credit for
Hours of Service in the Computation Period in which the
transfer occurs, determined by multiplying 45 by the
number of weeks worked in any fractional part of a year
credited under subparagraph 2.1(b)(i) immediately prior
to the transfer.
For purposes of the foregoing, the transfer will be deemed to
have occurred on the date the employee returns to work when the
change in status occurs in connection with an interruption of
active employment.
2.3 Treatment as New Employee After Consecutive One Year
Breaks in Service. If an employee who has never become a
Participant (and therefore does not have a nonforfeitable right
to any benefit under the Plan) terminates employment with the
Employers and Related Companies, and the number of his
consecutive One Year Breaks in Service equals or exceeds seven
(six in the case of an individual whose first 12 months of a
Maternity or Paternity Absence are disregarded under subsection
2.5), then any Year of Eligibility Service (and any eligibility
service not yet constituting a Year of Eligibility Service)
earned prior to the first such One Year Break in Service shall be
erased and, if he is later employed or reemployed by an Employer
or a Related Company, he shall be considered a new employee for
all purposes under the Plan. Notwithstanding the foregoing, an
individual who was employed by the Company or a Related Company
before 1998 and who terminates employment after having earned a
Year of Eligibility Service and attained age 21 but before
becoming a Participant by making contributions to the Plan shall
retain his Year of Eligibility Service regardless of the length
of his absence. The foregoing exception shall not apply to any
individual who was hired before 1998 but who terminates
employment with the Employers and Related Companies without
having earned a Year of Eligibility Service.
2.4 Hour of Service. The term "Hour of Service" means,
with respect to any employee, each hour for which he is paid or
entitled to payment for the performance of duties for an Employer
or a Related Company or for which back pay, irrespective of
mitigation of damages, has been awarded to the employee or agreed
to by an Employer or a Related Company, subject to the following:
(a) An employee or Participant shall be credited with the
number of regularly scheduled working hours included in
the time period on the basis of which payment to the
Employee is calculated (or, if the number of such hours
is not determinable, 8 Hours of Service per day (to a
maximum of 40 Hours of Service per week)) for any
period during which he performs no duties for an
Employer or a Related Company (irrespective of whether
the employment relationship has terminated) by reason
of a vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave
of absence but for which he is directly or indirectly
paid or entitled to payment by an Employer or a Related
Company; provided, however, that an employee or
Participant shall not be credited with more than 501
Hours of Service under this paragraph (a) for any
single continuous period during which he performs no
duties for an Employer or a Related Company. Payments
considered for purposes of the foregoing sentence shall
include payments unrelated to the length of the period
during which no duties are performed but shall not
include payments made solely as reimbursement for
medically related expenses or solely for the purpose of
complying with applicable workmen's compensation,
unemployment compensation or disability insurance laws.
(b) Hours of Service shall be calculated and credited
pursuant to Department of Labor Regulation section
2530.200b-2, which is incorporated herein by reference.
2.5 One Year Break in Service. For an absence beginning
before the Effective Date, the term "One Year Break in Service"
means the 12-consecutive-month period commencing on the day after
the day an employee's employment with the Employers and Related
Companies is terminated for any reason, unless such absence
constitutes a Maternity or Paternity Absence. With respect to
paragraph 2.1(a), any absence of less than 12 months following
such termination of employment shall be disregarded. An
individual who is absent because of service in the U.S. Armed
Forces will begin a One Year Break in Service on the 91st day
following his discharge from military service, if he does not
return to work within 90 days of such discharge. With respect to
an individual whose absence from employment constitutes a
Maternity or Paternity Absence, the term "One Year Break in
Service" means the 12-consecutive-month period commencing on the
second anniversary of the first day of such absence if he is not
paid or entitled to payment for the performance of duties for an
Employer or a Related Company during that 12-consecutive-month
absence. The period between the first and second anniversaries
of the first day of a Maternity or Paternity Absence shall not
constitute a period of continuous Service.
The term "Maternity or Paternity Absence" means an employee's or
Participant's absence from work because of the pregnancy of such
individual, the birth of a child of such individual, the
placement of a child with such individual in connection with the
adoption of a child by such individual, or for purposes of caring
for the child by such individual immediately following such birth
or placement. The Plan Administrator may require the employee or
Participant to furnish such information, as it considers
necessary to establish that such individual's absence was a
Maternity or Paternity Absence.
2.6 Military Absences. Notwithstanding any other provision
of the Plan to the contrary, eligibility service shall be
credited, and make-up contributions shall be permitted (and
made), as required by section 414(u) of the Code.
2.7 Pre-Acquisition Service. By written resolution of the
most senior executive of the Company with primary responsibility
for employee benefit matters, regardless of title (the "Benefits
Executive"), or by the terms of a stock or asset purchase
agreement, merger agreement or other transaction document
executed by the Company, the Company may recognize pre-
acquisition service with, or pre-acquisition eligibility under a
plan similar to the Plan of, a company which becomes a Related
Company or the assets of which are acquired by a Related Company,
for purposes of determining eligibility under the Plan. Such
pre-acquisition service and/or eligibility shall be calculated in
such manner as the Benefits Executive in his sole discretion
shall determine.
SECTION 3
Participation in Plan
3.1 Eligibility for Participation. Subject to the terms
and conditions of the Plan, each Eligible Employee who was a
Participant in the Plan immediately prior to the Effective Date
will continue as such. Each other Eligible Employee will become
a "Participant" in the Plan on the latest of (i) the date he
attains age 21, (ii) the first day following the date on which he
has completed one Year of Eligibility Service, and (iii) the
effective date of his election to participate in the Plan,
provided he is still an Eligible Employee on such date. Each
employee of an Employer is an "Eligible Employee" for any period
in which he satisfies all of the following requirements:
(a) he belongs to a group of employees to whom
participation in the Plan has been extended by the
Company,
(b) he is not a member of a collective bargaining unit,
unless the Plan has been extended to the collective
bargaining unit under a currently effective collective
bargaining agreement,
(c) he is not a person employed outside the United States
who is neither a citizen nor a resident of the United
States, and
(d) he does not perform services for an Employer under a
contract, agreement or arrangement that purports to
treat him as either an independent contractor or the
employee of a leasing organization or agency, even if
he is subsequently determined (by judicial action or
otherwise) to have instead been a common law employee
of such Employer.
For purposes of paragraph (a) above, all employees of an Employer
will be considered to belong to an eligible group unless the
Company by written action of the Benefits Executive designates
certain groups of employees or business units as ineligible to
participate in the Plan.
Except as provided in subsection 2.3, if a Participant ceases to
be an Eligible Employee for any reason, including termination of
employment, and he again becomes an Eligible Employee, he will be
eligible to recommence his participation in the Plan immediately
upon again becoming an Eligible Employee. In the event an
employee of an Employer or a Related Company who was not an
Eligible Employee becomes an Eligible Employee, such employee
will immediately be eligible to commence participation in the
Plan if he has completed a Year of Eligibility Service and is at
least age 21.
3.2 Commencement of Participation. Each Eligible Employee
is required to make an election to participate in the Plan. An
Eligible Employee may elect to commence participation in the Plan
on the first day following the date he has satisfied all of the
eligibility requirements set forth in subsection 3.1. If an
Eligible Employee does not properly elect to commence
participation on such date, he may commence his participation on
any day thereafter. Any such election will be effective with the
first payroll that is administratively feasible following such
election.
3.3 Inactive Participation. If an individual ceases to
meet the eligibility requirements of subsection 3.1, such
individual shall be considered an inactive Participant in the
Plan as long as any amount is credited to his Accounts under the
Plan, and:
(a) no contributions shall be made by or for him under
Section 4 or Section 5; and
(b) except as otherwise expressly provided herein, he may
not make a withdrawal under Section 10 after he ceases
to be an employee of an Employer or a Related Company.
3.4 Plan Not Contract of Employment. The Plan does not
constitute a contract of employment, and participation in the
Plan will not give any employee or Participant the right to be
retained in the employ of any Employer nor any right or claim to
any benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan.
3.5 Leased Employees. If a person satisfies the
requirements of section 414(n) of the Code and applicable
Treasury regulations for treatment as a "Leased Employee", such
Leased Employee shall not be eligible to participate in this Plan
but, to the extent required by section 414(n) of the Code and
applicable Treasury regulations, such person shall be treated as
if the services performed by him in such capacity were performed
by him as an employee of a Related Company which has not adopted
the Plan; provided, however, that no such service shall be
credited for any period during which not more than 20% of the
non-Highly Compensated workforce of the Employers and the Related
Companies consists of Leased Employees and the Leased Employee is
a participant in a money purchase pension plan maintained by the
leasing organization which (i) provides for a non-integrated
employer contribution of at least 10 percent of compensation,
(ii) provides for full and immediate vesting, and (iii) covers
all employees of the leasing organization (beginning with the
date they become employees), other than those employees excluded
under section 414(n)(5) of the Code. For purposes of this
subsection 3.5, "Highly Compensated" shall have the meaning set
forth in subsection 8.11.
SECTION 4
Pre-Tax, After-Tax and Rollover Contributions
4.1 Pre-Tax Contributions. Subject to the limitations set
forth in subsections 4.3 and 4.8 and Section 8 and such
additional rules as the Company from time to time may establish
on a uniform and nondiscriminatory basis, for any payroll period
a Participant may elect to have his Eligible Compensation reduced
by a whole percentage, and a corresponding amount contributed on
his behalf to the Plan by his Employer as a "Pre-Tax
Contribution", which amount shall not be less than 1 percent nor
more than 21 percent of his Eligible Compensation (as defined in
subsection 4.7) for that payroll period. Any election pursuant
to this subsection 4.1 shall be effective as soon after it is
entered into the Phone System as is administratively feasible.
4.2 After-Tax Contributions. Subject to the limitations
set forth in subsections 4.3 and 4.8 and Section 8 and such
additional rules as the Company from time to time may establish
on a uniform and nondiscriminatory basis, for any payroll period
a Participant may elect to make "After-Tax Contributions" to the
Plan through payroll deductions in a whole percentage that is not
less than 1 percent nor more than 10 percent of his Eligible
Compensation for that payroll period. Any election pursuant to
this subsection 4.2 shall be effective as soon after it is
entered into the Phone System as is administratively feasible.
4.3 Total Pre-Tax and After-Tax Contributions.
Notwithstanding the foregoing provisions of this Section 4, Pre-
Tax Contributions made on behalf of a Participant and After-Tax
Contributions made by such Participant for any payroll period may
not together exceed 21 percent of his Eligible Compensation for
such payroll period.
4.4 Payment of Pre-Tax and After-Tax Contributions. Pre-
Tax Contributions and After-Tax Contributions shall be paid to
the Trustee by the Employer on the earliest date on which such
contributions can be reasonably and accurately segregated from
the Employer's general assets with appropriate data confirmation
to ensure proper crediting.
4.5 Modification, Discontinuance and Resumption of Pre-Tax
or After-Tax Contributions. Subject to such rules and
restrictions as the Company may establish on a uniform and
nondiscriminatory basis, a Participant may adjust his Pre-Tax
and/or After-Tax Contributions prospectively by entering into the
Phone System, prior to the time such change is to be effective,
an election to make any of the changes listed below:
(a) change his Pre-Tax and/or After-Tax Contribution rates
within the limits specified above;
(b) discontinue making Pre-Tax and/or After-Tax
Contributions; or
(c) resume making Pre-Tax and/or After-Tax Contributions.
4.6 Rollover Contributions. A Participant may make a
Rollover Contribution (as defined below) to the Plan, in cash,
subject to the determination of the Company that such rollover
satisfies the requirements of this subsection 4.6. Before
approving a rollover, the Company may request from the
Participant any documents which the Company, in its discretion,
deems necessary. The term "Rollover Contribution" means a
rollover contribution of all or part of a distribution which,
under applicable provisions of the Code, is permitted to be
rolled over to a qualified plan. In no event shall a Participant
be permitted to make a Rollover Contribution of any amounts
previously contributed to another plan by the Participant on an
after-tax basis.
4.7 Compensation and Eligible Compensation. The Plan takes
into account different items of compensation paid to Participants
and Eligible Employees for different purposes. Generally, all
items of taxable compensation are divided into the following five
categories:
(a) regular pay, which includes (but is not limited to)
hourly wages, salary, shift differential, standby pay,
normal vacation pay, Sunday premium pay, business
training pay;
(b) special pay, which includes (but is not limited to)
vacation pay paid in a lump sum, taxable moving
allowances and any related tax gross-up, merchandise
and trip awards, cash prizes, tuition reimbursement,
sign-up bonuses, "WOW" bonuses, finder's fees;
(c) annual bonus and regular incentive pay;
(d) deferred compensation, including amounts paid to or
from any nonqualified deferred compensation plan
sponsored by the Employers and Related Companies or any
long-term incentive plan; and
(e) gain from the exercise of a nonqualified stock option
or the lapsing of a restriction on Company stock
awards.
All items in categories (a) and (c) that are paid to a
Participant during a Plan Year or that would have been paid to a
Participant during such Plan Year but for his Pre-Tax
Contribution election under this Plan (or any other cash or
deferred arrangement maintained by the Employers and Related
Companies) or his salary reduction election under a cafeteria
plan (within the meaning of section 125 of the Code) maintained
by an Employer or Related Company, constitute "Eligible
Compensation" for such Plan Year. All items in categories (a),
(b), and (c) (determined prior to any such pre-tax or salary
reduction election) are considered to constitute "Compensation"
within the meaning of Treas. Reg. Sec. 1.415-2(d) and sections
414(s) and 414(q) of the Code for purposes of applying the limits
of Section 8 of the Plan. Items in categories (d) and (e) are
not taken into account for any purpose under the Plan.
Notwithstanding the foregoing, the term Eligible Compensation
shall not include amounts paid after the date shown as the
Participant's termination date on his Employer's payroll records.
4.8 Limitation on Compensation Taken Into Account For Any
Plan Year. Only Eligible Compensation not exceeding for the
relevant Plan Year the limit set forth in section 401(a)(17) of
the Code for such Plan Year may be taken into account under
Section 4 or 5 of the Plan.
4.9 Residents of Puerto Rico. Participants who are
residents of Puerto Rico may not make contributions on a pre-tax
basis. Such Participants may make only After-Tax Contributions
from 1 percent through 10 percent, in whole percentages, of
Eligible Compensation. For purposes of subsections 5.1 and 5.8,
such a Participant's After-Tax Contributions of up to the lesser
of 5 percent of Eligible Compensation or an amount equal to the
maximum amount of Pre-Tax Contributions permitted in accordance
with subsection 4.1 will be treated in the same manner as Pre-Tax
Contributions under the Plan. Any After-Tax Contributions in
excess of the preceding limitations shall be treated as After-Tax
Contributions for all purposes of the Plan. Accounting for such
Participants, and other limitations of the Plan, shall be
adjusted to reflect this fact.
SECTION 5
Employer Contributions
5.1 Amount of Employer Contribution. Subject to the terms
and conditions of the Plan, including subsection 5.5 and
Supplement C hereof, the "Employer Contribution" to the Plan for
the Plan Year commencing January 1, 1999, and for each Plan Year
thereafter shall be an amount equal to 70 percent of the Pre-Tax
Contributions made on behalf of Participants for such Plan Year
that do not exceed 5 percent of their Eligible Compensation,
provided, however, that the Employer Contribution otherwise
required under this subsection 5.1 for any Plan Year shall be
reduced by the Fair Market Value of the ESOP Common Stock
allocated to the Accounts of Participants in accordance with
paragraph C-8(b) of Supplement C. For purposes of calculating
the reduction described in the preceding sentence, the "Fair
Market Value" of the ESOP Common Stock allocated to Participant
Accounts for each quarter of a Plan Year shall be determined as
of the last day of such calendar quarter and shall have the
meaning set forth in subsection C-10 of Supplement C. The
Employer Contribution shall be allocated to Participants'
Accounts in accordance with the provisions of subsection 5.5.
5.2 Medium of Employer Contribution. The Employer
Contribution will be made either in cash or in Common Stock, or
partially in each. Except as provided in subsection 5.1, any
Common Stock comprising a portion of the Employer Contribution
shall be valued at the Fair Market Value thereof at the date or
dates on which any contribution in that form is made.
5.3 Time of Employer Contribution. The Employer
Contribution for a Plan Year will be made no later than the due
date (including extensions thereof) for the filing of the federal
income tax return of the Company for the tax year in which the
last day of such Plan Year occurs.
5.4 Allocation of Employer Contribution To Employers. The
share of each Employer in the Employer Contribution for any
fiscal year shall equal the total sum credited out of such
contributions to the Accounts of all Plan Participants who are
employees of such Employer on the date as of which the
contribution is credited.
5.5 Allocation of Employer Contribution Among Participants.
Subject to the terms and conditions of the Plan, including
paragraph 7.3(b), the Employer Contribution for a Plan Year will
be allocated among and credited to the Accounts of Participants
who made Pre-Tax Contributions during such Plan Year and who
either
(a) were in the employ of the Employers and Related
Companies on December 31 of such Plan Year; or
(b) terminated employment with all Employers and Related
Companies on or after attainment of age 55 and
completion of 10 or more years of continuous service
with the Employers, measured from the service date
shown on the last Employer's payroll records,
provided that the Company, by written action of the Benefits
Executive, may waive the requirement of paragraph (a) above in
the case of Participants who are employed by an Employer or a
business unit which is sold to or merged or combined with another
entity or otherwise disposed of in a business transaction and
whose employment is terminated because of such transaction, as
determined by such Benefits Executive in his sole discretion.
Such allocation shall be made pro rata, according to the amount
of each such Participant's Pre-Tax Contribution (not in excess of
5% of Eligible Compensation) for that Plan Year.
5.6 Qualified Matching Contributions. For each Plan Year
any Employer may, but shall not be required to, contribute an
additional percentage of the Pre-Tax Contributions made on behalf
of Participants employed by such Employer who are not Highly
Compensated (as defined in subsection 8.11). Any contribution
made pursuant to this subsection 5.6 shall be referred to
hereinafter as a "Qualified Matching Contribution". At the
discretion of the Company, Qualified Matching Contributions may
be tested under subsection 8.7 or 8.9 in accordance with
applicable Treasury regulations.
5.7 Limitations on Amount of Employer Contributions. In no
event shall the sum of any Pre-Tax Contributions, Employer
Contributions and Qualified Matching Contributions made by an
Employer for any Plan Year exceed the limitations imposed by
Section 404 of the Code on the maximum amount deductible on
account thereof by the Employer for that year.
5.8 Payment of Employer Contributions. Each Employer's
contributions under the Plan (other than Pre-Tax Contributions)
for any Plan Year shall be paid to the Trustee, without interest,
no later than the time prescribed by law for filing the
Employer's federal income tax return, including any extensions
thereof.
SECTION 6
Investment of the Trust Fund
6.1 Investment Funds. The Investment Committee shall
establish and cause the Trustee to maintain one or more
"Investment Funds" or "Funds" for the investment of Participants'
Accounts. The Investment Committee in its discretion may add
additional Investment Funds, may delete any Investment Fund or
may change the investment strategy or categories of permitted
investments of any Investment Fund without prior notice to
Participants. One of the Investment Funds shall be a "Company
Stock Fund" invested in Common Stock of the Company and cash or
cash equivalents held for liquidity purposes.
6.2 Investment Fund Accounting. The Company shall maintain
or cause to be maintained separate subaccounts for each
Participant in each of the Investment Funds to separately reflect
his interest in each such Fund and the portion of such interest
that is attributable to each of his Accounts. The Company, in
its sole discretion, may establish uniform rules for reporting
the value of each such subaccount, including but not limited to
using a "unit" measurement to reflect each Participant's interest
in an Investment Fund that has the effect of blending the value
of the cash or cash equivalents that comprise part of that Fund
with the value of the securities in which the Fund is primarily
invested.
6.3 Investment Fund Elections. At the time that a
Participant enrolls in the Plan he may specify the percentage, in
increments of 1%, of contributions subsequently credited to his
Accounts that are to be invested in each of the Investment Funds
in accordance with uniform rules established by the Company. Any
such investment direction shall be deemed to be a continuing
direction until changed by the Participant. During any period in
which no such direction has been given in accordance with rules
established by the Company, contributions credited to a
Participant shall be invested in the Investment Funds as
determined by the Company. A Participant may modify his
investment direction prospectively by using the Phone System
prior to the effective time of the change in accordance with
uniform rules established by the Company.
The Plan is intended to satisfy the requirements of section
404(c) of ERISA with respect to Participants' investment
elections. To the extent permitted by law, neither the Company,
the Investment Committee, the Trustee, SIMCO nor any other
fiduciary of the Plan shall be liable for any loss resulting from
a Participant's exercise of his right to direct the investment of
his Accounts.
6.4 Transfers Between Investment Funds. Subject to uniform
rules established by the Company, each Participant may elect to
transfer, prospectively, the value of his Accounts held in any
Investment Fund to any other Investment Fund then made available
to such Participant. Any such election shall be made by entering
it into the Phone System prior to the time it is to be effective
in accordance with uniform rules established by the Company.
Notwithstanding the foregoing, amounts attributable to Employer
Contributions invested in the Company Stock Fund may not be
transferred to any other Investment Fund, except as provided in
subsection C-9, and in no event may Employer Contributions (or
any earnings thereon) be transferred while contingently allocated
under paragraph 7.3(b).
6.5 Liquidity. In order to accommodate investment changes
and other elections by Participants in a timely manner, a certain
portion of each of the Investment Funds may be held in cash or
cash equivalents. The percentage of assets held in each
Investment Fund in cash or cash equivalents may differ from Fund
to Fund and from time to time, as considered appropriate by the
Investment Committee (or its delegate). The rate of return of
each Investment Fund will be a combination of the short term
earnings (or losses) on the cash portion of the Fund and the
earnings (or losses) of the securities or other investments in
which such Fund is primarily invested, determined in accordance
with uniform rules established by the Investment Committee (or
its delegate).
6.6 Voting and Tendering of Common Stock. Notwithstanding
any other provisions of this Plan:
(a) Effective January 1, 1999, Common Stock held by the
Trustee shall be voted as follows:
(i) Before each meeting of the Company's shareholders,
each Participant shall be furnished with a proxy
statement for the meeting, together with an
appropriate form on which the Participant may
provide voting instructions (including
instructions on matters not specified in the proxy
statement which may come before the meeting) for
the Common Stock allocated and contingently
allocated under subsection 7.3(b) to the
Participant's Accounts under the Plan on the
Accounting Date coinciding with or next preceding
the record date for such meeting for which the
number of such shares has been provided to the
Plan Administrator. Upon timely receipt of such
instructions, such shares shall be voted as
instructed.
(ii) Common Stock for which the Trustee does not
receive timely voting instructions, including
those shares which are not allocated to
Participants' Accounts, shall be voted in the same
proportion as all Common Stock held under the Plan
(including shares held in a separate trust fund)
with respect to which directions are received by
the Trustee.
(b) Tender and exchange rights with respect to Common Stock
held by the Trustee shall be exercised as follows:
(i) Each Participant shall be furnished with a notice
of any tender or exchange offer for, or a request
or invitation for tender of, Common Stock,
together with an appropriate form on which such
Participant may instruct the Trustee with respect
to the tender or exchange of Common Stock
allocated and contingently allocated to his
Accounts. Common Stock as to which the Trustee
has received timely instructions shall be tendered
or exchanged in accordance with such instructions.
(ii) Common Stock allocated to Participants' Accounts
for which instructions are not timely received
shall not be tendered or exchanged.
(iii) Shares of Common Stock which are not allocated to
Participants' Accounts shall be tendered or
exchanged by the Trustee in its sole discretion.
(c) The Company and the Trustee shall take all reasonable
steps necessary to assure that Participants' individual
directions shall remain confidential. Notwithstanding
the foregoing, the Trustee shall provide such
information with respect to the tender or exchange of
Company Shares as an independent record keeper may
require for operation of the Plan, if the recipient of
such information agrees to keep such information
confidential.
(d) The Trustee shall execute such ballots, proxies or
other instruments as may be necessary or desirable in
order to effectuate the provisions of this subsection
6.6.
6.7 Sale of Common Stock to the Company. If, because of
distributions, withdrawals or transfers involving Common Stock in
the Company Stock Fund, it is necessary or desirable for the Plan
to sell Common Stock, the Trustee shall notify the Company. At
the timely direction of an Investment Manager, the Trustee shall
sell such Common Stock to the Company for cash. The sales price
for the shares of Common Stock sold to the Company shall be no
less than Fair Market Value as defined in subsection C-10 of
Supplement C, and no commission shall be charged on such sale.
The Company and the Trustee shall establish in writing such rules
and procedures regarding such sales as are required to meet
applicable laws.
SECTION 7
Plan Accounting
7.1 Participants' Accounts. The Company shall maintain the
following "Accounts" in the name of each Participant:
(a) an "Employer Contribution Account," which shall reflect
Employer Contributions, if any, made on his behalf and
the income, losses, appreciation and depreciation and
expenses attributable thereto;
(b) a "Pre-Tax Account," which shall reflect Pre-Tax
Contributions, if any, made on his behalf and the
income, losses, appreciation, depreciation and expenses
attributable thereto;
(c) an "After-Tax Account," which shall reflect After-Tax
contributions made by the Participant and the income,
losses, appreciation, depreciation and expenses
attributable thereto;
(d) a "Qualified Matching Account," which shall reflect
Qualified Matching Contributions, if any, made on his
behalf, and the income, losses, appreciation,
depreciation and expenses attributable thereto;
(e) a "Rollover Account," which shall reflect Rollover
Contributions, if any, made by him and the income,
losses, appreciation, depreciation and expenses
attributable thereto.
In addition, the Company may maintain subaccounts within the Pre-
Tax and After-Tax Accounts to distinguish contributions (and the
earnings thereon) eligible to be matched from contributions (and
the earnings thereon) above the matching limit, as well as
subaccounts to reflect balances transferred to this Plan from
another qualified plan that are subject to special rules. The
Accounts and subaccounts provided for in this subsection 7.1
shall be for accounting purposes only, and there shall be no
segregation of assets within the Investment Funds among the
separate Accounts. Reference to the "balance" in a Participant's
Accounts means the aggregate of the balances in the subaccounts
maintained in the Investment Funds attributable to those
Accounts.
7.2 Allocation of Fund Earnings and Changes in Value. As
of each Accounting Date, interest, dividends and changes in value
in each Investment Fund since the preceding Accounting Date shall
be allocated to each Participant's subaccounts invested in such
Investment Fund by adjusting upward or downward the balance of
his subaccounts invested in such Investment Fund in the ratio
which the subaccounts of such Participant invested in such
Investment Fund bears to the total of the subaccounts of all
Participants invested in such Investment Fund as of such
Accounting Date, excluding therefrom, for purposes of this
allocation only, all Pre-Tax, After-Tax, Employer, Qualified
Matching and Rollover Contributions received since the preceding
Accounting Date, so that the total of the subaccounts of all
Participants in each Investment Fund shall equal the total value
of such fund (exclusive of such contributions) as determined by
the Trustee in accordance with uniform procedures consistently
applied. The Plan will use a daily valuation system, which
generally shall mean that Accounts will be updated each business
day to reflect activity for that day, such as new contributions
received by the Trustee, changes in Participants' investment
elections, and changes in the unit value of the Investment Funds
under the Plan. Such daily valuation is dependent upon the
Plan's recordkeeper receiving complete and accurate information
from a variety of different sources on a timely basis. Since
events may occur that cause an interruption in this process,
affecting a single Participant or a group of Participants, there
shall be no guarantee by the Plan that any given transaction will
be processed on the anticipated day. In the event of any such
interruption, any affected transaction will be processed as soon
as administratively feasible and no attempt shall be made to
reconstruct events as they would have occurred absent the
interruption, regardless of the cause, unless the Company in its
sole discretion directs the Plan's recordkeeper to do so.
7.3 Allocation of Contributions. Subject to the provisions
of Section 8, contributions shall be allocated as follows:
(a) Pre-Tax, After-Tax, and Rollover Contributions made on
behalf of a Participant shall be allocated to that
Participant's appropriate Accounts as of the Accounting
Date coinciding with the paycheck date to which such
contribution relates.
(b) Employer Contributions described at subsection 5.1 for
a Plan Year shall be allocated as of the last day of
such Plan Year; provided, however, that
(i) Employer Contributions expected to be due with
respect to Pre-Tax Contributions made for a
calendar quarter (based on year to date
information); reduced by
(ii) the Fair Market Value (as defined at subsection C-
10 of Supplement C and determined on the last day
of the calendar quarter) of any allocation
described at paragraph C-8(b) of Supplement C for
such calendar quarter
shall be contingently allocated to Participants' Accounts as
of the last day of such calendar quarter. If a Participant
receiving such a contingent quarterly allocation during a
Plan Year fails to meet the requirements of subsection 5.5
as of the last day of the Plan Year, any amounts
contingently allocated during such Plan Year shall reduce
Employer contributions required at subsection 5.1 and shall
be allocated in accordance with subsection 5.5, and any
corresponding dividends (or dividend replacements under
Supplement C) shall be forfeited.
(c) Any Qualified Matching Contributions made by an
Employer for a Plan Year shall be allocated as of the
last day of that year by such Employer in accordance
with subsection 5.6.
Notwithstanding the foregoing, unless the Company establishes
uniform rules to the contrary, contributions made to the Plan
shall share in the gains and losses of the Investment Funds only
when received by the Trustee with verified data.
7.4 Correction of Error. In the event of an error in the
adjustment of a Participant's Accounts, the Company, in its sole
discretion, may correct such error by either crediting or
charging the adjustment required to make such correction to or
against income and expenses of the Trust for the Plan Year in
which the correction is made or the Employer may make an
additional contribution to permit correction of the error.
Except as provided in this subsection 7.4, the Accounts of other
Participants shall not be readjusted on account of such error.
7.5 Statement of Plan Interest. As soon as practicable
after the last day of each Plan Year and at such other intervals
as the Company may determine, the Company shall provide each
Participant with a statement reflecting the balances of his
Accounts. Each Participant is responsible for reviewing his
statement and any Participant who discovers an error shall bring
it to the attention of the Company within 90 days of receipt of
the statement. If a Participant does not bring errors in his
statement to the attention of the Company within 90 days of
receipt of his statement, the Participant will be deemed to have
confirmed the accuracy of the statement.
SECTION 8
Limitations on Compensation, Contributions and Allocations
8.1 Reduction of Contribution Rates. To conform the
operation of the Plan to sections 401(a)(4), 401(k)(3),
401(m)(2), 402(g) and 415(c) of the Code, the Company may
establish limits on the Pre-Tax and After-Tax Contribution rates
that may be elected by Participants, may unilaterally modify or
revoke any Pre-Tax or After-Tax Contribution election made by a
Participant pursuant to subsections 4.1 and 4.2, and may reduce
the share of the Employer Contribution (even to zero) allocable
to any Participant as a match pursuant to subsection 5.8. In the
event that the Company determines, prior to the end of a Plan
Year, that the limits it has imposed on Highly Compensated
Participants to ensure compliance with sections 401(k)(3) and
401(m)(2) are more restrictive than necessary based upon
preliminary testing results, the Company in its discretion may
modify such limits prospectively and may also permit affected
Participants to make additional contributions from Eligible
Compensation payable during the remainder of such year, provided
that no such Participant may contribute more, on an annual basis,
than the effective annual rate of contribution permitted for
Highly Compensated Participants as a group, applied against the
maximum amount of Eligible Compensation permitted to be taken
into account for that Plan Year under section 401(a)(17) of the
Code.
8.2 Compensation for Limitation/Testing Purposes.
Compensation as defined in subsection 4.7 shall be used in
applying the limits set forth in this Section 8, provided that
for purposes of subsections 8.3 and 8.11 Compensation for the
entire Plan Year shall be used, but for purposes of subsection
8.7 and 8.9 only Compensation paid after an individual becomes
eligible to participate in the Plan shall be used.
8.3 Limitations on Annual Additions. Notwithstanding any
other provisions of the Plan to the contrary, a Participant's
Annual Additions (as defined below) for any Plan Year shall not
exceed an amount equal to the lesser of:
(a) $30,000 (as adjusted for cost-of-living increases under
section 415(d) of the Code); or
(b) 25 percent of the Participant's Compensation for that
Plan Year, determined without regard to the limitation
under section 401(a)(17) of the Code, and calculated as
if each Section 415 Affiliate (defined below) were a
Related Company,
reduced by any Annual Additions for the Participant for the Plan
Year under any other defined contribution plan of an Employer or
a Related Company or Section 415 Affiliate, provided that, if any
other such plan has a similar provision, the reduction shall be
pro rata. The term "Annual Additions" means, with respect to any
Participant for any Plan Year, the sum of all contributions
allocated to a Participant's Accounts under the Plan for such
year, excluding Rollover Contributions and any Pre-Tax
Contributions that are distributed as excess deferrals in
accordance with subsection 8.6, but including any Pre-Tax, After-
Tax or Employer Contributions treated as excess contributions or
excess aggregate contributions under subsections 8.8 and 8.10. A
Participant's Annual Additions with respect to Supplement C
allocations shall be determined solely on the basis of
contributions thereto without regard to the value of ESOP Common
Stock released from the Suspense Account and, if no more than one
third of the Employer Contributions which are deductible under
section 404(a)(9) of the Code by reason of their application to
make payments on an ESOP Loan are allocated to Highly-Compensated
Participants, a Participant's Annual Additions shall not include
any share of an Employer Contribution which is deductible under
section 404(a)(9)(B) of the Code by reason of its application to
the payment of interest on an ESOP Loan. The term Annual
Additions shall also include employer contributions allocated for
a Plan Year to any individual medical account (as defined in
section 415(l) of the Code) of a Participant and any amount
allocated for a Plan Year to the separate account of a
Participant for payment of post-retirement medical benefits under
a funded welfare benefit plan (as described in section 419A(d)(2)
of the Code), which is maintained by an Employer or a Related
Company or Section 415 Affiliate. "Section 415 Affiliate" means
any entity that would be a Related Company if the ownership test
of section 414 of the Code was "more than 50%" rather than "at
least 80%".
8.4 Excess Annual Additions. If, as a result of a
reasonable error in estimating a Participant's Compensation, a
reasonable error in determining the amount of Pre-Tax
Contributions that may be made with respect to a Participant
under the limits of section 415 of the Code or such other
mitigating circumstances as the Commissioner of Internal Revenue
shall prescribe, the Annual Additions for a Participant for a
Plan Year exceed the limitations set forth in subsection 8.3, the
excess amounts shall be treated, as necessary, in accordance with
Treas. Reg. Sec. 1.415-6(b)(6)(ii), after any After-Tax
Contributions, and then any Pre-Tax Contributions, and any
income, losses, appreciation or depreciation attributable to the
foregoing, are first returned to the Participant to reduce the
excess amount.
8.5 Combined Plan Limitation. If a Participant also
participates in any defined benefit plan (as defined in section
415(k) of the Code) maintained by an Employer or a Related
Company or Section 415 Affiliate, the aggregate benefits payable
to, or on account of, the Participant under such plan together
with this Plan will be determined in a manner consistent with
section 415(e) of the Code, to the extent applicable for Plan
Years before January 1, 2000. The benefit provided for the
Participant under the defined benefit plan shall be adjusted to
the extent necessary so that the sum of the "defined benefit
fraction" and the "defined contribution fraction" (as such terms
are defined in section 415(e) of the Code and applicable
regulations thereunder) calculated with regard to such
Participant does not exceed 1.0. For purposes of this subsection
8.5, all qualified defined benefit plans (whether or not
terminated) of the Employers, Related Companies and Section 415
Affiliates shall be treated as one defined benefit plan.
8.6 Annual Limit on 401(k) Deferrals. In no event shall
the Pre-Tax Contributions for a Participant under the Plan and
any other elective deferrals (as defined in section 402(g)(3) of
the Code) under any other cash-or-deferred arrangement maintained
by an Employer or a Related Company for any taxable year exceed
the maximum amount as may be permitted under section 402(g) of
the Code. If during any taxable year a Participant is also a
participant in any other cash-or-deferred arrangement, and if his
elective deferrals made under such other arrangements together
with his Pre-Tax Contributions made under the Plan exceed the
maximum amount permitted for the Participant for that year under
section 402(g) of the Code, the Participant, not later than March
1 following the close of such taxable year, may request the
Company to direct the Trustee to distribute all or a portion of
such excess to him, with any gains or losses allocable thereto
for that Plan Year determined in accordance with any reasonable
method adopted by the Company for that Plan Year that either (i)
conforms to the accounting provisions of Section 7 and is
consistently applied to the distribution of excess contributions
under this subsection 8.6 and subsections 8.8 and 8.10 to all
affected Participants, or (ii) satisfies any alternative method
set forth in applicable Treasury regulations. Any such request
shall be in writing and shall include adequate proof of the
existence of such excess, as determined by the Company in its
sole discretion. If the Company is so notified, such excess
amount shall be distributed to the Participant no later than the
April 15 following the close of the Participant's taxable year.
In addition, if the applicable limitation for a Plan Year happens
to be exceeded with respect to this Plan alone, or this Plan and
another plan or plans of the Employers and Related Companies, the
Company shall direct such excess Pre-Tax Contributions (with
allocable gains or losses) to be distributed to the Participant
as soon as practicable after the Plan Administrator is notified
of the excess deferrals by an Employer or the Participant, or
otherwise discovers the error (but no later than the April 15
following the close of the Participant's taxable year).
Notwithstanding the foregoing provisions of this subsection 8.6,
the dollar amount of any distribution due hereunder shall be
reduced by the dollar amount of any Pre-Tax Contributions
previously distributed to the same Participant pursuant to
subsection 8.8; provided, however, that for purposes of
subsections 8.3 and 8.7, the correction under this subsection 8.6
shall be deemed to have occurred before the correction under
subsection 8.8.
8.7 Section 401(k)(3) Testing. For any Plan Year beginning
on or after January 1, 1997, the amount by which the average of
the Deferral Percentages (as defined below) for that Plan Year of
each eligible employee who is Highly Compensated for that Plan
Year (the "Highly Compensated Group Deferral Percentage") exceeds
the average of the Deferral Percentages for that Plan Year of
each eligible employee who is not Highly Compensated for that
Plan Year (the "Non-highly Compensated Group Deferral
Percentage"), shall be less than or equal to either (i) a factor
of 1.25 or (ii) both a factor of 2 and a difference of 2.The
"Deferral Percentage" for any eligible employee for a Plan Year
shall be determined by dividing his Pre- Tax Contributions (and
Qualified Matching Contributions, if applicable) for that Plan
Year by his Compensation for that Plan Year (measured from the
date he first becomes eligible to participate in the Plan and not
the date he actually becomes a Participant), subject to the
following special rules:
(a) any employee eligible to participate in the Plan at any
time during a Plan Year in accordance with subsection
3.1 (without regard to any suspension imposed by any
other provision hereunder) shall be counted, whether or
not any Pre-Tax Contributions are made on his behalf
for the year;
(b) the Deferral Percentage for any Highly Compensated
Participant who is eligible to participate in the Plan
and who is also eligible to make elective deferrals
under one or more other arrangements described in
section 401(k) of the Code that are maintained by an
Employer or a Related Company for a plan year that ends
with or within the same calendar year as the Plan Year
(other than a plan subject to mandatory disaggregation
under applicable Treasury regulations) shall be
determined as if all of such elective deferrals were
made on his behalf under the Plan;
(c) Pre-Tax Contributions distributed to a Participant as
excess deferrals under subsection 8.6 shall be counted
in determining such Participant's Deferral Percentage,
except in the case of a distribution to a Non-highly
Compensated Participant required to comply with section
401(a)(30) of the Code;
(d) if this Plan is aggregated with one or more other plans
for purposes of section 410(b) of the Code (other than
the average benefit percentage test), this subsection
8.7 shall be applied as if all such plans were a single
plan; provided, however, that for Plan Years beginning
after 1989, such aggregated plans must all have the
same plan year,
(e) all Participants who are members of collective
bargaining units shall be tested separately under this
subsection 8.7.
8.8 Correction Under Section 401(k) Test. In the event
that the Highly Compensated Group Deferral Percentage for any
Plan Year does not initially satisfy one of the tests referred to
in subsection 8.7, the Company shall direct the Trustee to
distribute to Highly Compensated Participants enough of their
Pre-Tax Contributions under the leveling method (first reducing
the Participant with the highest dollar contribution and then the
next highest, and so forth) described in applicable Treasury
regulations and notices, along with allocable income determined
in accordance with such notices or regulations, so that the
Highly Compensated Group Deferral Percentage meets one of the
tests referred to in subsection 8.7. The amounts to be
distributed to any Participant pursuant to this subsection 8.8
shall be reduced by the amount of any Pre-Tax Contributions
distributed to him for the taxable year ending with or within
such Plan Year pursuant to subsection 8.6. The Company shall
take such actions and cause any distribution to be made no later
than the close of the Plan Year following the Plan Year for which
the excess contributions were made.
8.9 Section 401(m)(2) Testing. For any Plan Year beginning
on or after January 1, 1997, the amount by which the average of
the Contribution Percentages (as defined below) for that Plan
Year of each eligible employee who is Highly Compensated for that
Plan Year (the "Highly Compensated Group Contribution
Percentage") exceeds the average of the Contribution Percentages
for that Plan Year of each eligible employee who is not Highly
Compensated for that Plan Year (the "Non-highly Compensated Group
Contribution Percentage") shall be less than or equal to either
(i) a factor of 1.25 or (ii) both a factor of 2 and a difference
of 2. The "Contribution Percentage" for any eligible employee
for a Plan Year shall be determined by dividing his total After-
Tax Contributions and Employer Contributions (and, if applicable,
Qualified Matching Contributions) for that Plan Year by his
Compensation for that Plan Year (measured from the date he first
becomes eligible to join the Plan and not the date he actually
becomes a Participant), subject to the following special rules:
(a) any employee eligible to participate in the Plan at any
time during a Plan Year in accordance with subsection
3.1 (without regard to any suspension imposed by any
other provision hereunder) shall be counted, regardless
of whether any After-Tax, Employer or Qualified
Matching Contributions are made by him for the year;
(b) the Contribution Percentage for any Highly Compensated
Participant who is eligible to participate in the Plan
and who is also eligible to participate in one or more
other qualified plans maintained by an Employer or a
Related Company with a plan year that ends with or
within the same calendar year as the Plan Year (other
than a plan subject to mandatory disaggregation under
applicable Treasury regulations) with after-tax or
matching contributions shall be determined as if all
such contributions were made under the Plan;
(c) if this Plan is aggregated with one or more other plans
for purposes of section 410(b) of the Code (other than
the average benefit percentage test), this subsection
8.9 shall be applied as if all such plans were a single
plan; provided, however, that such aggregated plans
must all have the same plan year; and
(d) members of collective bargaining units shall be
excluded from testing under this subsection 8.9.
8.10 Correction Under Section 401(m) Test. In the event
that the Highly Compensated Group Contribution Percentage for any
Plan Year does not initially satisfy one of the tests referred to
in subsection 8.9, the Company shall direct the Trustee to
distribute to the Highly Compensated Participants enough of their
After-Tax Contributions and Employer Contributions under the
leveling method (first reducing the Participant with the highest
dollar amount of contributions, and then the next highest and so
forth) described in applicable Treasury notices and regulations,
along with allocable income determined in accordance with such
notices or regulations, so that the Highly Compensated Group
Contribution Percentage meets one of the tests referred to in
subsection 8.9. Any such corrective distribution shall be made
first from any Employer Contribution attributable to Pre-Tax
Contributions that have to be returned pursuant to subsections
8.4, 8.6 or 8.8, second from After-Tax Contributions, then (if
necessary) from any other Employer Contributions. The Company
shall make any necessary distribution no later than the close of
the Plan Year following the Plan Year in which such excess
aggregate contributions were contributed.
8.11 Highly Compensated. An employee or Participant shall
be "Highly Compensated" for any Plan Year beginning on or after
January 1, 1997 if he:
(a) was at any time a 5 percent owner of an Employer or a
Related Company during that or the preceding Plan Year;
or
(b) received Compensation in excess of $80,000 (indexed for
cost-of-living adjustments under section 415(d) of the
Code) for the preceding Plan Year.
8.12 Forfeiture of "Orphan" Matching Employer
Contributions. In the event that any Pre-Tax Contributions are
distributed to a Participant to correct a situation where there
are excess annual additions, excess deferrals, excess
contributions or excess aggregate contributions pursuant to
subsections 8.4, 8.6, 8.8 or 8.10, any Employer Contributions
allocated as a match with respect to such Pre-Tax Contributions
and not already returned in accordance with subsection 8.10 shall
be forfeited and used to reduce future Employer Contributions
required at subsection 5.1 and shall be allocated in accordance
with subsection 5.5.
SECTION 9
Vesting and Termination Dates
9.1 Vested Interest. Except as provided in paragraph
7.3(b) or subsection 8.12 a Participant at all times shall have a
fully vested, nonforfeitable interest in all of this Accounts.
9.2 Termination of Employment. If a Participant's
employment is terminated for any reason, his "Termination Date"
generally will be the last day for which he is paid wages or
salary for services performed for an Employer or Related Company,
unless he is terminated while on an unpaid leave of absence, in
which case his Termination Date will be the day as of which he is
notified by his Employer of his termination or he resigns
(whichever is applicable).
SECTION 10
Withdrawals While Employed
10.1 Partial Withdrawals from the Plan Without Terminating
Employment. No more frequently than once in any six month
period, a Participant may elect to withdraw from the Plan,
without terminating employment, an amount specified by him, which
amount shall be no less than $250 (or the remaining balance
available for withdrawal in the Participant's account if less
than $250) and shall not exceed the balance of such Participant's
Accounts reduced by the following:
(a) Any Employer Contributions (and the earnings thereon)
contingently allocated under paragraph 7.3(b);
(b) If he has not participated in the Plan for at least 5
years, an amount equal to the Employer Contributions
credited to his Accounts for the last two Plan Years;
and
(c) If he has not attained age 59 1/2 , all Pre-Tax
Contributions and any earnings attributable thereto.
In addition, a Participant who has not attained age 59 1/2 and is
confronted by a Hardship (as defined below) may withdraw his Pre-
Tax Contributions (up to the amount required by such Hardship),
but not the earnings on his Pre-Tax Contributions, provided he
has first withdrawn all other amounts then available under the
Plan. In the event that a Participant becomes "permanently and
totally disabled," such Participant may at any time withdraw his
Accounts under the Plan. A Participant is "permanently and
totally disabled" if he is unable to perform each of the material
duties of his regular occupation with Sears as determined by the
Committee on the basis of a written opinion by a licensed
physician selected by the Committee.
10.2 Hardship. For purposes of subsection 10.1 above, a
withdrawal will not be considered to be made on account of
"Hardship" unless the withdrawal is requested because of an
immediate and heavy financial need of the Participant caused by
one of the following:
(a) medical expenses described in section 213(d) of the
Code incurred by the Participant, his spouse, or any
dependents of the Participant (as defined in section
152 of the Internal Revenue Code) or necessary for such
persons to obtain such medical care;
(b) purchase (excluding mortgage payments) of a principal
residence for the Participant;
(c) payment of tuition (and related expenses) for the next
12 months of postsecondary education for the
Participant, his spouse, children or dependents;
(d) the need to prevent the eviction of the Participant
from his principal residence or foreclosure on the
mortgage of the Participant's principal residence;
(e) expenses directly related to serious damage to the
principal residence of the Participant caused by a
catastrophic event such as fire, flood, hurricane or
earthquake;
(f) funeral expenses of a family member; or
(g) such other deemed immediate and heavy financial need
established from time to time by the Commissioner of
Internal Revenue.
To be considered a Hardship withdrawal under subsection 10.1, the
withdrawal must also be necessary to satisfy the immediate and
heavy financial need of the Participant, and will be so deemed if
the Participant represents to the Company (or its delegate) in
writing that the need cannot be relieved:
(h) through reimbursement or compensation by insurance or
otherwise;
(i) by reasonable liquidation of the Participant's assets,
to the extent such liquidation would not itself give
rise to an immediate and heavy financial need;
(j) by ceasing to make contributions to the Plan (or any
other deferred compensation plan); or
(k) by borrowing on reasonable commercial terms.
10.3 Sources of Withdrawals. Any partial withdrawal will
be made from, and will be charged to, the withdrawing
Participant's Accounts, subject to the limits on amounts
available for partial withdrawals set forth in subsection 10.1:
first, from the portion of the Participant's Accounts reflecting
his After-Tax Contributions made prior to January 1, 1987; next,
from the portions of the Participant's Accounts reflecting his
After-Tax Contributions made after December 31, 1986 and
reflecting the earnings on such After-Tax Contributions; next,
from the portion of the Participant's Accounts reflecting the
earnings on his After-Tax Contributions made prior to January 1,
1987 and from the portion of the Participant's Accounts
reflecting Employer Contributions; and, finally, from the portion
of the Participant's Accounts reflecting his Pre-Tax
Contributions. Unless otherwise requested by the Participant,
his various investment subaccounts will be charged in the order
and in such proportions as the Plan Administrator may specify. A
Participant who makes a withdrawal may elect to have any
specified amounts which would otherwise be payable to him in cash
used by the Trustee to purchase and distribute whole shares of
Common Stock to the Participant at a price determined in
accordance with subsection 5.1. Requests for payment in Common
Stock may be required to be processed as two separate
transactions within the Phone System, the first being an
investment transfer and the second being the actual withdrawal;
both transactions may occur on the same Accounting Date.
10.4 Method of Making Elections, Revocations, etc. All
actions required of, or permitted to be taken by, Participants
under this Section 10 shall be made through the Phone System, and
in the case of a Hardship withdrawal, shall be followed by
whatever written forms and documentation the Company deems
appropriate.
SECTION 11
Withdrawals After Termination of Employment
11.1 Withdrawals by and Distributions to Participants After
Termination of Employment. When a Participant's Termination Date
occurs (for a reason other than his death), his Accounts shall be
distributed or withdrawn in accordance with the following
provisions of this Section 11.
(a) If the value of the Participant's Accounts does not
exceed $5,000, and did not exceed $5,000 at the time of
any prior distribution or withdrawal, his Accounts will
be distributed to him in a lump sum payment as soon as
practicable after the Plan's Recordkeeper is notified
of his termination of employment.
(b) If the value of the Participant's Accounts exceeds
$5,000, the Participant may withdraw his Accounts on
the Distribution Date (as defined in paragraph (c)
below) he elects, in a lump sum; provided, however,
that such a Participant may make a partial withdrawal
of a portion of his Accounts during the first fifteen
months following his termination of employment,
deferring payment of the rest of his Accounts until
such later Distribution Date as he elects (within the
limits set forth in this Section 11). In the case of
all Participants, other than a Participant who retired
prior to January 1, 2000, a partial withdrawal under
this paragraph 11.1(b) may be made no more frequently
than once in any six months period and may be in an
amount no less than $250 (or the balance available for
withdrawal if less).
(c) A Participant's "Distribution Date" shall mean the date
as of which a payment is made to him pursuant to this
Section 11, without regard to any administrative delay.
A Participant may elect that his Distribution Date
occur on any Accounting Date occurring after his
Termination Date (but not later than the date on which
he attains age 70), provided that no election of a
Distribution Date will be valid if it is made more than
90 days prior to such date.
11.2 Distributions to Beneficiaries. If a Participant dies
while his Accounts remain undistributed, payment of his Accounts
will be made to his Beneficiary or Beneficiaries as soon as
practicable after the Recordkeeper receives confirmation of his
death.
11.3 Limits on Commencement and Duration of Distributions.
The following distribution rules shall be applied in accordance
with sections 401(a)(9) and 401(a)(14) of the Code and applicable
regulations thereunder, including the minimum distribution
incidental benefit requirement of Treas. Reg. Sec. 1.401(a)(9)-2,
and shall supersede any other provision of the Plan to the
contrary:
(a) Unless the Participant elects otherwise, in no event
shall distribution commence later than 60 days after
the close of the Plan Year in which the latest of the
following events occurs: the Participant's attainment
of age 65, or the Participant's Termination Date. The
failure of a Participant to consent to a distribution
is deemed to be an election to defer commencement of
payment for purposes of the preceding sentence.
(b) Notwithstanding any other provision herein to the
contrary, distribution of a Participant's Accounts
shall be made to him (or on his behalf) in the form of
a lump sum distribution on or before his Required
Beginning Date (as defined below). A Participant's
"Required Beginning Date" is April 1 of the calendar
year following the calendar year in which he attains
age 701/2 or terminates employment, whichever is later.
11.4 Beneficiary Designations. The term "Beneficiary"
shall mean the Participant's surviving spouse. However, if the
Participant is not married, or if the Participant is married but
his spouse consents (as provided below) to the designation of a
person other than the spouse, the term Beneficiary shall mean
such person or persons as the Participant designates to receive
his Accounts upon his death. Such designation may be made,
revoked or changed (without the consent of any previously-
designated Beneficiary except his spouse) only by an instrument
signed by the Participant and filed with the Recordkeeper prior
to his death. A spouse's consent to the designation of a
Beneficiary other than the spouse shall be in writing, shall
acknowledge the effect of such designation, shall be witnessed by
a notary public and shall be effective only with respect to such
consenting spouse. In default of such designation, or at any
time when there is no surviving spouse and no surviving
Beneficiary designated by the Participant, his Beneficiary shall
be his estate. For purposes of the Plan, "spouse" means the
person to whom the Participant is legally married at the relevant
time. Notwithstanding the foregoing provisions of this
subsection 11.4, no spousal consent to the designation of a
person other than, or in addition to, the spouse as Beneficiary
shall be required if it is established to the satisfaction of the
Plan Administrator that the spouse's consent cannot be obtained
because there is no spouse, because the spouse cannot be located
or because of such other circumstances as may be prescribed in
applicable Treasury regulations.
11.5 Distribution Only Upon Separation From Service.
Notwithstanding any other provision of the Plan to the contrary,
a Participant may not commence distribution of the portion of his
Accounts attributable to his Pre-Tax Contributions pursuant to
this Section 11 prior to the date he attains age 59 1/2, even though
his employment with the Employers and Related Companies has
terminated, unless or until he also has a "separation from
service" within the meaning of section 401(k)(2)(B) of the Code.
The foregoing restriction shall not apply, however, if the
Participant's termination of employment occurs in connection with
either (a) the sale by an Employer or a Related Company to an
unrelated corporation of at least 85% of the assets of a trade or
business or (b) the disposition of its interest in a subsidiary
to an unrelated entity, and the requirements for distribution
under applicable Treasury regulations on account of such sale or
disposition are met.
11.6 Form of Payment. Distributions from the Company Stock
Fund shall be made in cash unless the Participant elects to have
all or a portion of his interest in such fund distributed in
shares of Common Stock. Distributions from the other Investment
Funds shall be made in cash, unless the Participant elects that
some or all of such cash be converted to Common Stock.
11.7 Facility of Payment. Notwithstanding the provisions
of subsections 11.1 and 11.2, if, in the Company's opinion, a
Participant or other person entitled to benefits under the Plan
is under a legal disability or is in any way incapacitated so as
to be unable to manage his financial affairs, the Plan
Administrator may direct the Trustee to make payment to a
relative or friend of such person for his benefit until claim is
made by a conservator or other person legally charged with the
care of his person or his estate. Thereafter, any benefits under
the Plan to which such Participant or other person is entitled
shall be paid to such conservator or other person legally charged
with the care of his person or his estate.
11.8 Interests Not Transferable. The interests of
Participants and other persons entitled to benefits under the
Plan are not subject to the claims of their creditors and may not
be voluntarily or involuntarily assigned, alienated or
encumbered, except in the case of a properly documented levy of
the Internal Revenue Service, required tax withholding or
qualified domestic relations orders that relate to the provision
of child support, alimony or marital rights of a spouse, child or
other dependent and which meet such other requirements as may be
imposed by section 414(p) of the Code or regulations issued
thereunder. Notwithstanding any other provision of the Plan to
the contrary, distribution of the entire portion of a
Participant's Accounts awarded to his alternate payee may be made
in a lump sum payment, as soon as practicable after the Company
(or its delegate) determines that such order is qualified,
without regard to whether the Participant would himself be
entitled under the terms of the Plan to withdraw or receive a
distribution of such lump sum amount at that time, but only if
the terms of the order provide for such immediate distribution
either specifically or by general reference to any manner of
distribution permitted under the Plan.
11.9 Absence of Guaranty. None of the Company, the
Trustee, or the Employers in any way guarantee the assets of the
Plan from loss or depreciation, or guarantee any payment to any
person. The liability of the Trustee to make any payment is
limited to the available assets of the Plan held under the Trust.
11.10 Missing Participants or Beneficiaries. Each
Participant and each designated Beneficiary must file with the
Recordkeeper from time to time in writing his post office address
and each change of post office address. Any communication,
statement or notice addressed to a Participant or designated
Beneficiary at his last post office address filed with the
Recordkeeper, or, in the case of a Participant, if no address is
filed with the Recordkeeper, then at his last post office address
as shown on the Employers' records, will be binding on the
Participant and his designated Beneficiary for all purposes of
the Plan. None of the Company, the Employers, or the Trustee
will be required to search for or locate a Participant or
designated Beneficiary.
11.11 Direct Rollover Option. In accordance with uniform
rules established by the Company, each Participant, surviving
spouse of a Participant or alternate payee under a qualified
domestic relations order within the meaning of section 414(p) of
the Code who is due to receive an eligible rollover distribution
from the Plan may direct the Plan Administrator to transfer all
or a portion of such distribution directly to another eligible
retirement plan. For purposes of this subsection, the terms
"eligible rollover distribution" and "eligible retirement plan"
as applied to any such individual shall have the meaning accorded
such terms under section 401(a)(31) of the Code (or any successor
provision thereto) and applicable regulations thereunder.
SECTION 12
No Reversion to Employers
No part of the corpus or income of the Trust shall revert to
the Employers or be used for, or diverted to, purposes other than
the exclusive benefit of Participants and Beneficiaries, subject
to the following:
(a) Employer contributions under the Plan are conditioned
upon the deductibility of the contributions under
section 404 of the Code, and, to the extent any such
deduction is disallowed, the Trustee shall, upon
written request of the Employer, return the amount of
any contribution (to the extent disallowed), reduced by
the amount of any losses thereon, to the Employer
within one year after the date the deduction is
disallowed.
(b) If a contribution or any portion thereof is made by an
Employer by a mistake of fact, the Trustee shall, upon
written request of that Employer, return the amount of
such contribution or portion, reduced by the amount of
any losses thereon, to that Employer within one year
after the date of payment.
(c) If, upon termination of the Plan, any amounts are held
under the Plan in a suspense account pursuant to Treas.
Reg. Sec. 1.415-6(b)(6)(ii) and such amounts may not be
credited to the Accounts of Participants, such amount
will be returned to the Employers as soon as
practicable after the termination of the Plan.
SECTION 13
Administration
13.1 Administrative Authority. The Company shall be the
Plan Administrator of the Plan and shall have the following
discretionary authority, powers, rights and duties in addition to
those vested in it elsewhere in the Plan or Trust Agreement:
(a) to adopt such rules of procedure and regulations as, in
its opinion, may be necessary for the proper and
efficient administration of the Plan and as are
consistent with the provisions of the Plan;
(b) to enforce the Plan in accordance with its terms and
with such applicable rules and regulations it may
adopt;
(c) to determine conclusively all questions arising under
the Plan, including the power to determine the
eligibility of employees and the rights of Participants
and other persons entitled to benefits under the Plan
and their respective benefits, to make factual findings
and to remedy ambiguities, inconsistencies or omissions
of whatever kind;
(d) to maintain and keep adequate records concerning the
Plan and concerning its proceedings and acts in such
form and detail as the Company may decide;
(e) to direct all payments of benefits under the Plan;
(f) to perform the functions of a "plan administrator", as
defined in section 414(g) of the Code, for all purposes
of the Plan, including for purposes of establishing and
implementing procedures to determine the qualified
status of domestic relations orders (in accordance with
the requirements of section 414(p) of the Code) and to
administer distributions under such qualified orders;
(g) to employ agents, attorneys, accountants or other
persons (who may also be employed by or represent the
Employers) for such purposes as the Company considers
necessary or desirable to discharge its duties;
(h) to establish a claims procedure in accordance with
section 503 of ERISA; and
(i) to furnish the Employers, the Investment Committee and
the Trustee with such information with respect to the
Plan as may be required by them for tax or other
purposes.
The certificate of an officer of the Company that the Company has
taken or authorized any action shall be conclusive in favor of
any person relying on the certificate.
13.2 Delegation of Administrative Responsibilities and
Powers. In exercising its authority to control and manage the
operation and administration of the Plan, the Company may
delegate all or any part of its responsibilities and powers to
any person or persons selected by it. Any such allocation or
delegation may be revoked at any time.
13.3 Uniform Rules. In managing the Plan, the Company
shall uniformly apply rules and regulations adopted by it to all
persons similarly situated.
13.4 Information to be Furnished to Company. The other
Employers and Related Companies shall furnish the Company such
data and information as may be required for it to discharge its
duties. The records of the Employers and Related Companies as to
an employee's or Participant's period of employment, termination
of employment and the reason therefor, leave of absence,
reemployment and Eligible Compensation shall be conclusive on all
persons unless the Participant satisfactorily demonstrates that
such records are incorrect. Participants and other persons
entitled to benefits under the Plan must furnish to the Company
such evidence, data or information as the Company considers
desirable to carry out the Plan.
13.5 Company's Decision Final. Any interpretation of the
Plan and any decision on any matter within the discretion of the
Company made by the Company (or its delegate) shall be binding on
all persons. A misstatement or other mistake of fact shall be
corrected when it becomes known, and the Company shall make such
adjustment on account thereof as it considers equitable and
practicable.
13.6 Exercise of Company's Duties As Plan Administrator.
Notwithstanding any other provisions of the Plan, the Company
shall discharge its duties hereunder solely in the interests of
the Participants and other persons entitled to benefits under the
Plan, and:
(a) for the exclusive purpose of providing benefits to
Participants and other persons entitled to benefits
under the Plan; and
(b) with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting
in a like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character
and with like aims.
13.7 Administrative Expenses. Except as otherwise
determined by the Company, the reasonable expenses of
administering the Plan and the fees and expenses incurred in
connection with the collection, administration, management,
investment, protection and distribution of the Plan assets under
the Trust shall be paid directly by the Trust out of Plan assets
or, if paid by one or more Employers, reimbursed by the Trust, to
the maximum extent permitted by law, and shall be allocated to
Participant's accounts in accordance with rules established by
the Company in its sole discretion.
13.8 Indemnification of Individuals Acting on Behalf of the
Company. To the extent not reimbursed by any applicable
insurance policy, any person acting on behalf of the Company with
respect to the Plan shall be indemnified by the Employers against
any and all liabilities, losses, costs and expenses (including
legal fees and expenses) of whatsoever kind and nature which may
be imposed on, incurred by or asserted against any of them by
reason of the performance of such function if the individual did
not act dishonestly or in willful violation of the law or
regulation under which such liability, loss, cost or expense
arises.
13.9 The Trustee. Title to all assets of the Plan will be
held in trust by one or more trustees appointed by the Company
for the uses and purposes set forth herein. The powers, duties
and responsibilities of the trustees are set forth more fully in
one or more trust agreements between the Company and the
trustees.
13.10 The Investment Committee. Except as otherwise
provided in the trust agreement between the Company and the
Trustee, all of the assets of the Plan shall be managed and
controlled by the Investment Committee, which shall consist of
one or more individuals, none of whom shall be a Trustee. The
members of the Investment Committee shall be appointed by the
Company and shall serve at the pleasure of the Company. The
powers, duties and responsibilities of the Investment Committee
are set forth more fully in the trust agreement between the
Company and the Trustee.
13.11 General Powers, Rights and Duties of the Investment
Committee. Except as otherwise specifically provided and in
addition to the powers, rights and duties specifically given to
the Investment Committee elsewhere herein and in the trust
agreement, the Investment Committee shall have the following
rights, powers and duties:
(a) To direct the Trustee to the extent required under the
terms of any trust agreement with respect to the
acquisition, retention and disposition of Plan assets
and with respect to the exercise of investment powers,
authorities and discretions relating to such assets;
provided, however, that subject to the other provisions
of the Plan (including Supplement C), the Trustee shall
invest that portion of the assets of the Plan
consisting of Employers' Contributions and earnings
thereon in Common Stock to the end that, in the largest
measure possible, Participants may share in the
earnings of the Company and acquire a proprietary
interest therein.
(b) To furnish the Trustee and the Company with such
information as may be required by them for any purpose
related to the Plan.
(c) To adopt such rules of procedure and regulations as in
the Investment Committee's opinion may be necessary for
the proper and efficient performance of the Committee's
duties and responsibilities.
(d) To appoint an Executive Director--Investments, and a
Secretary, who may, but need not, be members of the
Investment Committee, and to employ such other agents,
attorneys, accountants, investment advisors and other
persons and to delegate to them and allocate among
them, in writing, such powers, rights and duties as the
Investment Committee may consider necessary or
advisable to properly carry out the Investment
Committee's responsibilities, and in the same manner to
revoke such delegation and allocation; the acceptance
of such written allocation or delegation shall also be
in writing; any action of the delegate or person to
whom responsibilities have been allocated shall have
the same force and effect for all purposes hereunder as
if such action had been taken by the Investment
Committee; neither the Investment Committee nor any of
its members shall be liable for the acts or omissions
of such delegates or persons to whom responsibilities
have been allocated except as required by law.
(e) Without limiting the generality of (d) above, to
appoint one or more investment managers as defined in
section 3(38) of ERISA ("Investment Manager") to manage
(with power to acquire and dispose of) the assets of
the Plan, any of which Investment Managers may or may
not be a subsidiary of the Company, and to delegate to
any such Investment Manager all of the powers,
authorities and discretions granted to the Investment
Committee hereunder or under the trust agreement
(including the power to delegate and, in the case of
SIMCO, the power, with prior notice to the Investment
Committee, to appoint an Investment Manager), in which
event any direction to the Trustee from any duly
appointed Investment Manager with respect to the
acquisition, retention or disposition of Plan assets
shall have the same force and effect as if such
direction had been given by the Investment Committee,
and to remove any Investment Manager; provided,
however, that the power and authority to manage,
acquire, or dispose of any asset of the Plan shall not
be delegated except to an Investment Manager, and
provided further that the acceptance by any Investment
Manager of such appointment and delegation shall be in
writing, and the Investment Committee shall give notice
to the Trustee, in writing, of any appointment of,
delegation to or removal of an Investment Manager.
13.12 Manner of Action by Investment Committee. In the
performance of the Investment Committee's duties, the following
provisions shall apply where the context admits:
(a) An Investment Committee member, by written instrument,
may delegate any or all of his rights, powers, duties
or discretions to any other Committee member, with the
consent of the latter.
(b) The Investment Committee may act by meeting or by a
written instrument signed without meeting and may
execute any document by signing one document or
concurrent documents. Actions of the Investment
Committee may be communicated by telephone by the
Secretary of the Investment Committee, a majority of
the members of the Investment Committee or any member
of the Investment Committee designated by a majority of
the members of the Investment Committee.
(c) An action or decision of a majority of the members of
the Investment Committee as to a matter shall be as
effective as if taken or made by all members of the
Investment Committee, but, except to the extent
otherwise expressly provided by law, no member of the
Investment Committee who dissents from any action or
decision of the majority of the Investment Committee
shall be liable or responsible for such action.
(d) If, because of the number qualified to act, there is an
even division of opinion among the members of the
Investment Committee as to any matter, a disinterested
party selected by the Investment Committee shall decide
the matter and his decision shall control.
(e) The certificate of the Secretary of the Investment
Committee or of a majority of the members of the
Investment Committee that the Investment Committee has
taken or authorized any action shall be conclusive in
favor of any person relying on the certificate.
13.13 Liabilities and Responsibilities of the Trustee,
Investment Committee and Employers. Any final judgment or decree
which may be rendered against the Plan, the Trustee, the
Investment Committee or any other fiduciary with respect to the
Plan which is not predicated upon a breach of fiduciary
responsibility shall be satisfied from the Plan's assets, and not
from the individual assets of the Trustee, the members of the
Investment Committee or other fiduciaries. No Employer shall
have any responsibility or liability whatsoever with reference to
the management or conduct of the business of the Plan, or for any
act or failure to act on the part of the Trustee, any member of
the Investment Committee, any Investment Manager or any other
fiduciary or their agents and employees, except that the Company
shall be responsible for the acts it performs (or fails to
perform) in its capacity as Plan Administrator (unless any such
responsibility has been delegated to another person in accordance
with the provisions of subsection 13.2).
SECTION 14
Amendment and Termination
14.1 Amendment. While it is expected that the Plan will be
continued, either the Company or a duly authorized committee or
officer thereof may terminate the Plan or amend it from time to
time, except that no amendment will reduce a Participant's
interest in the Plan to less than an amount equal to the amount
he would have been entitled to receive if he had resigned from
the employ of the Employers and the Related Companies on the day
of the amendment, and no amendment will eliminate an optional
form of benefit with respect to a Participant except as otherwise
permitted by law.
14.2 Termination. The Plan will terminate as to all of the
Employers on any day specified by the Company upon advance
written notice of the termination given to the Employers.
Employees of an Employer shall cease active participation in the
Plan (and will be treated as inactive Participants in accordance
with subsection 3.3) on the first to occur of the following:
(a) the date on which that Employer ceases to be an
Employer by appropriate action taken by the Company or
by such Employer;
(b) the date that Employer is judicially declared bankrupt
or insolvent; or
(c) the dissolution, merger, consolidation, reorganization
or sale of that Employer, or the sale of all or
substantially all of the assets of an Employer, except
that, subject to the provisions of subsection 14.3,
with the consent of the Company, in any such event
arrangements may be made whereby the Plan will be
continued by any successor to that Employer or any
purchaser of all or substantially all of that
Employer's assets, in which case the successor or
purchaser will be substituted for the Employer under
the Plan.
14.3 Merger and Consolidation of the Plan, Transfer of Plan
Assets, Acceptance of Transfers from Other Plans. The Company in
its discretion may direct the Trustee to transfer all or a
portion of the assets of this Plan to another defined
contribution plan of the Employers or Related Companies which is
qualified under section 401(a) of the Code or, in the event of
the sale of stock of an Employer or all or a portion of the
assets of an Employer, to a qualified plan of an employer which
is not a Related Company. The Benefits Executive by written
resolution may permit the Plan to accept a transfer of assets and
liabilities to this Plan from another defined contribution plan
that is qualified under section 401(a) of the Code, may direct
the Trustee accordingly, and may adopt such amendment or
Supplement to the Plan as such Benefits Executive considers
necessary to reflect the terms of such transfer, including
provision for any protected rights that may not be eliminated by
reason of such transfer under section 411(d)(6) of the Code. In
the case of any merger or consolidation with, or transfer of
assets and liabilities to or from, any other plan, provisions
shall be made so that each affected Participant in the Plan on
the date thereof (if the Plan or the other plan, as applied to
that Participant, then terminated) would receive a benefit
immediately after the merger, consolidation or transfer which is
equal to or greater than the benefit he would have been entitled
to receive immediately prior to the merger, consolidation or
transfer if the Plan or such other plan, as applied to him, had
then terminated.
14.4 Distribution on Termination and Partial Termination.
Upon termination or partial termination of the Plan, all benefits
under the Plan shall continue to be paid in accordance with
Sections 10 and 11 as those sections may be amended from time to
time.
14.5 Notice of Amendment, Termination or Partial
Termination. Affected Participants will be notified of an
amendment, termination or partial termination of the Plan as
required by law.
EXECUTED this ____ day of ________________, 2000, to be
effective as indicated herein.
SEARS, ROEBUCK AND CO.
By
Its
SUPPLEMENT A
SEARS 401(k) SAVINGS PLAN
Tax Credit Employee Stock Ownership Feature
Effective as of January 1, 1983 a tax credit employee stock
ownership feature (the "ESOF") was added to the Plan in the form
of Supplement A thereto. ESOF "Stock Ownership Contributions"
were made in accordance with such Supplement A for plan years
ending after December 31, 1982 and before January 1, 1987. The
ESOF was terminated as of December 20, 1989 and the Supplement A
Shares Fund, to which Company stock held under the ESOF was
credited, was merged into and made part of the Company Stock
Fund.
If because of distributions, withdrawals or transfers
involving Common Stock which was held at any time in the
Supplemental A Shares Fund, it is necessary or desirable for the
Plan to sell Common Stock, the Trustee shall notify the Company.
At the direction of an Investment Manager, the Trustee shall sell
such Common Stock to the Company for cash. The sales price for
the shares of Common Stock sold to the Company shall be no less
than Fair Market Value on the date of sale as defined in
subsection C-10 of Supplement C, and no commission shall be
charged on such sale. The Company and Trustee shall establish in
writing such rules and procedures regarding such sales as are
required to meet applicable laws.
SUPPLEMENT B
SEARS 401(k) SAVINGS PLAN
Top-Heavy Provisions
B-1 Application. This Supplement B to the Sears 401(k)
Savings Plan shall be applicable on and after the date on which
the Plan becomes Top-Heavy (as described in subsection B-5).
B-2 Effective Date. The Effective Date of the top-heavy
provisions as set forth in this Supplement B is January 1, 1998.
B-3 Definitions. Unless the context clearly implies or
indicates the contrary, a word, term or phrase used or defined in
the Plan is similarly used or defined for purposes of this
Supplement B.
B-4 Affected Participant. For purposes of this Supplement
A, the term "Affected Participant" means each Participant who is
employed by an Employer or a Related Company during any Plan Year
for which the Plan is Top-Heavy; provided, however, that the term
"Affected Participant" shall not include any Participant who is
covered by a collective bargaining agreement if retirement
benefits were the subject of good faith bargaining between his
Employer and his collective bargaining representative.
B-5 Top-Heavy. The Plan shall be "Top-Heavy" for any Plan
Year if, as of the Determination Date for that year (as described
in paragraph (a) next below), the present value of the benefits
attributable to Key Employees (as defined in subsection B-6)
under all Aggregation Plans (as defined in subsection B-9)
exceeds 60% of the present value of all benefits under such
plans. The foregoing determination shall be made in accordance
with the provisions of section 416 of the Code. Subject to the
preceding sentence:
(a) The Determination Date with respect to any plan for
purposes of determining Top-Heavy status for any plan
year of that plan shall be the last day of the
preceding plan year or, in the case of the first plan
year of that plan, the last day of that year. The
present value of benefits as of any Determination Date
shall be determined as of the accounting date or
valuation date coincident with or next preceding the
Determination Date. If the plan years of all
Aggregation Plans do not coincide, the Top-Heavy status
of the Plan on any Determination Date shall be
determined by aggregating the present value of Plan
benefits on that date with the present value of the
benefits under each other Aggregation Plan determined
as of the Determination Date of such other Aggregation
Plan which occurs in the same calendar year as the
Plan's Determination Date.
(b) Benefits under any plan as of any Determination Date
shall include the amount of any distributions from that
plan made during the plan year which includes the
Determination Date (including distributions under a
terminated plan which, if it had not been terminated,
would have been included in an aggregation group) or
during any of the preceding four plan years, but shall
not include any amounts attributable to employee
contributions which are deductible under section 219 of
the Code, any amounts attributable to employee-
initiated rollovers or transfers made after December
31, 1983 from a plan maintained by an unrelated
employer, or, in case of a defined contribution plan,
any amounts attributable to contributions made after
the Determination Date unless such contributions are
required by section 412 of the Code or are made for the
plan's first plan year.
(c) Benefits attributable to a participant shall include
benefits paid or payable to a beneficiary of the
participant, but shall not include benefits paid or
payable to any participant who has not performed
services for an Employer or Related Company during any
of the five plan years ending on the applicable
Determination Date; provided, however, that if a
participant performs no services for five years and
then performs services, the benefits attributable to
such participant shall be included.
(d) The accrued benefit of any participant who is a Non-Key
Employee with respect to a plan but who was a Key
Employee with respect to such plan for any prior plan
year shall not be taken into account.
(e) The accrued benefit of a Non-Key Employee shall be
determined under the method which is used for accrual
purposes for all plans of the Employer and Related
Companies; or, if there is no such method, as if the
benefit accrued not more rapidly than the slowest
accrual rate permitted under section 411(b)(1)(C) of
the Code.
(f) The present value of benefits under all defined benefit
plans shall be determined on the basis of a 7.5% per
annum interest factor and the 1951 Group Annuity
Projected Mortality Table for Males, with a one-year
setback.
B-6 Key Employee. The term "Key Employee" means an
employee or deceased employee (or beneficiary of such deceased
employee) who is a Key Employee within the meaning ascribed to
that term by section 416(i) of the Code. Subject to the
preceding sentence, the term Key Employee includes any employee
or deceased employee (or beneficiary of such deceased employee)
who at any time during the plan year which includes the
Determination Date or during any of the four preceding plan years
was:
(a) an officer of any Employer or Related Company with
Compensation for that year in excess of 50 percent
of the amount in effect under section 415(b)(1)(A)
of the Code for the calendar year in which that
year ends; provided, however, that the maximum
number of employees who shall be considered Key
Employees under this paragraph (a) shall be the
lesser of 50 or 10% of the total number of
employees of the Employers and the Related
Companies disregarding any excludable employees
under Code section 414(q)(8).
(b) one of the 10 employees owning the largest
interests in any Employer or any Related Company
(disregarding any ownership interest which is less
than 1/2 of one percent), excluding any employee for
any plan year whose Compensation for that year did
not exceed the applicable amount in effect under
section 415(c)(1)(A) of the Code for the calendar
year in which that year ends;
(c) a 5% owner of any Employer or of any Related
Company; or
(d) a 1% owner of any Employer or any Related Company
having Compensation for that year in excess of
$150,000.
B-7 Compensation. The term "Compensation" for purposes of
this Supplement B generally means compensation within the meaning
of section 415(c)(3) for that year, not exceeding the maximum
amount permitted for any year under Code section 401(a)(17).
However, for Plan Years beginning on or after January 1, 1989,
solely for purposes of determining who is a Key Employee, the
term "Compensation" means compensation as defined in Code section
414(q)(7).
B-8 Non-Key Employee. The term "Non-Key Employee" means
any employee (or beneficiary of a deceased employee) who is not a
Key Employee.
B-9 Aggregation Plan. The term "Aggregation Plan" means
the Plan and each other retirement plan (including any terminated
plan) maintained by an Employer or Related Company which is
qualified under section 401(a) of the Code and which:
(a) during the plan year which includes the applicable
Determination Date, or during any of the preceding four
plan years, includes a Key Employee as a participant;
(b) during the plan year which includes the applicable
Determination Date or, during any of the preceding four
plan years, enables the Plan or any plan in which a Key
Employee participates to meet the requirements of
section 401(a)(4) or 410 of the Code; or
(c) at the election of the Employer, would meet the
requirements of sections 401(a)(4) and 410 if it were
considered together with the Plan and all other plans
described in paragraphs (a) and (b) next above.
B-10 Required Aggregation Plan. The term "Required
Aggregation Plan" means a plan described in either paragraph (a)
or (b) of subsection B-9.
B-11 Permissive Aggregation Plan. The term "Permissive
Aggregation Plan" means a plan described in paragraph (c) of
subsection B-9.
B-12 Vesting. For any Plan Year during which the Plan is
Top-Heavy, the Account balances of each Affected Participant who
has completed at least three Years of Service shall be 100%
vested. If the Plan ceases to be Top-Heavy for any Plan Year,
the provisions of this subsection B-12 shall continue to apply to
any Affected Participant who had completed at least 3 Years of
Service prior to such Plan Year.
B-13 Minimum Contribution. For any Plan Year during which
the Plan is Top-Heavy, the minimum amount of Employer
contributions, excluding elective contributions as defined in
Code section 401(k), allocated to the Accounts of each Affected
Participant who is employed by an Employer or Related Company on
the last day of that year who is a Non-Key Employee and who is
not entitled to a minimum benefit for that year under any defined
benefit Aggregation Plan which is top-heavy nor is entitled to a
minimum contribution for that year under any other defined
contribution Aggregation Plan maintained by the Employer shall,
when expressed as a percentage of the Affected Participant's
Compensation for that year, be equal to the lesser of:
(a) 3%; or
(b) the percentage at which Employer contributions
(including Employer contributions made pursuant to a
cash or deferred arrangement) are allocated to the
Accounts of the Key Employee for whom such percentage
is greatest.
For purposes of the preceding sentence, compensation
earned while a member of a group of employees to whom
the Plan has not been extended shall be disregarded.
Paragraph (b) next above shall not be applicable for
any Plan Year if the Plan enables a defined benefit
plan described in paragraph B-9(a) or B-9(b) to meet
the requirements of section 401(a)(4) or 410 for that
year. Employer contributions for any Plan Year during
which the Plan is Top-Heavy shall be allocated first to
Non-Key Employees until the requirements of this
subsection B-13 have been met and, to the extent
necessary to comply with the provisions of this
subsection B-13, additional contributions shall be
required of the Employers.
B-14 Aggregate Benefit Limit. For any Plan Year during
which the Plan is Top-Heavy, paragraphs (2)(B) and (3)(B) of
section 415(e) of the Code shall be applied by substituting "1.0"
for "1.25".
SUPPLEMENT C
SEARS 401(k) SAVINGS PLAN
Employee Stock Ownership Plan (ESOP) Portion of the Plan
C-1 Purpose. The purpose of this Supplement C to the Plan
is to set forth the terms of the Plan as applied to the portion
of the ESOP attributable to ESOP Loans as described in subsection
C-4.
C-2 Effective Date. The effective date of this Supplement
C is December 20, 1989.
C-3 Participation. Each Participant in the Plan on the
Effective Date of this Supplement C shall immediately become a
Participant in this Supplement C. Every other person who
thereafter becomes a Participant in the Plan shall at the same
time become a Participant in this Supplement C.
C-4 ESOP Loans. The Trustee is authorized to incur debt
(an "ESOP Loan") for the purpose of acquiring Common Stock or for
the purpose of repaying all or any portion of any outstanding
ESOP Loan. The terms of any ESOP Loan shall be subject to the
conditions and restrictions set forth in the applicable
provisions of the trust agreement or agreements between the
Company and the Trustee. Common Stock acquired with the proceeds
of an ESOP Loan ("ESOP Common Stock") shall be credited to a
"Suspense Account" within the Company Stock Fund until released
in accordance with subsection C-7. The Plan Administrator shall
maintain or cause to be maintained a subaccount for each
Participant to reflect his interest in the Company Stock Fund
which is attributable to each ESOP Loan.
C-5 ESOP Cash Equivalents. All cash dividends on Common
Stock held in the ESOP which are not allocated to Participants'
Accounts or, in the case of allocated shares, which the Company
directs, are to be used to make payments on ESOP Loans, and all
Employer Contributions made under subsection C-6 with respect to
Plan Years beginning on or after January 1, 1990 shall be
credited to a cash equivalents account pending their application
to ESOP Loan payments. All such dividends and earnings shall be
used to make principal payments on outstanding ESOP Loans to the
extent then due. In the event that the amount of such dividends
and earnings exceeds the amount of principal payable on that
date, the excess shall be applied until exhausted to interest
payable on that date, and principal and interest payments due
thereafter. Notwithstanding the preceding sentences of this
subsection C-5, in lieu of making payments on outstanding ESOP
Loans, the Investment Committee may direct that all or any amount
of cash dividends received with respect to Common Stock held in
the ESOP allocated to Participants' Accounts shall be credited
proportionately to such Participants' Accounts pending investment
in the Company Stock Fund. Any amount that is applied to make a
payment on an outstanding ESOP Loan after the last day of a Plan
Year (the "prior Plan Year"), but on or before the due date
(including extensions thereof) for the filing of the federal
income tax return of the Company for the tax year in which the
last day of such prior Plan Year occurs, may be designated by the
Employers as a payment with respect to such prior Plan Year.
C-6 Employer Contribution. For each Plan Year beginning on
or after January 1, 1990, the Employers shall make contributions
under this subsection C-6 which, after taking into account the
use of dividends and earnings in accordance with subsection C-5,
are sufficient to meet all scheduled payments of principal and
interest on outstanding ESOP Loans. In addition to the foregoing
contributions, in any Plan Year, the Employers may make
supplemental contributions to be used by the Trustee to prepay
any ESOP Loan, to pay expenses of the Plan and any related trust
and to satisfy the dividend-replacement requirements for that
year with respect to ESOP Common Stock allocated to Participants'
Accounts. All Employer Contributions for Plan Years beginning on
or after January 1, 1990 shall be used to make payments on ESOP
Loans to the extent required to meet any scheduled payments of
principal and interest after taking into account the use of
dividends and earnings in accordance with subsection C-5.
C-7 Release of ESOP Common Stock From Suspense Account. As
of the last day of each calendar quarter throughout the duration
of an ESOP Loan, a portion of the ESOP Common Stock acquired with
the proceeds of such ESOP Loan shall be withdrawn from the
Suspense Account. Such ESOP Common Stock released for a Plan
Year shall be allocated to eligible Participants' Accounts in
accordance with the provisions of subsection C-8.
(a) Subject to the provisions of paragraph (b) below,
the number of shares of ESOP Common Stock which
shall be released from the Suspense Account for
any Plan Year (calculated separately with respect
to each ESOP Loan) shall be equal to the product
of:
(i) the number of shares of ESOP Common Stock
acquired with the proceeds of the ESOP Loan
which are then held in the Suspense Account;
MULTIPLIED BY
(ii) a fraction, the numerator of which is the
amount of principal and interest paid on that
loan for that Plan Year and the denominator
of which is the amount of principal and
interest paid or payable on that loan for
that Plan Year and for all future years.
For purposes of determining the fraction in
(ii), if the interest rate under the ESOP
Loan is variable, the interest rate to be
paid in future years shall be assumed to be
equal to the interest rate applicable as of
the last day of the Plan Year, and if an ESOP
Loan is refinanced, the numerator in such
fraction shall not include the proceeds of
the second loan used to make principal and
interest payments on the first loan (that is,
the loan being refinanced).
(b) Notwithstanding the provisions of paragraph (a)
above, if provided by the terms of an ESOP Loan or
directed by the Investment Committee prior to the
first payment of principal or interest on any ESOP
Loan, the number of shares of ESOP Common Stock
attributable to such ESOP Loan which are withdrawn
from the Suspense Account for any Plan Year shall
be proportionate to principal payments only,
provided that:
(i) such withdrawal is consistent with the
provisions of the ESOP Loan with respect to
the release of shares of ESOP Common Stock as
collateral, if any, for such loan;
(ii) the ESOP Loan provides for annual payments of
principal and interest at a cumulative rate
that is not less rapid at any time than level
annual payments of such amounts for ten
years;
(iii) interest is disregarded for purposes of
determining such release only to the extent
that it would be determined to be interest
under standard loan amortization tables; and
(iv) the term of the ESOP Loan, together with any
renewal, extension or refinancing thereof,
does not exceed ten years.
In the event that more than one ESOP Loan is outstanding at any
time, the number of shares of Common Stock that are released from
encumbrance at any time under this Section shall be based solely
on the repayment of the ESOP Loan to which such shares of Common
Stock are attributable. In addition, if an ESOP Loan is
refinanced, the numerator in the fraction described in paragraph
(a) above shall not include the proceeds from the second ESOP
Loan used to make payments of principal and interest on the first
ESOP Loan.
C-8 Allocation and Crediting of ESOP Common Stock to
Participants' Accounts and Application to Plan Limitations.
Shares of ESOP Common Stock released from the Suspense Account
during any Plan Year shall be allocated and credited as follows:
(a) To the extent that dividends on Common Stock
previously allocated to the Accounts of a
Participant have been used to make payments on an
ESOP Loan, such Accounts shall be credited with
newly-released shares of ESOP Common Stock with a
Fair Market Value determined as of the last day of
the month preceding the month of the dividend
payment date equal to the amount of such dividend.
(b) As of the last day of each calendar quarter within
a Plan Year, any shares of ESOP Common Stock
released from the Suspense Account that are
attributable to payments made on ESOP Loans that
are designated as payments with respect to that
calendar quarter pursuant to subsection C-5 and
not credited in accordance with paragraph (a)
shall be contingently allocated to the Accounts of
eligible Participants as of the last day of such
calendar quarter in proportion to the allocation
described in the first sentence of paragraph
7.3(b) (without regard to the reduction described
at clause 7.3(b)(ii)), provided that if a
Participant receiving such a contingent quarterly
allocation during the Plan Year fails to meet the
requirements of subsection 5.5 as of the last day
of the Plan Year, any amounts contingently
allocated hereunder during such Plan Year shall
further reduce Employer Contributions required at
subsection 5.1 and shall be allocated in
accordance with subsection 5.5 and any
corresponding dividends (or dividend replacements
under this Supplement C) shall be forfeited.
(c) For purposes of subsection 8.3 of the Plan, the
Employer Contribution for any Plan Year which is
utilized to make any payment of principal or
interest on an ESOP Loan shall be deemed to have
been allocated among Participants in the same
ratios as the number of shares of ESOP Common
Stock released from the Suspense Account are
credited in accordance with paragraph (b) above,
without regard to the value of the shares of ESOP
Common Stock released from the Suspense Account.
(d) All ESOP Common Stock allocated to Participants in
accordance with paragraph (b) above shall be
treated as Employer Contributions for purposes of
subsection 5.1 and 8.9 and as matching
contributions for purposes of section 401(m) of
the Code.
C-9 Transfer Elections by Participants. Notwithstanding
any more restrictive provision of the Plan to the contrary, a
qualified Participant (as defined below) may make the elections
as set forth in this subsection C-9.
(a) A qualified Participant during each of his
qualified election periods (as defined below), may
elect to transfer not more than 25 percent (50
percent in the case of his last qualified election
period) of the sum of his entire interest in the
ESOP portion of the Plan plus his prior transfers
(or, prior to January 1, 1998, withdrawals) under
this subsection C-9, excluding any Employer
Contributions (or the earnings thereon)
contingently allocated under paragraph 7.3(b);
provided, however, that the portion of a
Participant's ESOP interest that is subject to
election under this paragraph for any qualified
election period shall be reduced by the portion of
his ESOP interest that was previously transferred
(or withdrawn) pursuant to this subsection C-9.
(b) Any election made in accordance with the
provisions of paragraph (a) next above with
respect to any qualified election period shall be
given effect not later than 90 days after the end
of that qualified election period.
(c) Any election required under this subsection shall
be made in such manner as the Plan Administrator
may require.
(d) For purposes of this subsection, the term
"qualified Participant" means an employee who has
completed at least ten years of participation in
the ESOP, commencing on or after January 1, 1983,
and has attained at least age 55.
(e) For purposes of this subsection, "qualified
election periods" shall include the 90-day period
immediately following the last day of the first
Plan Year in which the Participant becomes a
qualified Participant, and the 90-day period
following each of the five subsequent Plan Years.
(f) The provisions of this subsection C-9 shall not
apply to any Participant if the value of the
Common Stock allocated to such Participant in the
ESOP portion of the Plan (determined as of the end
of the month immediately preceding the first day
on which the participant would otherwise be
entitled to make an election under this
subsection) is $500 or less.
C-10 Fair Market Value. For purposes of this Supplement C,
the Fair Market Value of a share of Common Stock as of any date
means the closing price of a share of such stock on that date as
reported on the New York Stock Exchange, unless such date is not
a trading date, in which case it means the closing price as
reported on the next preceding trading date.
C-11 Sale of ESOP Common Stock to the Company. If, because
of distributions, withdrawals or transfers involving ESOP Common
Stock, it is necessary or desirable for the Plan to sell Common
Stock, the Trustee shall notify the Company. At the timely
direction of an Investment Manager, the Trustee shall sell such
Common Stock to the Company for cash. The sales price for the
shares of Common Stock sold to the Company shall be no less than
Fair Market Value on the date of sale as defined in subsection C-
10, and no commission shall be charged on such sale. The Company
and Trustee shall establish in writing such rules and procedures
regarding such sales as are required to meet applicable laws.
SUPPLEMENT D
SEARS 401(k) SAVINGS PLAN
Spray-Tech, Inc.
D-1 Application. This Supplement D to the Sears 401(k)
Savings Plan (the "Plan") describes the special provisions
relating to employees of Spray-Tech, Inc. that have been adopted
by the Company as a part of its extension of the Plan to Spray-
Tech, Inc. ("Spray-Tech") employees. Pursuant to this Supplement
D, Spray-Tech is a participating Employer in the Plan as of the
Effective Date defined at subsection D-2.
D-2 Effective Date. The Effective Date of this Supplement
shall be October 1, 1998, except as otherwise indicated.
D-3 Definitions. Unless the context clearly implies or
indicates the contrary, a word, term or phrase used or defined in
the Plan is similarly used or defined for purposes of this
Supplement D.
D-4 Immediate Eligibility. Each employee of Spray-Tech on
the Effective Date who (I) was an active participant in the
Spray-Tech, Inc. 401(k) Plan immediately prior to its termination
in April of 1998 or (ii) was eligible to participate in the
Spray-Tech, Inc. 401(k) Plan prior to its termination and had
attained age 21 as of the Effective Date.
D-5 Past Service Credit for Eligibility. As of October 1,
1998, each Spray-Tech employee who is actively employed by Spray-
Tech on that date and who was actively employed by Spray-Tech
immediately after the date of acquisition of Spray-Tech by the
Company, shall be credited for purposes of eligibility to
participate in the Plan with his service from his date of hire by
Spray-Tech. An employee's service with Spray-Tech prior to its
acquisition by the Company shall be calculated in accordance with
the provisions of Section 2 of the Plan, as if applicable to
Spray-Tech prior to the acquisition
SUPPLEMENT E
SEARS 401(k) SAVINGS PLAN
Sears Carpet and Upholstery Care, Inc.
E-1 Application. This Supplement E to the Sears 401(k)
Savings Plan (the "Plan") describes the special provisions
relating to employees of Sears Carpet and Upholstery Care, Inc.
("Sears Carpet") that have been adopted by the Company as part of
its extension of the Plan to Sears Carpet. Pursuant to this
Supplement E, Sears Carpet is a participating Employer in the
Plan as of the Effective Date as defined at subsection E-2
hereof.
E-2 Effective Date. The Effective Date of this Supplement
shall be January 1, 1999.
E-3 Definitions. Unless the context clearly implies or
indicates the contrary, a word, term or phrase used or defined in
the Plan is similarly used or defined for purposes of this
Supplement E.
E-4 Past Service Credit for Eligibility. As of the
Effective Date, each Employee who is actively employed by Sears
Carpet on that date and who was actively employed by Sears Carpet
immediately after the date of the acquisition of Sears Carpet by
the Company, shall be credited for purposes of eligibility to
participate in the Plan with his service from date of hire with
Sears Carpet. An employee's service with Sears Carpet prior to
its acquisition by the Company shall be calculated in accordance
with the provisions of Section 2 of the Plan, as if applicable to
Sears Carpet prior to the acquisition.
SUPPLEMENT F
SEARS 401(k) SAVINGS PLAN
MaxServ, Inc.
F-1 Application. This Supplement F to the Sears 401(k)
Savings Plan (the "Plan") describes the special provisions
relating to employees of MaxServ, Inc. ("MaxServ") that have been
adopted by the Company as part of its extension of the Plan to
MaxServ. Pursuant to this Supplement F, MaxServ is a
participating Employer in the Plan as of the Effective Date as
defined at subsection F-2 hereof.
F-2 Effective Date. The Effective Date of this Supplement
shall be January 1, 1999.
F-3 Definitions. Unless the context clearly implies or
indicates the contrary, a word, term or phrase used or defined in
the Plan is similarly used or defined for purposes of this
Supplement F.
F-4 Immediate Eligibility. On the Effective Date, each
MaxServ employee who was eligible to participate in the MaxServ,
Inc. Retirement Savings Plan immediately after the date of
acquisition of MaxServ by the Company, and who is an employee of
the Company on December 1, 1998, shall be eligible to participate
in the Plan on January 1, 1999.
F-5 Past Service Credit for Eligibility. As of the
Effective Date, each Employee who is actively employed by MaxServ
on that date and who was actively employed by MaxServ immediately
after the acquisition of MaxServ by the Company shall be credited
for purposes of eligibility to participate in the Plan with his
service with MaxServ from his date of hire (or January 1, 1997 if
later). An employee's service with MaxServ prior to its
acquisition by the Company shall be calculated in accordance with
the provisions of Section 2 as if applicable to MaxServ prior to
the acquisition.
F-6 Merger. Effective as of March 31, 2000 (the "Merger
Date"), the MaxServ, Inc. Retirement Savings Plan will be merged
into the Plan. The accounts transferred from the MaxServ, Inc.
Retirement Savings Plan and earnings attributable thereto (the
"MaxServ Accounts") will be accounted for separately under the
Plan. Spousal consent shall not be required with respect to any
distribution or withdrawal from the MaxServ Accounts under the
Plan.
F-7 Vesting, Forfeitures and Repayments. In the case of a
Participant who is employed by MaxServ on the Merger Date or who
terminated employment with MaxServ within five years prior to the
Merger Date and had not yet taken a distribution of any portion
of his accounts under the MaxServ, Inc. Retirement Savings Plan,
his entire accounts under the MaxServ, Inc. Retirement Savings
Plan that were transferred to the Plan shall be 100% vested upon
the date of transfer. In the case of a Participant whose
employment with MaxServ terminated prior to the Merger Date, who
was partially vested at that time and who elected to take a
distribution of the vested portion of his accounts, the balance
of his accounts under the MaxServ, Inc. Retirement Savings Plan
shall continue to be subject to the vesting schedule of the
MaxServ, Inc. Retirement Savings Plan and those provisions
relating to vesting, forfeitures and the restoration of
forfeitures, (as in effect on the date of the individual's
termination of employment) subject to the modification described
in the following paragraph.
In the event that a Participant who (i) terminated
employment prior to the Merger Date and (ii) received a
distribution of the then vested portion of his account balance,
is rehired by the Company prior to the fifth anniversary of his
separation from service date, the Participant will have
recredited to his accounts the balance without interest (if any)
which he forfeited on his prior termination of employment and
shall be immediately 100% vested in such restored amounts but
only if the Participant repays the full amount, if any,
distributed to him before the earlier of five (5) years after the
date the Participant is rehired or the close of the first period
of five (5) consecutive 1-year Breaks in Service starting after
the distribution.
F-8 Loans. All outstanding loans made to participants
under the MaxServ, Inc. Retirement Savings Plan prior to the
Merger Date will be transferred to the Plan and participants
shall continue to make repayments under the loans. No new loans
will be permitted under the terms of the Plan.
SUPPLEMENT G
SEARS 401(k) SAVINGS PLAN
Sears Logistics Services, Inc.
Subsidiaries
G-1 Application. This Supplement G to the Sears 401(k)
Savings Plan (the "Plan") applies to employees of the following
subsidiaries of Sears Logistics Services, Inc. (the "SLS
subsidiaries") which are participating Employers in the Plan as
of the Effective Date (as defined at subsection G-2): Customized
Delivery Services, Delano Logistics Services, Inc., Optimum Home
Delivery Service, Inc., STG Logistics, Inc., Wilkes Barr
Logistics Services, Inc. and Focus Distribution, Inc. and
describes the special provisions relating to employees of the SLS
subsidiaries that have been adopted by the Company as part of its
extension of the Plan to the SLS subsidiaries.
G-2 Effective Date. The Effective Date of this Supplement
shall be January 1, 1999.
G-3 Definitions. Unless the context clearly implies or
indicates the contrary, a word, term or phrase used or defined in
the Plan is similarly used or defined for purposes of this
Supplement G.
G-4 Waiver of Age Eligibility Requirement. Each employee
of the SLS subsidiaries who (i) was an active participant in the
Sears Logistics Services, Inc. 401(k) Plan for Participating
Subsidiaries (the "SLS 401(k) Plan") on December 31, 1998, or
(ii) was eligible to participate in the SLS 401(k) Plan and had
attained age 21 as of the Effective Date, shall be immediately
eligible to participate in the Plan on the Effective Date.
G-5 Past Service Credit for Eligibility. As of the
Effective Date, each Employee who is actively employed by an SLS
subsidiary on that date and who was actively employed by an SLS
subsidiary immediately after the date of acquisition of the SLS
subsidiaries by the Company, shall be credited for purposes of
eligibility to participate in the Plan with his service from his
date of hire with the SLS subsidiaries. An employee's service
with the SLS subsidiaries prior to their acquisition by the
Company shall be calculated in accordance with the provisions of
Section 2 of the Plan, as if applicable to the SLS subsidiaries
prior to the acquisition.
G-6. Merger. Effective February 29, 2000, the ("the Merger
Date") the SLS 401(k) Plan will be merged into the Plan. The
accounts transferred from the SLS 401(k) Plan and any earnings
attributable thereto ("the SLS Accounts") shall be separately
accounted for under the Plan and the following distribution
provisions shall apply thereto. The provisions of this
subsection G-6 shall not apply to any amounts under the Plan
except the SLS Accounts.
a) Unless a qualified election of an optional form of
benefit has been made within the election period, the
automatic form of benefit for an SLS Account payable to
or on behalf of a Participant is determined as follows:
(i) The automatic form of retirement benefit for a
Participant who does not die before his Annuity
Starting Date shall be the Qualified Joint and
Survivor Form. Qualified Joint and Survivor Form
means, for a Participant who has a spouse, an
immediate survivorship life annuity with installment
refund purchased from an insurance company with the
Participant's vested SLS Accounts, where the
survivorship percentage is 50% and the Contingent
Annuitant is the Participant's spouse. A former
spouse will be treated as the spouse to the extent
provided under a qualified domestic relations order
as described in Code Section 414(p). If a
Participant does not have a spouse, the Qualified
Joint and Survivor Form means a single life annuity
purchased from an insurance company with the
Participant's vested SLS Accounts.
The amount of benefit payable under the Qualified
Joint and Survivor Form shall be the amount of
benefit which may be provided by the Participant's
vested SLS Accounts.
(ii) The automatic form of death benefit for a
Participant who dies before his Annuity Starting Date
shall be:
(i) A Qualified Preretirement Survivor
Annuity (sometimes referred to as a "QPSA") for a
Participant who has a spouse to whom he has been
continuously married throughout the one-year
period ending on the date of his death. The
spouse may elect to start receiving the death
benefit on any first day of the month on or after
the Participant dies and before the date the
Participant would have been age 70 1/2. Qualified
Preretirement Survivor Annuity means a single life
annuity with installment refund purchased from an
insurance company with the Participant's vested
SLS Accounts payable to the surviving spouse of a
Participant who dies before his Annuity Starting
Date. A former spouse will be treated as the
surviving spouse to the extent provided under a
qualified domestic relations order and described
in Code Section 414(p).
(ii) A single-sum payment to the
Participant's Beneficiary for a Participant who
does not have a spouse who is entitled to a
Qualified Preretirement Survivor Annuity or for
whom the QPSA has been waived.
b) The optional forms of retirement benefit shall be the
following: a straight life annuity; single life
annuities with periods certain of five, ten or fifteen
years: a single life annuity with installment refund:
survivorship life annuities with installment refund and
survivorship percentages of 50, 66 2/3, or 100: and
fixed period annuities for any period of whole months
which is not less than 60 and does not exceed the life
expectancy of the Participant and the named Beneficiary
where the life expectancy is not recalculated. The
foregoing forms of payment are available only in the
form of an annuity contract purchased from an insurance
company with the Participant's account balance. A
Participant may also elect a series of installments
chosen by the Participant with a minimum payment each
year beginning with the year the Participant turns age
70 1/2. The payment for the first year in which a
minimum payment is required will be made by April 1 of
the following calendar year. The payment for the second
year and each successive year will be made by December
31 of that year. The minimum payment will be based on a
period equal to the joint and last survivor expectancy
of the Participant and the Participant's spouse, if any,
where the joint and last survivor expectancy is
recalculated. The balance of the Participant's vested
SLS Account, if any, will be payable on the
Participant's death to his Beneficiary in a single sum.
The participant may also elect to receive his vested
account in a single-sum payment. Election of an
optional form is subject to the qualified election
provisions of paragraph (f) below.
Any annuity contract distributed shall be
nontransferable. The terms of any annuity contract
purchased and distributed by the Plan to a participant
or spouse shall comply with the requirements of this
Plan.
c) If a Participant's Beneficiary is his spouse, his
account balance shall be paid to his spouse in the form
of a QPSA unless the spouse elects to receive a lump sum
distribution. The form of death benefit for all other
Beneficiaries is a lump sum distribution.
d) The requirements of this subsection G-6 shall apply to
any distribution of a Participant's interest in an SLS
Account and will take precedence over any inconsistent
provisions of this Plan. All distributions required
under this section shall be determined and made in
accordance with the proposed regulations under Code
Section 401(a)(9), including the minimum distribution
incidental benefit requirement of section 1.401(a)(9)-2
of the proposed regulations.
e) Death distribution provisions:
i) Distribution beginning before death. If the
Participant dies after distribution of his interest
has begun, the remaining portion of such interest
will continue to be distributed at least as rapidly
as under the method of distribution being used prior
to the Participant's death.
ii) Distribution beginning after death. If the
Participant dies before distribution of his interest
begins, distribution of the Participant's entire
interest shall be made in a lump sum to the
Participant's Beneficiary as soon as practicable
after the Participant's death subject to the
following exception:
If the Designated Beneficiary is the Participant's
surviving spouse, the date distributions are required
to begin shall not be earlier than the later of
1) December 31 of the calendar year immediately
following the calendar year in which the
Participant died and
2) December 31 of the calendar year in which the
Participant would have attained age 70 1/2.
f) Qualified Election. With respect to retirement
benefits, the Participant may (i) elect to waive the
Qualified Joint and Survivor Form and/or (ii) designate
a Beneficiary other than his spouse at any time during
the relevant election period subject to the provisions
below. With respect to death benefits, the Participant
may waive the QPSA (in favor of another Beneficiary) at
any time during the relevant election period subject to
and in accordance with the relevant provisions below.
The Participant may revoke the election made (or make a
new election) at any time and any number of times during
the election period. An election is effective only if
it meets the consent requirements below.
If the Participant's vested SLS Account has at any time
exceeded $3,500, any benefit which is (1) immediately
distributable or (2) payable in a form other than a
Qualified Joint and Survivor Form, requires the consent
of the Participant and the Participant's spouse. The
consent to waive the Qualified Joint and Survivor Form
shall not be made more than 90 days before the Annuity
Starting Date. Spousal consent is not required for a
benefit which is immediately distributable in a
Qualified Joint and Survivor Form. Neither the consent
of the Participant nor the Participant's spouse shall be
required to the extent that a distribution is required
to satisfy the Code Section 401(a)(9) or Code Section
415. If the Qualified Joint and Survivor Form is
waived, the spouse has the right to consent only to a
specific Beneficiary or a specific form of benefit. The
spouse can relinquish one or both such rights. Such
consent shall be made in writing.
A Participant may make an election as to death benefits,
with his spouse's consent, designating a Beneficiary
other than his spouse at any time before he dies but not
before the date he is provided with the notice of the
ability to waive the Qualified Preretirement Survivor
Annuity. A Participant's election to waive the
Qualified Preretirement Survivor Annuity which is made
before the first day of the Plan Year in which he
reaches age 35 shall become invalid on such date. If
the Qualified Preretirement Survivor Annuity is waived
by the Participant, the spouse has the right to limit
consent only to a specific Beneficiary. Such consent
shall be in writing.
For purposes of both retirement benefits and death
benefits, the spouse's consent shall be witnessed by a
plan representative or notary public. The spouse's
consent must acknowledge the effect of the election,
including that the spouse had the right to limit consent
only to a specific Beneficiary or a specific form of
benefit, if applicable, and that the relinquishment of
one or both such rights was voluntary. Unless the
consent of the spouse expressly permits designations by
the Participant without a requirement of further consent
by the spouse, the spouse's consent must be limited to
the form of benefit, if applicable and the Beneficiary
(including any Contingent Annuitant), class of
Beneficiaries, or contingent Beneficiary named in the
election. Spousal consent is not required, however, if
the Participant establishes to the satisfaction of the
plan representative that the consent of the spouse
cannot be obtained because there is no spouse or the
spouse cannot be located. A spouse's consent under this
paragraph shall not be valid with respect to any other
spouse. A Participant may revoke a prior election
without the consent of the spouse. Any new election
will require a new spousal consent unless the consent of
the spouse expressly permits such election by the
Participant without further consent by the spouse. A
spouse's consent may be revoked at any time within the
Participant's election period.
G-7. Loans. All outstanding loans made to participants under the
SLS 401(k) plan (or any plan merged into the SLS 401(k)
plan) prior to the Merger Date will be transferred to the
Plan and participants shall continue to make repayments
under the terms of the loans. No new loans will be
permitted under the terms of the Plan.
SUPPLEMENT H
SEARS 401(k) SAVINGS PLAN
Sears Home Improvement Products
H-1 Application. This Supplement H to the Sears 401(k)
Savings Plan (the "Plan") describes the special provisions
relating to employees of Sears Home Improvement Products that
have been adopted by the Company as part of the extension of the
Plan to Sears Home Improvement Products. Pursuant to this
Supplement H, Sears Home Improvement Products is a participating
Employer in the Plan as of the Effective Date as defined at
subsection H-2 hereof).
H-2 Effective Date. The Effective Date of this Supplement
shall be July 1, 1999.
H-3 Definitions. Unless the context clearly implies or
indicates the contrary, a word, term or phrase used or defined in
the Plan is similarly used or defined for purposes of this
Supplement H.
H-4 Past Service Credit for Eligibility. As of the
Effective Date, each employee who is actively employed by Sears
Home Improvement Products on that date and who was actively
employed by Sears Home Improvement Products immediately after the
date of its acquisition by the Company, shall be credited for
purposes of eligibility to participate in the Plan with his
service from his date of hire with Sears Home Improvement
Products. An employee's service with Sears Home Improvement
Products prior to its acquisition by the Company shall be
calculated in accordance with Section 2 of the Plan, as if
applicable to Sears Home Improvement Products prior to the
acquisition.
SUPPLEMENT I
SEARS 401(k) SAVINGS PLAN
Orchard Supply Hardware Stores Corporation
I-1 Application. This Supplement I to the Sears 401(k)
Savings Plan (the "Plan") describes the special provisions
relating to employees of Orchard Supply Hardware Stores
("Orchard") that have been adopted by the Company as a part of
the extension of the Plan to Orchard. Pursuant to this
Supplement I, Orchard is a participating Employer in the Plan as
of the Effective Date (as defined at subsection I-2 hereof). On
September 1, 1999, the Orchard Savings Plan was merged into the
Plan. All account balances in the Orchard Savings Plan,
including account balances of individuals not yet eligible to
participate in the Plan were transferred to the Plan.
I-2 Effective Date. The Effective Date of this Supplement
shall be July 1, 1999, except as otherwise indicated.
I-3 Definitions. Unless the context clearly implies or
indicates the contrary, a word, term or phrase used or defined in
the Plan is similarly used or defined for purposes of this
Supplement I.
I-4 Loans. All outstanding loans made to participants
under the Orchard Savings Plan prior to July 1, 1999, were
transferred to the Plan, and participants shall continue to make
repayments under the terms of the loans. No new loans will be
permitted under the terms of the Plan.
I-5 Vesting, Forfeitures and Repayments. In the case of a
Participant who was employed by Orchard on the date that the
Orchard Savings Plan was merged into the Plan, or who had
terminated employment with Orchard within five years prior to the
merger of the Plans and had not yet taken a distribution of any
portion of his accounts under the Orchard Savings Plan, his
entire accounts under the Orchard Savings Plan that were
transferred to the Plan shall be 100% vested upon the date of
transfer. In the case of a Participant whose employment with
Orchard terminated prior to the date that the Orchard Savings
Plan was merged into the Plan, who was partially vested at that
time and who elected to take a distribution of the vested portion
of his accounts, the balance of his accounts transferred from the
Orchard Savings Plan to the Plan shall continue to be subject to
the vesting, schedule of the Orchard Savings Plan and those
provisions relating to vesting, forfeitures and the restoration
of forfeitures, (as in effect on the date of the individual's
termination of employment) subject to the following modification:
In the event that a Participant who (i) terminated
employment prior to the merger of the Orchard Savings Plan into
the Plan and (ii) received a distribution of the then vested
portion of his account balance, is rehired by the Company prior
to the fifth anniversary of his separation from service date, the
Participant will have recredited to his accounts the balance
without interest (if any) which he forfeited on his prior
termination of employment and shall be immediately 100% vested in
such restored amounts but only if the Participant repays the full
amount, if any, distributed to him before the earlier of five (5)
years after the date the Participant is rehired or the close of
the first period of five (5) consecutive 1-year Breaks in Service
starting after the distribution.
I-6 Final Matching Contribution. A special matching
contribution shall be made to the Plan to be allocated under the
Plan to individuals employed by Orchard Supply Hardware Stores on
June 30, 1999 with respect to their pre-tax contributions for the
period January 1, 1999, through June 30, 1999, in accordance with
the terms of the Orchard Savings Plan, as in effect immediately
prior to the Effective Date, as if June 30, 1999 were the last
day of the plan year of that plan.
I-7 Past Service Credit for Eligibility. As of the
Effective Date, each Employee who is actively employed by Orchard
on that date and who was actively employed by Orchard immediately
after the date of its acquisition by the Company, shall be
credited for purposes of eligibility to participate in the Plan
with his service from his date of hire with Orchard. An
employee's service with Orchard prior to its acquisition by the
Company shall be calculated in accordance Section 2 of the Sears
Plan, as if applicable to Orchard prior to the acquisition.
I-8 Immediate Eligibility. Each employee of Orchard who
has eligible to participate in the Orchard Supply Hardware Stores
401(k) Plan prior to its merger into the Plan and who is employed
by Orchard on the Effective Date shall be immediately eligible to
participate in the Plan on the Effective Date.