Exhibit 10.20
THE ALLSTATE CORPORATION
EMPLOYEES REPLACEMENT STOCK PLAN
As Amended and Restated on November 10, 1998
TABLE OF CONTENTS
Page
1. Purpose...............................................................1
2. Definitions...........................................................1
3. Scope of the Plan.....................................................5
(a) Number of Shares Available Under Plan........................5
(b) Expired or Terminated Awards not Available...................5
(c) Treasury Stock...............................................6
4. Administration........................................................6
(a) Committee Administration.....................................6
(b) Board Reservation and Delegation.............................6
(c) Committee Authority..........................................6
(d) Committee Determinations Final...............................7
5. Eligibility...........................................................7
6. Awards................................................................7
(a) In General...................................................7
(b) Options and Reload Options...................................7
(c) Stock Appreciation Rights....................................9
(d) Restricted Stock............................................10
7. Limitations on Transferability.......................................11
8. Exercise.............................................................12
(a) Exercise of Replacement Options.............................12
(b) Exercise of Replacement Stock Appreciation Rights...........12
(c) Special Rules for Section 16 Grantees.......................12
9. Notification under Section 83(b).....................................12
10. Withholding Taxes....................................................13
(a) Mandatory Withholding.......................................13
(b) Elective Share Withholding..................................13
11. Termination of Employment............................................14
(a) Restricted Stock............................................14
(b) Other Awards................................................14
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12. Securities Law Matters...............................................14
13. No Funding Required..................................................15
14. No Employment Rights.................................................15
15. Rights as a Stockholder..............................................15
16. Nature of Payments...................................................15
17. Non-Uniform Determinations...........................................16
18. Adjustments..........................................................16
19. Amendment of the Plan................................................16
20. Termination of the Plan..............................................16
21. No Illegal Transactions..............................................16
22. Controlling Law......................................................17
23. Severability.........................................................17
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THE PLAN. The Allstate Corporation ("Company") Employees Replacement
Stock Plan (as set forth herein and from time to time amended, the "Plan"), was
adopted by the Company's Board of Directors on January 16, 1995 and was approved
by the Company's stockholders on May 23, 1995. The Plan was amended and restated
by the Board on November 12, 1996, August 14, 1997 and November 10, 1998.
1. PURPOSE. The purpose of the Plan is to provide continuation of benefits
and opportunities provided to former participants in any of the Sears Plans,
which benefits and opportunities were lost, terminated, forfeited, cancelled
(with or without consent of the grantee) or reduced as a result of the
Distribution, by providing for the grant of substitute Awards hereunder.
2. DEFINITIONS.
As used in the Plan, terms defined parenthetically immediately after their
use shall have the respective meanings provided by such definitions and the
terms set forth below shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
(a) "Allstate Group Grantee" means any individual who is employed on
the Distribution Date or who, immediately prior to his most recent Termination
of Employment prior to the Distribution Date, was employed by The Allstate
Corporation or any Allstate Affiliate, as defined in the Separation Agreement,
except The PMI Group, Inc. ("PMI") or any of PMI's subsidiaries.
(b) "Award" means an option, share of restricted Stock, or stock
appreciation right granted under the Plan.
(c) "Award Agreement" means the written agreement by which an Award is
evidenced.
(d) "Board" means the Board of Directors of the Company.
(e) "Change of Control" means any of the following occurring more than
five business days after the Distribution:
(i) the acquisition by any person or group of beneficial
ownership of any of the Stock or the Voting Power of the Company, which
acquisition results in such person or group having beneficial ownership
of 20% or more of either the then-outstanding Stock or Voting Power of
the Company, except that (A) no such person or group shall be deemed to
own beneficially (1) any securities acquired directly from the Company
pursuant to a written agreement with the Company, (2) any securities
held by the Company or a Subsidiary or any employee benefit plan (or
any related trust) of the Company or a Subsidiary, or (3) any
securities acquired directly from any Grantee, except securities
acquired in transactions effected through the facilities of a
registered national
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securities exchange or any automated quotation system of the National
Association of Securities Dealers, Inc., and (B) no Change of Control
shall be deemed to have occurred solely by reason of any such
acquisition by a corporation with respect to which, after such
acquisition, more than 60% of both the then-outstanding common shares
of such corporation and the Voting Power of such corporation are then
beneficially owned, directly or indirectly, by the persons who were
the beneficial owners of the Stock and Voting Power of the Company
immediately before such acquisition in substantially the same
proportion as their ownership, immediately before such acquisition, of
the then-outstanding Stock or the Voting Power of the Company, as the
case may be;
(ii) individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided that any individual who becomes
a director after the Effective Date whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at
least two-thirds of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors
of the Company (as such terms are used in Rule 14a-11 under the 1934
Act); or
(iii) approval by the stockholders of the Company of (A) a
merger, reorganization or consolidation with respect to which the
individuals and entities who were the respective beneficial owners of
the Stock and Voting Power of the Company immediately before such
merger, reorganization or consolidation do not, after such merger,
reorganization or consolidation, beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding common
shares and the Voting Power of the corporation resulting from such
merger, reorganization or consolidation, (B) a liquidation or
dissolution of the Company or (C) the sale or other disposition of all
or substantially all of the assets of the Company; PROVIDED, HOWEVER,
that for the purposes of this clause (iii), the votes of all Section 16
Grantees shall be disregarded in determining whether stockholder
approval has been obtained.
For purposes of this definition, "person" means such term as used in SEC Rule
13d-5(b) under the 1934 Act, "beneficial owner" means such term as defined in
SEC Rule 13d-3 under the 1934 Act, and "group" means such term as defined in
Section 13(d) of the 1934 Act.
Notwithstanding the foregoing, (a) a Change of Control shall be deemed
not to have occurred with respect to any Section 16 Grantee if such Section 16
Grantee is, by agreement (written or otherwise), a participant on such Section
16 Grantee's own behalf in a transaction which causes the Change of Control to
occur; and (b) the Distribution shall not be deemed to be a Change in Control.
(f) "Change of Control Value" means the Fair Market Value of a share of
Stock on the date of receipt of notice of exercise of a limited stock
appreciation right issued to replace a
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limited stock appreciation right granted under a Sears Plan.
(g) "Committee" means the committee of the Board appointed pursuant to
Article 4.
(h) "Company" means The Allstate Corporation, a Delaware corporation.
(i) "Distribution" means the distribution by Sears to holders of Sears
common shares of all of the shares of Stock owned by it.
(j) "Distribution Date" means the date to be determined by the board of
directors of Sears, as of which the Distribution shall be effected.
(k) "Effective Date" means the date described in the first paragraph of
the Plan.
(l) "Fair Market Value" of any security of the Company or any other
issuer (other than Fair Market Value of Stock as of the Distribution Date and
Fair Market Value of a Sears common share as of the Distribution Date) means, as
of any applicable date:
(i) if the security is listed for trading on the New York
Stock Exchange, the mean between the high and low prices of the
security as reported on the New York Stock Exchange Composite Tape, or
if no such reported sale of the security shall have occurred on such
date, on the next preceding date on which there was such a reported
sale, or
(ii) if the security is not so listed, but is listed on
another national securities exchange or authorized for quotation on the
National Association of Securities Dealers Inc.'s NASDAQ National
Market ("NASDAQ/NM"), the closing price, regular way, of the security
on such exchange or NASDAQ/NM, as the case may be, or if no such
reported sale of the security shall have occurred on such date, on the
next preceding date on which there was such a reported sale, or
(iii) if the security is not listed for trading on a national
securities exchange or authorized for quotation on NASDAQ/NM, the
average of the closing bid and asked prices as reported by the National
Association of Securities Dealers Automated Quotation System ("NASDAQ")
or, if no such prices shall have been so reported for such date, on the
next preceding date for which such prices were so reported, or
(iv) if the security is not listed for trading on a national
securities exchange or authorized for quotation on NASDAQ/NM or NASDAQ,
the fair market value of the security as determined in good faith by
the Committee.
Notwithstanding paragraphs (i) through (iv) above, "Fair Market Value" of a
Sears common share as of the Distribution Date shall be the sum of the average
of the high and low per share prices, regular way, of such share as reported on
the New York Stock Exchange Composite Tape on each of the five business days
beginning on and including the tenth business day preceding
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the record date associated with the Distribution ("Record Date"), on which there
was a reported sale of such stock, divided by five (or, if less, the number of
such days on which there was such a reported sale); and "Fair Market Value" of
Stock as of the Distribution Date shall be the sum of the average of the high
and low per share prices, regular way, of the Stock as reported on the New York
Stock Exchange Composite Tape on each of the five business days beginning on and
including the tenth business day preceding the Record Date, on which there was a
reported sale of such stock divided by five (or, if less, the number of such
days on which there was such a reported sale).
(m) "Grant Date" means, except as provided in Article 6, the date on
which the Committee grants the Award or such later date as specified in advance
by the Committee.
(n) "Grantee" means an individual who has been granted an Award.
(o) "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and regulations and rulings thereunder. References to a particular
section of the Internal Revenue Code shall include references to successor
provisions.
(p) "Minimum Consideration" means the $.01 par value per share of the
Stock or such larger amount determined pursuant to resolution of the Board to be
capital within the meaning of Section 154 of the Delaware General Corporation
Law.
(q) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(r) "Option Price" means the per share purchase price of Stock subject
to an option.
(s) "Plan" has the meaning set forth in the introductory paragraph.
(t) "Reload Option" has the meaning set forth in Article 6(b)(ii).
(u) "Retirement" means a Termination of Employment occurring on or
after an individual attains age 65, or a Termination of Employment after an
individual attains age 55 approved by Allstate Insurance Company as an early
retirement, provided that in the case of a Section 16 Grantee, such early
retirement must be approved by the Committee.
(v) "Sears" means Sears, Roebuck and Co., a New York corporation.
(w) "Sears Option" means an option granted under a Sears Plan.
(x) "Sears Plans" means the following plans of Sears: the 1994
Employees Stock Plan, the 1990 Employees Stock Plan, the 1986 Employees Stock
Plan, the 1982 Employees Stock Plan, the 1978 Employees Stock Plan and the 1979
Incentive Compensation Plan.
(y) "Sears Restricted Stock" means restricted shares granted under a
Sears Plan.
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(z) "Sears SAR" means a stock appreciation right, limited stock
appreciation right or tax benefit right granted under a Sears Plan.
(aa) "SEC" means the Securities and Exchange Commission.
(bb) "Section 16 Grantee" means a person subject to potential liability
with respect to equity securities of the Company under Section 16(b) of the 1934
Act.
(cc) "Separation Agreement" means the separation agreement between
Sears and the Company dated as of January ___, 1995.
(dd) "Stock" means common stock of the Company, par value $.01 per
share.
(ee) "Subsidiary" means a corporation as defined in Section 424(f) of
the Internal Revenue Code, with the Company being treated as the employer
corporation for purposes of this definition.
(ff) "10% Owner" means a person who owns stock (including stock treated
as owned under Section 424(d) of the Internal Revenue Code) possessing more than
10% of the total combined voting power of all classes of stock of the Company.
(gg) "Termination of Employment" occurs as of the first day on which an
individual is for any reason no longer employed by the Company or any of its
Subsidiaries, or with respect to an individual who is an employee of a
Subsidiary, the first day on which the Company no longer, directly or
indirectly, owns voting securities possessing at least 50% of the aggregate
Voting Power of such Subsidiary.
(hh) "Voting Power" of a corporation or other entity means the combined
voting power of the then-outstanding voting securities of such corporation or
other entity entitled to vote generally in the election of directors.
3. SCOPE OF THE PLAN.
(a) NUMBER OF SHARES AVAILABLE UNDER PLAN. An aggregate number of shares of
Stock is hereby made available and is reserved for delivery on account of the
exercise of Awards and payment of benefits in connection with Awards equal to
the number of shares of Stock determined pursuant to the formulas set forth in
Article 6 to be required to replace awards under the Sears Plans; provided that
in no event shall the aggregate number of such shares of Stock exceed
4,500,000shares of Stock. Subject to the foregoing limits, shares of authorized
but unissued Stock or shares of Stock held as treasury shares by the Company may
be used for or in connection with Awards.
(b) EXPIRED OR TERMINATED AWARDS NOT AVAILABLE. If and to the extent an
Award shall
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expire or terminate for any reason without having been exercised in full, or
shall be forfeited, regardless of whether, in either case, the Grantee enjoyed
any of the benefits of stock ownership, the shares of Stock (including
restricted Stock) and stock appreciation rights associated with such Award shall
not become available for other Awards.
(c) TREASURY STOCK. The Committee shall have the authority to cause the
Company to purchase from time to time shares of Stock to be held as treasury
shares and used for or in connection with Awards.
4. ADMINISTRATION.
(a) COMMITTEE ADMINISTRATION. Subject to Article 4(b), the Plan shall be
administered by the Committee, which shall consist of not less than three
persons who are appointed by the Board, who are directors of the Company and not
employees of the Company or any of its affiliates. Membership on the Committee
shall be subject to such limitations (including, if appropriate, a change in the
minimum number of members of the Committee) as the Board deems appropriate to
permit transactions pursuant to the Plan to be (1) exempt from potential
liability under Section 16(b) of the 1934 Act, and Rule 16b-3 pursuant thereto,
as in effect both before and after September 1, 1995, or such other date as the
SEC shall determine, and (2) exempt from limitations on deductibility under
Section 162(m) of the Internal Revenue Code.
(b) BOARD RESERVATION AND DELEGATION. The Board may, in its discretion,
reserve to itself or delegate to another committee of the Board any or all of
the authority and responsibility of the Committee with respect to Awards to
Grantees who are not Section 16 Grantees at the time any such delegated
authority or responsibility is exercised. Such other committee may consist of
one or more directors who may, but need not, be officers or employees of the
Company or of any of its Subsidiaries. To the extent that the Board has reserved
to itself or delegated the authority and responsibility of the Committee to such
other committee, all references to the Committee in the Plan shall be to the
Board or such other committee, as the case may be.
(C) COMMITTEE AUTHORITY. The Committee shall have full and final authority,
in its discretion, but subject to the express provisions of the Plan, as
follows:
(i) to grant Awards on or after the Distribution Date as described in
Article 6,
(ii) to determine (A) when Awards may be granted, and (B) whether or
not specific Awards shall be identified with other specific Awards, and if
so, whether they shall be exercisable cumulatively with, or alternatively
to, such other specific Awards,
(iii) to interpret the Plan and to make all determinations necessary
or advisable for the administration of the Plan,
(iv) to prescribe, amend, and rescind rules and regulations relating
to the Plan, including, without limitation, rules with respect to the
exercisability and nonforfeitability
6
of Awards upon the Termination of Employment of a Grantee,
(v) to determine the terms and provisions of the Award Agreements,
which need not be identical and, with the consent (to the extent required
by the Plan) of the Grantee, to modify any such Award Agreement at any
time,
(vi) to accelerate the exercisability of, and to accelerate or waive
any or all of the restrictions and conditions applicable to, any Award,
(vii) to make such adjustments or modifications to Awards to Grantees
working outside the United States as are necessary and advisable to fulfill
the purposes of the Plan, and
(viii) to impose such additional conditions, restrictions, and
limitations upon the grant, exercise or retention of Awards as the
Committee may, before or concurrently with the grant thereof, deem
appropriate, including, without limitation, requiring simultaneous exercise
of related identified Awards, and limiting the percentage of Awards which
may from time to time be exercised by a Grantee.
The Committee shall have full and final authority to authorize any
action or make any determination as the Committee shall deem necessary or
advisable for carrying out the purposes of the Plan, including to correct any
defect, supply any omission and reconcile any inconsistency between the Plan and
the awards under the Sears Plans the Plan is intended to replace.
(d) COMMITTEE DETERMINATIONS FINAL. The determination of the Committee
on all matters relating to the Plan or any Award Agreement shall be
conclusive and final. No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
Award.
5. ELIGIBILITY. Awards may be granted to any employee or former employee
(or to the estate of a deceased employee) of the Company or any of its
Subsidiaries to replace any awards granted to such employee, former employee or
deceased employee under a Sears Plan which were terminated, forfeited, cancelled
or reduced (with or without the consent of the Grantee) in connection with the
Distribution.
6. AWARDS.
(a) IN GENERAL. In accordance with its powers under the Plan, the Committee
may grant replacement Awards, including options (including Reload Options),
replacement stock appreciation rights (including replacement stock appreciation
rights replacing limited stock appreciation rights and tax benefit rights) and
replacement restricted stock in accordance with Article 6 to preserve those
opportunities and benefits of Allstate Group Grantees which were terminated,
forfeited, cancelled, or reduced in connection with the Distribution, provided
that no Grantee shall be granted Awards under the Plan with respect to more than
675,000 shares of
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Stock.
(b) OPTIONS AND RELOAD OPTIONs.
(i) GRANT OF REPLACEMENT OPTIONS. Subject to Article 3(a), the Committee
may grant options ("Replacement Options") under the Plan to each Allstate Group
Grantee who holds unexercised Sears Options (whether or not nonforfeitable) at
the Distribution Date; provided that such Allstate Group Grantee's right to
exercise any Sears Options has been forfeited or cancelled in connection with
the Distribution. The Award Agreement with respect to such Replacement Options
shall provide that the Grantee may exercise a Replacement Option at the same
time as he would have been able to exercise the Sears Option it replaces,
subject to Article 8(c), if applicable.
(A) The Option Price for a Replacement Option shall
be determined by the following formula; provided that in no event
shall the Option Price be less than the Minimum Consideration:
Option Price = A x B
------
C
Any fraction of a cent shall be rounded down to the next full cent.
(B) The number of shares of Stock for which the
Replacement Option is exercisable shall be determined in
accordance with the following formula:
Number of shares = C x D
-----
B
Any fractional share shall be rounded up to the next full share.
(C) In the foregoing formulas,
"A" is the option exercise price for a Sears Option being replaced,
"B" is the Fair Market Value of a share of Stock as of the
Distribution Date,
"C" is the Fair Market Value of a Sears common share as of the
Distribution Date, and
"D" is the number of Sears common shares for which the Sears Option
being replaced is exercisable.
(D) Each Replacement Option shall have the same terms
and conditions (other than the Option Price and the number of
shares of Stock, but including any provision for Reload Options)
as, and not give the Grantee any benefits he did not
8
have, under the corresponding Sears Option.
(ii) GRANT OF RELOAD OPTIONS. The Committee may, subject to
Article 3, grant a Reload Option to any Grantee of a Replacement Option
whose Replaced Sears Option included a reload option for Sears shares.
For purposes of the Plan, a "Reload Option" shall mean an option to
purchase a number of shares of Stock granted in connection with the
exercise of the Grantee's Replacement Option (the "Exercised Options")
upon the payment of the Option Price for such Exercised Options with
shares of Stock which have a Fair Market Value equal to not less than
100% of the Option Price for such Exercised Options. The Reload Option
with respect to an Exercised Option shall be for a number of shares of
Stock equal to the number of shares of Stock tendered to exercise the
Exercised Options plus, if so provided by the Committee, the number of
shares of Stock, if any, retained by the Company in connection with the
exercise of the Exercised Options to satisfy any federal, state, or
local tax withholding requirements. Reload Options shall be subject to
the following terms and conditions:
(A) the Grant Date for each Reload Option shall be
the date of exercise of the Exercised Option to which it relates;
(B) the Reload Option may be exercised at any time
during the unexpired term of the Replacement Option to which it
relates (subject to earlier termination thereof as provided in
the Plan and in the applicable Award Agreement); and
(C) the terms of the Reload Option shall be the same
as the terms of the Exercised Option to which it relates, except
that (1) the Option Price shall be the Fair Market Value of the
Stock on the Grant Date of the Reload Option and (2) no Reload
Option may be exercised within one year from the Grant Date
thereof.
(c) STOCK APPRECIATION RIGHTS.
(i) GRANT OF REPLACEMENT SARs. The Committee may grant stock
appreciation rights ("Replacement SARs") under the Plan to each
Allstate Group Grantee who holds unexercised limited stock appreciation
rights, and tax benefit rights (whether or not nonforfeitable) under
the Sears Plans; provided that such Allstate Group Grantee's right to
exercise any Sears SARs has been forfeited or cancelled in connection
with the Distribution. Replacement SARs granted in replacement of Sears
SARs identified with Sears Options shall be equal in number to, and
shall be identified with the Replacement Options granted in replacement
of such Sears Options. The Award Agreement with respect to such
Replacement SARs shall provide that the Grantee may exercise a
Replacement SAR at the same time as if the Grantee had held the
Replacement SAR since the grant date of the Sears SAR it replaces,
subject to the limitations of Article 8(c), if applicable.
(ii) BENEFIT FOR REPLACEMENT LIMITED STOCK APPRECIATION
RIGHTS. The benefit for
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each Replacement SAR granted in replacement of a limited stock
appreciation right ("Replacement LSAR") identified with a Sears Option
shall be equal to the difference between the Change of Control Value
of a share of Stock on the date of exercise of such Replacement SAR
and the Option Price of the related Replacement Option.
(iii) BENEFIT FOR REPLACEMENT TAX BENEFIT RIGHTS. The benefit
for each Replacement SAR granted in replacement of a tax benefit right
("Replacement Tax Benefit Right") identified with a Sears Option shall
be equal to the then applicable maximum statutory federal income tax
rate for corporations (subject to any limitations thereon contained in
the tax benefit right being replaced), multiplied by the amount of
compensation, if any, realized by the Grantee for federal income tax
purposes upon exercise of the related Replacement Option.
(iv) TERMS AND CONDITIONS OF REPLACEMENT SARs. Each
Replacement SAR shall have the same terms and conditions (except as
provided above in this Article 6(c)) as, and not give the Grantee
greater rights than, the corresponding Sears SAR.
(d) RESTRICTED STOCK.
(i) REPLACEMENT RESTRICTED STOCK. The Committee may grant
shares of restricted Stock ("Replacement Restricted Stock") under the
Plan to each Allstate Group Grantee whose Sears Restricted Stock is
forfeited or cancelled in connection with the Distribution. The Award
Agreement with respect to such Replacement Restricted Stock shall
provide that such Replacement Restricted Stock shall become
nonforfeitable at the same time that the Sears Restricted Stock it
replaces would have become nonforfeitable, subject to the limitations
of Article 8(c), if applicable.
(A) The Grantee's basis in the Replacement Restricted
Stock (i.e. the amount of consideration, if any, that shall be
deemed to have been paid by the Grantee for the Replacement
Restricted Stock) shall be determined by the following formula:
E x B
-----
C
The Grantee shall not be required to pay additional
consideration for the grant of Replacement Restricted Stock,
except that the Minimum Consideration shall be paid for any
shares of restricted Stock that are not treasury shares.
(B) The number of shares of Replacement Restricted
Stock to be granted shall be determined by the following formula:
Number of shares = F x C
-----
B
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Any fractional share shall be rounded up to the next full share.
(C) In the foregoing formulas,
"B" is the Fair Market Value of a share of Stock as of
the Distribution Date,
"C" is the Fair Market Value of a Sears common share as
of the Distribution Date,
"E" is the Grantee's average per share basis, if any,
in the Sears Restricted Stock being replaced, and
"F" is the number of shares of Sears Restricted Stock
being replaced.
(D) Each share of Replacement Restricted Stock shall be
substantially the same terms and conditions (other than the
number of shares and the amount of the Grantee's basis therein)
as, and shall not give the Grantee any benefits which he did not
have, under the corresponding Sears Restricted Stock, except as
otherwise provided by the Committee.
(ii) ADDITIONAL CONDITIONS FOR RESTRICTED STOCK.
(A) The Committee may provide that any share of
restricted Stock shall be held (together with a stock power
executed in blank by the Grantee) in escrow by the Secretary of
the Company until such shares become nonforfeitable or are
forfeited or may make such other arrangements for the holding of
shares of restricted stock as it deems appropriate.
(B) If a share of restricted Stock is forfeited such
share of restricted Stock shall cease to be outstanding, and
shall no longer confer on the Grantee thereof any rights as a
stockholder of the Company.
(C) Any share of restricted Stock shall bear an
appropriate legend specifying that such share is non-transferable
and subject to the restrictions set forth in the Plan. If any
shares of restricted Stock become nonforfeitable, the Company
shall cause certificates for such shares to be issued or reissued
without such legend and delivered to the Grantee or, at the
request of the Grantee, shall cause such shares to be credited to
a brokerage account specified by the Grantee.
7. LIMITATIONS ON TRANSFERABILITY. Awards are not transferable by a
Grantee except by will or the laws of descent and distribution; PROVIDED,
HOWEVER, that the Committee shall have
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the authority, in its discretion, to grant (or to sanction by way of amendment
of an existing grant) Replacement Options (other than Replacement Options which
are Incentive Stock Options under Section 422 of the Internal Revenue Code), the
vested portions of which may be transferred by the Grantee during his lifetime
to (a) any member of his immediate family, (b) to a trust established for the
exclusive benefit of himself or one or more members of his immediate family, or
(c) to a partnership, the partners of which are limited to the Grantee and
members of his immediate family. A transfer of an Award may only be effected by
the Company at the written request of a Grantee and shall become effective only
when recorded in the Company=s record of outstanding Awards. In the event an
Award is transferred, any Reload Options associated with such transferred Award
shall terminate, and such transferred Award may not be subsequently transferred
by the transferee except by will or the laws of descent and distribution.
Otherwise, a transferred Award shall continue to be governed by and subject to
the terms and limitations of the Plan and the relevant grant, and the transferee
shall be entitled to the same rights as the Grantee, as if no transfer had taken
place. As used in this paragraph, Aimmediate family@ shall mean, with respect to
any person, his/her spouse, any child, stepchild or grandchild, and shall
include relationships arising from legal adoption.
8. EXERCISE.
(a) EXERCISE OF REPLACEMENT OPTIONS. Subject to Articles 4 and 6, (i) each
Replacement Option shall be exercisable in one or more installments commencing
not earlier than the first anniversary of the grant date of the Sears Option it
replaces, (ii) options shall not be exercisable for twelve months following a
hardship distribution that is subject to Treasury Regulation '
1.401(k)-1(d)(2)(iv)(B)(4), (iii) each option shall be exercised by delivery to
the Company of written notice of intent to purchase a specific number of shares
of Stock subject to the option, (iv) the Option Price of any shares of Stock as
to which an option shall be exercised shall be paid in full at the time of the
exercise, and (v) payment may be made in either one or any combination of the
following, as provided in the Award Agreement:
(I) cash, or
(II) Stock that has been held for at least six months,
valued at the Fair Market Value on the date of exercise.
Shares of Stock acquired by a Grantee on exercise of an option shall be
delivered to the Grantee or, at the request of the Grantee, shall be credited
directly to a brokerage account specified by the Grantee.
(b) EXERCISE OF REPLACEMENT STOCK APPRECIATION RIGHTS. Subject to Articles
4(c)(vi) and 6, (i) each stock appreciation right shall be exercisable not
earlier than the first anniversary of the grant date of the Sears stock
appreciation right it replaces, to the extent the option with which it is
identified, if any, may be exercised, (ii) replacement LSARs shall become fully
exercisable upon the occurrence of a Change of Control and shall be exercisable
for a period of sixty days
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thereafter, (iii) replacement SARs shall be exercised by delivery to the Company
of written notice of intent to exercise a specific number of Replacement SARs,
and (iv) unless otherwise provided in the applicable Award Agreement, the
exercise of stock appreciation rights which are identified with shares subject
to an option shall result in the cancellation or forfeiture of such option to
the extent of such exercise.
(c) SPECIAL RULES FOR SECTION 16 GRANTEES. Subject to Article 6, no stock
appreciation right or option shall be exercisable by a Section 16 Grantee during
the first six months after its Grant Date, except as exempted from Section 16(b)
of the 1934 Act.
9. NOTIFICATION UNDER SECTION 83(B). The Committee may, on the Grant Date
or any later date, prohibit a Grantee from making the election described below.
If the Committee has not prohibited such Grantee from making such election, and
the Grantee, in connection with the exercise of any option, or the grant of any
share of restricted Stock, makes the election permitted under Section 83(b) of
the Internal Revenue Code to include in such Grantee's gross income in the year
of transfer the amounts specified in Section 83(b) of the Internal Revenue Code,
such Grantee shall notify the Company of such election within 10 days of filing
notice of such election.
10. WITHHOLDING TAXES.
(a) MANDATORY WITHHOLDING.
(i) Whenever under the Plan, cash or shares of Stock are to be
delivered upon exercise or payment of an Award or upon a share of
restricted Stock becoming nonforfeitable, or any other event with
respect to rights and benefits hereunder, the Company shall be entitled
to require as a condition of delivery (A) that the Grantee remit an
amount sufficient to satisfy all federal, state, and local withholding
tax requirements related thereto, (B) the withholding of such sums from
compensation otherwise due to the Grantee or from any shares of Stock
due to the Grantee under the Plan or (C) any combination of the
foregoing.
(ii) If any election described in Article 9 is made, then the
person making such election shall remit to the Company an amount
sufficient to satisfy all federal, state, and local withholding taxes
thereby incurred; provided that, in lieu of or in addition to the
foregoing, the Company shall have the right to withhold such sums from
compensation otherwise due to the Grantee or from any shares of Stock
due to the Grantee under the Plan.
(b) ELECTIVE SHARE WITHHOLDING.
(i)To the extent provided under the terms of the Sears Option or
Sears Restricted Stock Award which it replaces, and subject to the
prior approval of the Committee and to Article 10(b)(ii) below, a
Grantee may elect the withholding ("Share Withholding") by
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the Company of a portion of the shares of Stock otherwise deliverable to
such Grantee upon the exercise or payment of an Award or upon a share of
restricted Stock's becoming nonforfeitable (each a "Taxable Event")
having a Fair Market Value equal to
(A) the minimum amount necessary to satisfy required federal,
state, or local withholding tax liability attributable to the
Taxable Event; or
(B) with the Committee's prior approval, a greater amount, not
to exceed the estimated total amount of such Grantee's tax
liability with respect to the Taxable Event.
(ii) Each Share Withholding election by a Grantee shall be
subject to the following restrictions:
(A) any Grantee's election shall be subject to the Committee's
right to revoke its approval of Share Withholding by such Grantee
at any time before the Grantee's election if the Committee has
reserved the right to do so at the time of its approval;
(B) if the Grantee is a Section 16 Grantee, such Grantee's
election shall be subject to the disapproval of the Committee at
any time, whether or not the Committee has reserved the right to
do so; and
(C) the Grantee's election must be made before the date (the
"Tax Date") on which the amount of tax to be withheld is
determined.
11. TERMINATION OF EMPLOYMENT.
(a) RESTRICTED STOCK. Except as otherwise provided by the Committee on or
after the Grant Date, a Grantee's shares of restricted Stock that are
forfeitable shall be forfeited upon the Grantee's Termination of Employment.
(b) OTHER AWARDS. Unless otherwise provided in the Award Agreement, any
unexercised option or stock appreciation right, to the extent exercisable on the
date of the Grantee's Termination of Employment, may be exercised, in whole or
in part, at any time within three months after the Grantee's Termination of
Employment, except that
(i) if the Grantee's Termination of Employment is caused by
the death of the Grantee, or if the Grantee's death occurs during the
period following Termination of Employment during which the option or
stock appreciation right would be exercisable under the preceding
clause of Article 11(b) or under Article 11(b)(ii), then any
unexercised option or stock appreciation rights, to the extent
exercisable on the date of the Grantee's death, may be exercised, in
whole or in part, at any time within two years after the Grantee's
death by the Grantee's personal representative or by the person to
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whom the option or stock appreciation rights are transferred by will
or the applicable laws of descent and distribution; and
(ii) if the Grantee's Termination of Employment is on account
of Retirement, then any unexercised option or stock appreciation
rights, to the extent exercisable on the date of such Termination of
Employment, may be exercised, in whole or in part, at any time within
two years after such Termination of Employment.
(c) The foregoing provisions of this Article 11 shall not extend the
unexpired term of any Award.
12. SECURITIES LAW MATTERS.
(a) If the Committee deems necessary to comply with the Securities Act
of 1933, the Committee may require a written investment intent representation by
the Grantee and may require that a restrictive legend be affixed to certificates
for shares of Stock.
(b) If, based upon the opinion of counsel for the Company, the
Committee determines that the exercise, nonforfeitability of, or delivery of
benefits pursuant to, any Award would violate any applicable provision of (i)
federal or state securities law or regulations or (ii) the listing requirements
of any national securities exchange on which are listed any of the Company's
equity securities, then the Committee may postpone any such exercise,
nonforfeitability or delivery, as the case may be, but the Company shall use its
best efforts to cause such exercise, nonforfeitability or delivery to comply
with all such provisions at the earliest practicable date.
13. NO FUNDING REQUIRED. Benefits payable under the Plan to any person
shall be paid directly by the Company. The Company shall not be required to fund
or otherwise segregate assets to be used for payment of benefits under the Plan.
14. NO EMPLOYMENT RIGHTS. Neither the establishment of the Plan nor the
granting of any Award shall be construed to (a) give any Grantee the right to
remain employed by the Company or any of its Subsidiaries or to any benefits not
specifically provided by the Plan or (b) alter in any manner the right of the
Company or any of its Subsidiaries to modify, amend, or terminate any of its
employee benefit plans.
15. RIGHTS AS A STOCKHOLDER. A Grantee shall not, by reason of any Award
(other than restricted Stock) have any right as a stockholder of the Company
with respect to the shares of Stock which may be deliverable upon exercise or
payment of such Award until such Stock has been delivered to him. Shares of
restricted Stock held by a Grantee or held in escrow by the Secretary of the
Company shall confer on the Grantee all rights of a stockholder of the Company,
except as otherwise provided in the Plan or Award Agreement. Subject to Article
6, the Committee may, in its discretion, at the time of grant of restricted
Stock, permit or require the payment of cash dividends thereon to be reinvested
in additional restricted Stock to the extent
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shares are available under Article 3, or otherwise reinvested in Stock. Stock
dividends and deferred cash dividends with respect to restricted Stock shall be
subject to the same restrictions and other terms as apply to the shares with
respect to which such dividends are issued. Subject to Article 6, the Committee
may, in its discretion, provide for crediting and payment of interest on
deferred cash dividends.
16. NATURE OF PAYMENTS. Any and all grants, payments of cash, or
deliveries of shares of Stock hereunder shall constitute special incentive
payments to the Grantee and shall not be taken into account in computing the
amount of salary or compensation of the Grantee for the purposes of determining
any pension, retirement, death or other benefits under (a) any pension,
retirement, profit-sharing, bonus, life insurance or other employee benefit plan
of the Company or any of its Subsidiaries or (b) any agreement between the
Company or any Subsidiary, on the one hand, and the Grantee, on the other hand,
except as such plan or agreement shall otherwise expressly provide.
17. NON-UNIFORM DETERMINATIONS. The Committee and the Board may make
non-uniform determinations under the Plan and may make determinations
selectively among persons who receive, or are eligible to receive, Awards
(whether or not such persons are similarly situated). Without limiting the
generality of the foregoing, the Committee shall be entitled, among other
things, to make non-uniform and selective determinations, to enter into
non-uniform and selective Award Agreements as to (a) the identity of the
Grantees, (b) the terms and provisions of Awards, and (c) the treatment, under
Article 11, of Terminations of Employment.
18. ADJUSTMENTS. Subject to Article 6, the Committee shall make equitable
adjustment of
(a) the aggregate numbers of shares of Stock available under Articles
3(a) and 3(b),
(b) the number of shares of Stock, shares of restricted Stock or stock
appreciation rights covered by an Award,
(c) the Option Price,
(d) the Fair Market Value of Stock to be used to determine the amount
of the benefit payable upon exercise of stock appreciation rights, and
(e) all other appropriate matters,
to reflect any stock dividend, stock split, reverse stock split, share
combination, recapitalization, merger, consolidation, acquisition of property or
shares, separation, spin-off, reorganization, stock rights offering, liquidation
or similar event of or by the Company.
19. AMENDMENT OF THE PLAN. The Board may from time to time in its
discretion amend or
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modify the Plan without the approval of the stockholders of the Company, except
as such stockholder approval may be required (a) to permit transactions in Stock
pursuant to the Plan to be exempt from potential liability under Section 16(b)
of the 1934 Act, (b) to permit the Company to deduct, in computing its income
tax liability pursuant to the provisions of the Internal Revenue Code,
compensation resulting from Awards, or (c) under the listing requirements of any
national securities exchange on which are listed any of the Company's equity
securities.
20. TERMINATION OF THE PLAN. The Plan shall terminate on the tenth (10th)
anniversary of the Effective Date or at such earlier time as the Board may
determine. Any termination, whether in whole or in part, shall not affect any
Award then outstanding under the Plan.
21. NO ILLEGAL TRANSACTIONS. The Plan and all Awards granted pursuant to
it are subject to all laws and regulations of any governmental authority which
may be applicable thereto; and notwithstanding any provision of the Plan or any
Award, Grantees shall not be entitled to exercise Awards or receive the benefits
thereof and the Company shall not be obligated to deliver any Stock or pay any
benefits to a Grantee if such exercise, delivery, receipt or payment of benefits
would constitute a violation by the Grantee or the Company of any provision of
any such law or regulation.
22. CONTROLLING LAW. The law of the State of Delaware, except its law
with respect to choice of law, shall be controlling in all matters relating to
the Plan.
23. SEVERABILITY. If all or any part of the Plan is declared by any
court or governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not invalidate any portion of the Plan not declared to be
unlawful or invalid. Any Article or part of an Article so declared to be
unlawful or invalid shall, if possible, be construed in a manner which will give
effect to the terms of such Article or part of an Article to the fullest extent
possible while remaining lawful and valid.
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