SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 1, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-416
SEARS, ROEBUCK AND CO.
(Exact name of registrant as specified in its charter)
New York 36-1750680
(State of Incorporation) (I.R.S.Employer Identification No.)
Sears Tower, Chicago, Illinois 60684
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 312/875-2500
Registrant (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
As of July 31, 1995 the Registrant had 389,484,028 common shares, $.75
par value, outstanding.
<PAGE>
Sears, Roebuck and Co.
Index to Quarterly Report on Form 10-Q
July 1, 1995
Page
Part I - Financial Information.
Item 1. Financial Statements.
Condensed Consolidated Statements of Income
(unaudited) - Three and Six Months Ended
July 1, 1995 and July 2, 1994. 1
Condensed Consolidated Balance Sheets (unaudited)
- July 1, 1995, July 2, 1994 and December 31, 1994. 2
Condensed Consolidated Statements of Cash Flows
(unaudited) - Six Months Ended July 1, 1995 and
July 2, 1994. 3
Notes to Condensed Consolidated Financial
Statements (unaudited). 4
Independent Certified Public Accountants' Review
Report. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 7
Part II - Other Information.
Item 1. Legal Proceedings. 10
Item 4. Submission of Matters to a Vote of Security-Holders. 10
Item 6. Exhibits and Reports on Form 8-K. 11
<PAGE>
<TABLE>
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
July 1, July 2, July 1, July 2,
(millions, except per common share data) 1995 1994 1995 1994
<S>
Revenues <C> <C> <C> <C>
Merchandise sales and services $ 7,263 $ 6,926 $ 13,765 $13,143
Credit revenues 941 884 1,888 1,762
Total revenues 8,204 7,810 15,653 14,905
Costs and expenses
Cost of sales, buying and occupancy 5,346 5,061 10,242 9,677
Selling and administrative 1,856 1,830 3,528 3,497
Depreciation and amortization 137 120 275 242
Provision for uncollectible accounts 174 159 372 338
Interest 346 320 682 641
Total costs and expenses 7,859 7,490 15,099 14,395
Operating income 345 320 554 510
Other income 15 4 11 13
Income before income taxes 360 324 565 523
Income taxes 142 133 223 214
Income from continuing operations 218 191 342 309
Income from discontinued operations, less income tax
expense (benefit) of $98, $73, $249 and $(218) 341 312 776 96
Net income $ 559 $ 503 $ 1,118 $ 405
Income from continuing operations consists of:
Domestic operations $ 220 $ 200 $ 358 $ 336
International operations (2) (1) (16) (7)
Corporate - (8) - (20)
Income from continuing operations $ 218 $ 191 $ 342 $ 309
Earnings per common share, after
allowing for dividends on preferred shares:
Income from continuing operations $ 0.54 $ 0.47 $ 0.84 $ 0.76
Discontinued operations 0.87 0.80 1.98 0.25
Net income $ 1.41 $ 1.27 $ 2.82 $ 1.01
Cash dividends declared per common share $ 0.40 $ 0.40 $ 0.80 $ 0.80
Average common and common
equivalent shares outstanding 392.5 389.8 391.2 388.2
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
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<TABLE>
SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
(millions) July 1, July 2, Dec. 31,
<S> 1995 1994 1994
Assets
<C> <C> <C>
Current assets
Cash and invested cash $ 492 $ 532 $ 548
Retail customer receivables 17,662 16,536 18,201
Other receivables 203 849 321
Merchandise inventories 4,206 3,655 4,044
Prepaid expenses and deferred charges 465 495 303
Deferred income taxes 1,055 1,214 998
Total current assets 24,083 23,281 24,415
Property and equipment
Land 367 407 371
Buildings and improvements 4,124 4,330 4,041
Furniture, fixtures and equipment 4,011 3,751 3,777
Capitalized leases 235 233 229
8,737 8,721 8,418
Less accumulated depreciation 4,342 4,402 4,165
Total property and equipment, net 4,395 4,319 4,253
Deferred income taxes 607 658 607
Other assets 796 908 806
Net assets of discontinued operations 472 7,512 7,231
Total assets $ 30,353 $ 36,678 $ 37,312
Liabilities
Current liabilities
Short-term borrowings $ 5,697 $ 5,640 $ 6,190
Current portion of long-term debt and capitalized
lease obligations 1,016 1,696 1,141
Accounts payable and other liabilities 5,652 5,585 5,787
Unearned revenues 796 740 795
Total current liabilities 13,161 13,661 13,913
Long-term debt and capitalized lease obligations 9,331 8,657 8,844
Postretirement benefits 2,818 2,767 2,810
Minority interest and other liabilities 902 1,005 944
Total liabilities 26,212 26,090 26,511
Shareholders' Equity
8.88% Preferred Shares, First Series 325 325 325
Series A Mandatorily Exchangeable Preferred Shares - 1,236 1,236
Common shares 322 294 294
Capital in excess of par value 3,625 2,373 2,385
Retained income (note 2) 1,955 8,219 8,918
Treasury stock (at cost) (1,658) (1,693) (1,690)
Deferred ESOP expense (267) (591) (558)
Unrealized net capital gains - 504 32
Cumulative translation adjustments (161) (79) (141)
Total shareholders' equity 4,141 10,588 10,801
Total liabilities and shareholders' equity $ 30,353 $ 36,678 $ 37,312
Total common shares outstanding (including Series A
Mandatorily Exchangeable Preferred Shares) 389.4 386.9 389.3
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
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<TABLE>
SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
July 1, July 2,
1995 1994
(millions)
<S>
CASH FLOWS FROM OPERATING ACTIVITIES:
<C> <C>
Net income $ 1,118 $ 406
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, amortization and other noncash items 297 301
Provision for uncollectible accounts 372 338
Gain on sales of property and investments (12) (1)
Change in deferred income taxes (44) 61
Decrease (increase) in retail customer receivables 133 (1,028)
Increase in merchandise inventories (169) (163)
Increase in other operating assets (36) (26)
Decrease in other operating liabilities (224) (389)
Discontinued operations (777) (97)
Net cash provided by (used in) operating activities 658 (598)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in investments (1) 23
Proceeds from sales of property and equipment 14 1
Purchases of property and equipment (370) (263)
Net cash provided by (used in) discontinued operations (310) 117
Net cash used in investing activities (667) (122)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 923 1,078
Repayments of long-term debt (580) (1,520)
Increase (decrease) in short-term borrowings,
primarily 90 days or less (475) 1,027
Repayment of ESOP note receivable 372 69
Common shares issued for employee stock plans 63 30
Dividends paid to shareholders (347) (494)
Net cash provided by (used in) financing activities (44) 190
Effect of exchange rate changes on cash and invested cash (4) (4)
Net decrease in cash and invested cash (57) (534)
Cash and invested cash at December 31, 1994 and 1993 548 1,066
Cash and invested cash at July 1, 1995 and July 2, 1994 $ 491 $ 532
<FN>
See accompanying notes.
</FN>
</TABLE>
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SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Condensed Consolidated Financial Statements
The Condensed Consolidated Balance Sheets as of July 1, 1995
and July 2, 1994 and the related Condensed Consolidated
Statements of Income for the three and six months then ended and
Condensed Consolidated Statements of Cash Flows for the six
months then ended are unaudited. The interim financial
statements reflect all adjustments (consisting only of normal
recurring accruals) which are, in the opinion of management,
necessary for a fair statement of the results for the interim
periods presented. The condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Sears,
Roebuck and Co. 1994 consolidated financial statements for the
three years ended December 31, 1994 in the Report on Form 8-K
dated May 15, 1995, as amended by Amendment No. 1. The results
of operations for the interim periods should not be considered
indicative of results to be expected for the full year.
Earnings per common share is computed based on the weighted
average number of common and common equivalent shares (dilutive
stock options) outstanding and after adjustment for dividends
of $7 and $15 million for the three- and six-month periods ended
July 1, 1995 and July 2, 1994, respectively, on the 8.88% Preferred
Shares. The Series A Mandatorily Exchangeable Preferred Shares
(PERCS) were considered common shares due to their mandatory exchange
into common shares, and the dividends thereon were not deducted from net
income for purposes of calculating earnings per common share. On
March 20, 1995, the Company exchanged all of the 28.8 million PERCS for
35.7 million common shares of the Company. The exchange did not
dilute earnings per share as the PERCS were reflected in the
Company's earnings per share calculation.
Certain reclassifications have been made in the 1994
financial statements to conform to current accounting classifications.
2. Dividend Restrictions
Under terms of indentures entered into in 1981 and
thereafter, Sears cannot take specified actions, including the
declaration of cash dividends, which would cause its
consolidated unencumbered assets, as defined, to fall below 150%
of its consolidated liabilities, as defined. At July 1, 1995,
approximately $1.4 billion could be paid in dividends to
shareholders under the most restrictive indentures.
3. Discontinued Operations
On November 10, 1994, the Company announced its intention
to distribute in a tax-free dividend to the Company's common
shareholders its 80.3% ownership interest in The Allstate
Corporation. The distribution was approved by shareholders at
a special meeting on March 31, 1995. On June 20, 1995, the
Company's Board of Directors approved the distribution to Sears
shareholders in a tax-free dividend. Sears shareholders of
record on June 30, 1995 received, effective June 30, 1995,
.927035 share of The Allstate Corporation for each Sears common
share. This transaction resulted in a non-cash dividend to
Sears shareholders totaling $8.98 billion.
In conjunction with the Allstate spin-off, The Savings and
Profit Sharing Fund of Sears Employees, which includes an
Employee Stock Ownership Plan (the ESOP), was split into two
different plans, a plan for employees of the Company and its
affiliates other than Allstate and a plan for Allstate
employees. The ESOP was split with 50% of the unallocated
shares in the ESOP and 50% of the ESOP debt being transferred
to the Allstate plan. In connection with this transfer,
Allstate purchased from the Company 50% of the Company's
remaining loan to the ESOP at a purchase price of $327 million.
<PAGE>
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SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company is also in the process of selling its interest
in Homart Development Co. and affiliated entities. In July 1995,
the Company completed the sale of Homart's commercial office
building portfolio to an operating partnership composed of The
Morgan Stanley Real Estate Fund II, L.P. and Hines Interests
Limited Partnership. On July 31, 1995, the Company announced
a final agreement to sell the retail shopping center and
community development businesses of Homart to a wholly-owned
subsidiary of General Growth Properties, Inc. Closing of the
shopping center transaction is expected by the end of the third
quarter of 1995. No loss is expected to be incurred as a result
of these transactions.
Revenues of the discontinued operations were $5.74 and
$11.38 billion for the three- and six-month periods ended July
1, 1995, respectively, and $5.29 and $10.59 billion for the
comparable 1994 periods.
4. Legal Proceedings
Various legal and governmental proceedings are pending
against the Company, many involving routine litigation
incidental to the businesses. Other matters contain allegations
which are nonroutine and involve compensatory, punitive or
antitrust treble damage claims in very large amounts, as well
as other types of relief.
On March 31, 1995, a former employee filed a lawsuit seeking
recovery of purported deficiencies in lump sum pension payouts,
on behalf of himself and a class consisting of each participant
in Sears Pension Plan (the Plan) who received a lump sum pension
payout since January 1, 1986 based on a Pension Benefit Guaranty
Corporation (PBGC) interest rate in effect at the beginning of
the distribution year that was higher than the interest rate in
effect at the time the payout was actually made, which plaintiff
alleges violated the terms of the Plan. The lawsuit also seeks
injunctive relief requiring that future lump sum payouts be made
in accordance with plaintiff's interpretation of the Plan, on
behalf of all Plan participants who may become entitled or
required to receive a lump sum payout at a time when the PBGC
interest rate is lower than the rate in effect at the beginning
of the year in which such payout is made. The Company and the
Plan deny the material allegations of the complaint, assert that
the Plan Administrator has consistently complied with applicable
law in determining the appropriate PBGC interest rates for lump
sum payouts and plan to vigorously contest the claims.
The consequences of these matters are not presently
determinable but, in the opinion of management, the ultimate
liability in excess of reserves currently recorded will not have
a material effect on the results of operations, financial
position, liquidity or capital resources of the Company.
<PAGE>
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SEARS, ROEBUCK AND CO.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REVIEW REPORT
To the Shareholders and Board of Directors
of Sears, Roebuck and Co.:
We have reviewed the accompanying Condensed Consolidated Balance
Sheets of Sears, Roebuck and Co. as of July 1, 1995 and July 2,
1994, and the related Condensed Consolidated Statements of
Income for the three- and six-month periods ended July 1, 1995
and July 2, 1994 and Condensed Consolidated Statements of Cash
Flows for the six-month periods ended July 1, 1995 and July 2,
1994. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and of making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to such condensed consolidated
financial statements for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the Consolidated Balance Sheet of
Sears, Roebuck and Co. as of December 31, 1994, and the related
Consolidated Statements of Income, Shareholders' Equity, and
Cash Flows for the year then ended (not presented herein); and
in our report dated February 24, 1995 (May 10, 1995 as to Note
4), we expressed an unqualified opinion on those consolidated
financial statements and included an explanatory paragraph
relating to the Company's changing its method of accounting for
postretirement benefits in 1992. In our opinion, the
information set forth in the accompanying Condensed Consolidated
Balance Sheet as of December 31, 1994, is fairly stated, in all
material respects, in relation to the Consolidated Balance Sheet
from which it has been derived.
Deloitte & Touche LLP
Chicago, Illinois
August 14, 1995
<PAGE>
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ITEM 2. - SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE- AND SIX-MONTH PERIODS ENDED JULY 1, 1995 AND JULY 2,1994
Operating Results
Revenues increased 5.0% for both the second quarter and
first six months of 1995, to $8.20 and $15.65 billion,
respectively, from the comparable 1994 periods. Revenues
consist of revenues from domestic operations and international
operations. Domestic operations are comprised of domestic
merchandising and domestic credit operations. Domestic
merchandising includes the core merchandising, product services
and direct response businesses in the United States and Puerto
Rico. International operations consist of similar
merchandising and credit operations conducted in Canada through
Sears Canada Inc. (Sears Canada), an indirect 61.1% owned
subsidiary, and in Mexico through Sears Roebuck de Mexico, S.A.
de C.V. (Sears Mexico), an indirect 75.2% owned subsidiary.
<TABLE>
<CAPTION>
Revenues Three Months Ended Six Months Ended
July 1, July 2, July 1, July 2,
(millions) 1995 1994 Change 1995 1994 Change
<S>
Domestic operations: <C> <C> <C> <C> <C> <C>
Merchandise sales and services $ 6,571 $ 6,163 6.6 % $12,453 $11,705 6.4 %
Credit revenues 848 805 5.3 1,707 1,600 6.7
Total domestic operations 7,419 6,968 6.5 14,160 13,305 6.4
International operations 785 842 (6.8) 1,493 1,600 (6.7)
Total revenues $ 8,204 $ 7,810 5.0 % $15,653 $14,905 5.0 %
</TABLE>
<TABLE>
<CAPTION>
Domestic Merchandise Sales and Services Three Months Ended Six Months Ended
July 1, July 2, July 1, July 2,
(millions, except number of stores) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Department stores $ 5,135 $ 4,863 $ 9,755 $ 9,242
Free-standing stores 924 816 1,747 1,544
Core merchandising revenues 6,059 5,679 11,502 10,786
Other revenues 512 484 951 919
Merchandise sales and services $ 6,571 $ 6,163 $12,453 $11,705
Domestic comparable store sales 3.2 % 9.7 % 3.7 % 11.2 %
Number of domestic department stores 801 799
Number of domestic free-standing stores 1,218 1,050
Total 2,019 1,849
</TABLE>
Department store revenues grew 5.6% for the second
quarter, which came on top of an 11.9% increase in 1994.
Despite the robust sales growth trends experienced in 1994,
particularly for home-related merchandise, the Company
continued to post solid domestic comparable sales gains.
Apparel revenues increased 11.1% during the second quarter,
aided in part by the shift of the Easter holiday selling
season into the second quarter of 1995. Sales gains during
the second quarter were strongest in women's dresses and
men's and children's fashions. Home revenues increased 3.4%
for the second quarter on top of a double-digit sales
increase in 1994. Increased sales of home electronics,
hardware and sporting goods contributed the greatest share of
the increase. Revenues at Sears Auto increased 5.0% for the
three-month period driven by double-digit tire sales
increases. For the six-month period, department store sales
increased 5.5% over 1994 and were driven by increases of 7.3%
at Apparel and 6.0% at Home, while sales at Sears Auto were
primarily flat.
<PAGE>
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ITEM 2. - SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE- AND SIX-MONTH PERIODS ENDED JULY 1, 1995 AND JULY 2, 1994
Free-standing store revenues increased 13.2% for the second
quarter, which came on top of a 23.0% gain in 1994. Western
Auto, a wholly-owned subsidiary which participates in the retail
and wholesale automotive products and services business,
contributed the largest portion of the revenue growth, as 50 new
stores have been opened since the second quarter of 1994.
Dealer stores, which are independently owned and operated and
focus on a home-related product assortment, also experienced
strong revenue growth for the second quarter, as 79 new stores
have been opened during the last twelve months. Free-standing
store revenues increased 13.2% for the six-month period as
compared to 1994, driven by increases at the Dealer stores,
Western Auto and the free-standing Homelife furniture stores.
Net openings of free-standing stores during the first half of
1995 were as follows:
Dealer Stores 37
Western Auto 23
Homelife 12
Sears Hardware 4
Retail Outlet 2
Total 78
The growth in credit revenues for the three- and six-month
periods reflected higher owned receivable balances, which were
driven by the growth in merchandise sales and services over the
past year and a slower customer liquidation rate. The
percentage of merchandise sales and services transacted with the
Sears Card in the second quarter continued to increase relative
to 1994 due to the Company's continuing efforts to promote and
grow the credit business.
International revenues decreased 6.8% for the second
quarter primarily due to unfavorable exchange rates. In local
currency, revenues increased at Sears Mexico on significantly
higher finance charge revenues due to increases in government
regulated consumer credit rates and higher merchandise sales.
This increase was partially offset by lower local currency
revenues at Sears Canada.
Gross margin as a percentage of domestic merchandise sales
and services for the second quarter was 26.7% versus 27.4% in
the comparable prior year period. The decline in domestic gross
margin reflects a highly competitive retail environment. The
second quarter decline was 40 basis points less than the 110
basis point decline experienced in the first quarter of 1995.
A shift in the balance of sale to the higher margin Apparel
business coupled with improved markdown trends accounted for the
lower decline in the gross margin rate relative to the first
quarter. For the six-month period, 1995 domestic gross margins
declined 90 basis points to 26.0%. International gross margins
increased slightly to 23.3% in the second quarter from 23.0% in
1994 due to margin improvement at Sears Canada. For the six-
month period, gross margins dropped 50 basis points to 21.5%,
reflecting lower margins at both Sears Canada and Sears Mexico.
Selling and administrative expense as a percentage of
revenues for domestic operations improved to 22.5% from 23.6%
in the second quarter of 1994. The improvement in the selling
and administrative expense ratio reflects the Company's
continued emphasis on controlling expenses and leveraging its
fixed cost base. For the six-month period, the selling and
administrative rate for domestic operations improved 110 basis
points to 22.5%. International selling and administrative
expenses increased to 23.3% from 22.1% in the second quarter, as
expense leverage declined on lower local currency sales at Sears
Canada. For the six-month period, the selling and
administrative expense rate improved 10 basis points to 22.5%.
Depreciation and amortization expense was $137 million in
the second quarter and $275 million for the six-month period as
compared to $120 and $242 million in the prior year
periods. The increase is attributable to higher capital
expenditures made in 1994 as part of the Company's department
store remodeling program.
<PAGE>
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ITEM 2. - SEARS, ROEBUCK AND CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE- AND SIX-MONTH PERIODS ENDED JULY 1, 1995 AND JULY 2, 1994
The provision for uncollectible accounts was $174 million
in the second quarter and $372 million for the six-month period
as compared to $159 and $338 million in the prior year
periods. The increase is attributable to the growth in the
domestic receivable portfolio and increases in net write-offs
related to higher customer delinquency trends.
Interest expense increased $26 million to $346 million in
the second quarter and $41 million to $682 million in the first
six months from the comparable 1994 periods. Total funding costs,
comprised of interest expense and the funding cost of securitized
receivables, increased $24 and $25 million to $440 and $871 million
in the three- and six-month periods of 1995, respectively, as
compared with the prior year periods. The increase was due to
funding requirements of a larger gross receivable portfolio, which
was partially offset by a lower effective funding rate driven by a
change in the funding mix.
Holiday buying patterns generally result in the lowest
merchandising sales in the first quarter and the highest
merchandising sales in the fourth quarter. This business
seasonality results in performance for the first quarter which
is not necessarily indicative of performance for the balance of
the year.
Financial Condition
As of July 1, 1995, domestic merchandise inventories on the
first-in, first-out (FIFO) basis were $4.50 billion, compared
with $3.93 billion at April 2, 1994 and $4.28 billion at
December 31, 1994. The increase in the inventory levels
reflects the expansion of selling space in the department
stores, the growth of the free-standing store businesses and a
building of Home Improvement and Brand Central inventory stocks.
Net cash provided by the Company's operating activities
totaled $658 million for the first half of 1995, compared with
cash used in operating activities of $598 million for the same
period in 1994. The change was primarily attributable to a
decrease in net retail customer receivables in 1995. The
decrease in retail customer receivables was associated with the
issuance of $1.35 billion in credit account pass-through trust
certificates in the first half of 1995.
Gross domestic retail customer receivables were $21.29
billion at July 1, 1995, compared to $21.33 billion at December
31, 1994. Sears, through its wholly-owned subsidiary, Sears
Receivables Financing Group, Inc., had $4.36 and $3.95 billion
of credit account pass-through certificates outstanding at July
2, 1995 and December 31, 1994, respectively. Net sales and
liquidations of outstanding credit account pass-through
certificates decreased owned receivables by $415 million during
the six months ended July 1, 1995, compared with a net increase
in owned receivables of $1.19 billion during the comparable 1994
period.
Net cash used in investing activities totaled $667 million
for the first half of 1995 compared to $122 million in 1994.
The change was primarily due to a net increase in cash used by
discontinued operations associated with the repayment of a $450
note payable to Allstate related to a capital contribution in
1990 and higher net purchases of property and equipment due to
the Company's store remodeling program.
Net cash used in financing activities totaled $44 million
for the first half of 1995 compared to net cash provided by
financing activities of $190 million in 1994. The change in
cash used in financing activities resulted from a reduction in
net borrowings related to increased securitization activity in
1995, partially offset by a $327 million repayment of the ESOP
note receivable associated with the Allstate spin-off and lower
dividends paid to shareholders in 1995 as the 1994 period
included one additional common dividend payment.
<PAGE>
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Commonwealth of Massachusetts has filed a complaint against
the Company's Homart Development Co. subsidiary ("Homart") and
other parties, alleging releases of asbestos containing
materials at the site of Homart's Shopper's World Center and
General Cinema Complex in Framingham, Massachusetts and relating
to the Natick Mall in Natick, Massachusetts. The registrant
expects that this matter will not have a material impact on the
results of operations, financial position, liquidity or capital
resources of the Company. (Commonwealth of Massachusetts v.
Homart Development Co., Walsh Brothers, Inc., and Gabe and Sons,
Inc., 95-2280 (Superior Court)).
Item 4. Submission of Matters to a Vote of Security-Holders.
On May 11, 1995, the Company held its annual meeting of
shareholders at The Art Institute of Chicago in Chicago,
Illinois.
1) Warren L. Batts, Arthur C. Martinez, Nancy C. Reynolds and
Clarence B. Rogers, Jr. were elected to Class A of the Board
for three year terms expiring at the 1998 annual meeting of
shareholders. Dorothy A. Terrell was elected to Class B of the
Board for a term expiring at the 1996 annual meeting of
shareholders. The shareholders approved the recommendation of
the Audit Committee that Deloitte & Touche LLP be appointed auditors
for 1995. Three shareholder proposals were voted on and
defeated. The vote on these matters was as follows:
Directors
Name For Withheld
Warren L. Batts 333,779,573 2,751,377
Arthur C. Martinez 333,779,573 2,890,141
Nancy C. Reynolds 333,779,573 2,976,965
Clarence B. Rogers, Jr. 333,779,573 2,805,914
Dorothy A. Terrell 333,779,573 2,879,831
2) Approval of appointment of Deloitte & Touche LLP as auditors
for 1995
For Against Abstain
333,875,836 1,428,876 1,335,707
3) Shareholder Proposals
a) high-performance workplace
For Against Abstain Broker-Non Votes
22,507,626 266,423,407 12,176,374 35,533,012
b) de-classifying the Board of Directors
For Against Abstain Broker-Non Votes
125,226,737 169,889,170 5,991,500 35,533,012
c) submitting incentive compensation performance measures for
annual shareholder vote
For Against Abstain Broker-Non Votes
28,297,059 264,887,133 7,923,215 35,533,012
<PAGE>
- 11 -
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
An Exhibit Index has been filed as part of this Report on
Page E-1.
(b) Reports on Form 8-K.
Registrant filed Current Reports dated April 20, April 25,
May 15 (as amended by Amendment No. 1), June 1 and June 20, 1995
(Items 5 and 7).
<PAGE>
- 12 -
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Sears, Roebuck and Co.
(Registrant)
August 14, 1995 By /s/ James A. Blanda
James A. Blanda
Vice President and Controller
(Principal Accounting
Officer and duly authorized
Officer of Registrant)
<PAGE>
E-1
EXHIBIT INDEX
SEARS, ROEBUCK AND CO.
THREE MONTHS ENDED JULY 1, 1995
Exhibit No.
4. Registrant hereby agrees to furnish the Commission, upon
request, with the instruments defining the rights of holders
of each issue of long-term debt of the Registrant and its
consolidated subsidiaries.
10. Deferred Compensation Plan for Directors as amended and
restated on June 20, 1995.
12 (a). Computation of ratio of income to fixed charges for
Sears, Roebuck and Co. and consolidated subsidiaries for each
of the five years ended December 31, 1994, and for the six-
and twelve-month periods ended July 1, 1995.
12 (b). Computation of ratio of income to combined fixed charges and
preferred share dividends for Sears, Roebuck and Co. and
consolidated subsidiaries for each of the five years ended
December 31, 1994, and for the six- and twelve-month periods
ended July 1, 1995.
15. Acknowledgement of awareness from Deloitte & Touche LLP,
dated August 14, 1995, concerning unaudited interim
financial information.
27. Financial Data Schedule.
99 (a). The Savings and Profit Sharing Fund of Sears Employees, as
amended and restated effective as of June 30, 1995.
99 (b). The Savings and Profit Sharing Fund of Sears Employees Trust
Agreement, as amended and restated effective as of June 30, 1995.
99 (c). Sears, Roebuck and Co. Employee Stock Ownership Trust, as
amended and restated effective as of June 30, 1995.
<PAGE>
<TABLE>
Exhibit 12. (a)
COMPUTATION OF RATIO OF INCOME TO FIXED CHARGES
SEARS, ROEBUCK AND CO. AND CONSOLIDATED SUBSIDIARIES
<CAPTION>
Twelve Six
Months Months
Ended Ended
July 1, July 1,
1995 1995 Year Ended December 31
(unaudited) (unaudited) 1994 1993 1992 1991 1990
<S> (millions, except ratios)
Fixed Charges
Interest and amortization of debt discount <C> <C> <C> <C> <C> <C> <C>
and expense on all indebtedness $1,321 $682 $1,279 $1,318 $1,389 $1,568 $1,651
Add interest element implicit in rentals 114 60 114 105 165 155 147
1,435 742 1,393 1,423 1,554 1,723 1,798
Interest capitalized 2 3 1 3 23 22 16
Total fixed charges $1,437 $745 $1,394 $1,426 $1,577 $1,745 $1,814
Income (loss)
Income (loss) from continuing operations $890 $342 $857 $625 ($1,812) $160 ($45)
Deduct undistributed net income (loss)
of unconsolidated companies (7) (2) (7) 6 (5) (11) (8)
897 344 864 619 (1,807) 171 (37)
Add
Fixed charges (excluding interest capitalized) 1,435 742 1,393 1,423 1,554 1,723 1,798
Income taxes (benefit) 624 223 614 329 (1,039) 126 (13)
Income (loss) before fixed charges and
income taxes $2,956 $1,309 $2,871 $2,371 ($1,292) $2,020 $1,748
Ratio of income to fixed charges 2.06 1.76 2.06 1.66 (A) 1.16 0.96
<FN>
(A) As a result of the loss for the year ended December 31, 1992, earnings did not cover fixed
charges by $2,869 million.
</FN>
</TABLE>
<PAGE>
<TABLE>
Exhibit 12. (b)
COMPUTATION OF RATIO OF INCOME TO COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDENDS
SEARS, ROEBUCK AND CO. AND CONSOLIDATED SUBSIDIARIES
<CAPTION>
Twelve Six
Months Months
Ended Ended
July 1, July 1,
1995 1995 Year Ended December 31
(unaudited) (unaudited) 1994 1993 1992 1991 1990
<S> (millions, except ratios)
Fixed Charges
Interest and amortization of debt discount <C> <C> <C> <C> <C> <C> <C>
and expense on all indebtedness $1,321 $682 $1,279 $1,318 $1,389 $1,568 $1,651
Add interest element implicit in rentals 114 60 114 105 165 155 147
1,435 742 1,393 1,423 1,554 1,723 1,798
Preferred dividend factor 181 63 234 209 120 7 -
Interest capitalized 2 3 1 3 23 22 16
Total fixed charges $1,618 $808 $1,628 $1,635 $1,697 $1,752 $1,814
Income (loss)
Income (loss) from continuing operations $890 $342 $857 $625 ($1,812) $160 ($45)
Deduct undistributed net income (loss)
of unconsolidated companies (7) (2) (7) 6 (5) (11) (8)
897 344 864 619 (1,807) 171 (37)
Add
Fixed charges (excluding interest capitalized
and preferred dividend factor) 1,435 742 1,393 1,423 1,554 1,723 1,798
Income taxes (benefit) 624 223 614 329 (1,039) 126 (13)
Income (loss) before fixed charges and
income taxes $2,956 $1,309 $2,871 $2,371 ($1,292) $2,020 $1,748
Ratio of income to combined fixed charges
and preferred share dividends 1.83 1.62 1.76 1.45 (A) 1.15 0.96
<FN>
(A) As a result of the loss for the year ended December 31, 1992, earnings did not cover fixed
charges and preferred share dividends by $2,989 million.
</FN>
</TABLE>
<PAGE>
Exhibit 15
To the Shareholders and Board of Directors
of Sears, Roebuck and Co.:
We have reviewed, in accordance with standards established by
the American Institute of Certified Public Accountants, the
unaudited interim financial information of Sears, Roebuck and
Co. for the three- and six-month periods ended July 1, 1995 and
July 2, 1994, as indicated in our report dated August 14, 1995;
because we did not perform an audit, we expressed no opinion on
that information.
We are aware that our report referred to above, which is
included in your Quarterly Report on Form 10-Q for the six-month
period ended July 1, 1995, is incorporated by reference in
Registration Statement Nos. 2-64879, 2-80037, 33-18081, 33-
23793, 33-41485, 33-43459, 33-45479, 33-49992, 33-55825 and 33-
58851 of Sears, Roebuck and Co., Registration Statement Nos. 33-
51361 and 33-57205 of Sears, Roebuck and Co. and The Savings and
Profit Sharing Fund of Sears Employees, Registration Statement
No. 33-58139 of Sears, Roebuck and Co. and Sears Roebuck
Acceptance Corp., and Registration Statement No. 33-44671 of
Sears, Roebuck and Co. and Sears DC Corp.
We also are aware that the aforementioned report, pursuant to
Rule 436(c) under the Securities Act of 1933, is not considered
a part of the Registration Statement prepared or certified by
an accountant or a report prepared or certified by an accountant
within the meaning of Sections 7 and 11 of the Act.
Deloitte & Touche LLP
Chicago, Illinois
August 14, 1995
Exhibit 10
SEARS, ROEBUCK AND CO.
DEFERRED COMPENSATION PLAN
FOR DIRECTORS
as amended and restated on June 20, 1995
1. PURPOSE
The purpose of this Plan is to offer non-employee members of the
Board of Directors the opportunity to defer receipt of their
directors' compensation, as an incentive to their continued
participation as directors of Sears, Roebuck and Co.
2. DEFINITIONS
a."Beneficiary" shall mean the person or persons designated from
time to time in writing by a Participant to receive payments under
the Plan after the death of such Participant, or, in the absence of
any such designation or in the event that such designated person or
persons shall predecease such Participant, his estate.
b."Common Share Unit" shall mean a Deferred Amount which is
converted into a unit or fraction of a unit for purposes of the
Plan by dividing a dollar amount by the Fair Market Value of one of
the Company's common shares.
c."Company" shall mean Sears, Roebuck and Co.
d."Compensation" shall mean payments which the Participant receives
from the Company for services, including retainer fees and meeting
fees.
e."Deferred Amount" shall mean an amount of Compensation deferred
under the Plan and carried during the deferral period in any
Account provided for in the Plan.
f."Distribution Date" shall mean the date designated by a
Participant in the Notice of Election form for distribution of
Accounts.
g."Dividend Equivalent" shall mean an amount equal to the cash
dividend paid on one of the Company's common shares credited to an
Account for each Common Share Unit credited to such Account.
h."Fair Market Value" shall mean the closing price of the Company's
common shares as reported by the Wall Street Journal or other
comparable source in a summary of composite transactions for stocks
listed on the New York Stock Exchange.
i."Hardship" shall mean an emergency or unexpected situation in the
Participant's financial affairs including, but not limited to,
illness or accident involving the Participant or his/her dependents
which, in the opinion of the Compensation Committee of the Board of
Directors of the Company, presents a severe economic difficulty to
the Participant, due to which a distribution of the Account balance
is appropriate.
j."Index" shall mean the Standard & Poor's 500 Composite Stock
Price Index which is a market value-weighted index consisting of
500 common stocks of large U.S. domiciled companies selected by
Standard and Poor's Corporation ("S&P") through a detailed
screening process starting on a macro-economic level and working
toward a micro-economic level dealing with company specific
information such as market value, industry group classification,
capitalization and trading activity. S&P's primary objective for
the S&P Index is to represent the segment of the U.S. equity
securities markets consisting of large market capitalization
stocks. However, companies are not selected by S&P for inclusion
because they are expected to have superior stock price performance
relative to the market in general or other stocks in particular.
k."Non-Employee Director" shall mean any duly elected or appointed
member of the Board of Directors of the Company who is not an
employee of the Company or of any subsidiary of the Company.
l."Participant" shall mean any Non-Employee Director who elects to
defer any amount of Compensation under the Plan.
m."Plan" shall mean the Sears, Roebuck and Co., Deferred
Compensation Plan for Directors.
n."Secretary" shall mean the duly elected Secretary of the Company.
3. ELECTION TO DEFER COMPENSATION
Each Participant may elect to defer the payment of all or any part
of his or her Compensation by executing and delivering to the
Secretary a Notice of Election, in the form attached hereto and
incorporated herein by this reference. Such election shall be
applicable only to Compensation payable on or after the first day
of the month following the month in which such Notice of Election
is received by the Secretary.
An election to defer payment of Compensation shall continue in
effect until revoked by notice in writing to the Secretary. In
addition, the receipt of a new or revised Notice of Election form
by the Secretary shall constitute a revocation of any previously
filed Notice of Election form to the extent inconsistent therewith.
No revocation shall be effective with respect to Compensation
earned prior to the date the revocation is received by the
Secretary or the effective date of the new or revised Notice of
Election.
4. TREATMENT OF DEFERRED AMOUNTS
The Company shall establish on its books the necessary accounts
("Account", or collectively, "Accounts") to accurately reflect the
Company's liability to each Participant. To each Account shall be
credited, as applicable, Deferred Amounts, Dividend Equivalents on
Common Shares, Allstate Share Units, Allstate Dividend Equivalents
and interest. Payments to the Participant or amounts transferred
to another Account under the Plan shall be debited to the
appropriate Account.
a.Account #1 - Interest-Bearing Account. Compensation deferred
into an Interest-Bearing Account shall be credited to the Account
on the same date when it would otherwise be payable to the
Participant. Deferred Amounts carried in this Account shall earn
interest from the date of credit to the date of payment. At the
end of each calendar month, interest at a rate equal to the monthly
average per annum cost of commercial paper or the equivalent issued
by Sears Roebuck Acceptance Corp. ("SRAC") as reported in the
monthly report to the SRAC Board of Directors shall be credited to
the amounts previously accrued in each Account for the period from
the date amounts were credited to such Account to the end of such
calendar month.
b.Account #2 - Common Share Unit Account. Compensation deferred
into a Common Share Unit Account shall be credited to the Account
on the same date when it would otherwise be payable to the
Participant. Such Deferred Amounts shall be converted into a
number of Common Share Units on the date credited to the Account by
dividing the Deferred Amount by the Fair Market Value on such date.
If Common Share Units exist in a Participant's Account on a
dividend record date for the Company's common shares, Dividend
Equivalents shall be credited to the Participant's Account on the
related dividend payment date, and shall be converted into the
number of Common Share Units which could be purchased with the
amount of Dividend Equivalents so credited.
In the event of any change in the Company's common shares
outstanding, by reason of any stock split or dividend,
recapitalization, merger, consolidation, combination or exchange of
stock or similar corporate change, the Secretary shall make such
equitable adjustments, if any, deemed appropriate by reason of any
such change, in the number of Common Share Units credited to each
Participant's Account.
Subject to changes in the law, the Common Share Units will be
treated as derivative securities as defined in the rules
promulgated under Section 16 of the Securities Exchange Act of
1934. A Participant may opt out of such treatment by irrevocably
waiving in writing the right to have amounts transferred out of
this Account, except incident to termination of membership on the
Board of Directors, death or disability.
c.Account #3 - Index Account. Compensation deferred into an Index
Account shall be credited to the Account on the same date when it
would otherwise be payable to the Participant. On the last day in
the month the amounts in the Participant's Account shall be
adjusted by a percentage factor based on the total return
(including dividends) of the Index from the date the amount was
credited to the Account for amounts credited during the month or
from the last day of the preceding month for amounts in the Account
on such day. Similar adjustments shall also be made on any date
the Account is debited by reason of any transfer of an amount to
another Account or distribution to the Participant. In the event
that the Index is not published for any date referred to above, the
Index for the closest day preceding such date for which such Index
is published shall be used.
d.Account #4 - Money Market Account. Compensation deferred into a
Money Market Account shall be credited to the Account on the same
date when it would otherwise be payable to the Participant.
Amounts credited to the Account shall earn additional amounts which
will be credited to the Account on the last business day of each
month based upon the average yield on InterCapital Liquid Asset
Fund for such month, pro rata for the portion of such month when
such Deferred Amounts were carried in the Account.
e.Account #5 - Allstate Share Unit Account. Participants who have
Common Share Unit Accounts on the payment date for the Company's
distribution to its common shareholders of its remaining ownership
of Allstate common stock will, at their election, be credited with
the same number of Allstate Share Units per Common Share Unit as
Allstate common shares distributed per each Company common share in
the distribution. Such election shall be received by the Secretary
of the Company on or before the payment date for such distribution.
In the absence of receipt of such election as to any Participant,
the Secretary shall adjust the Common Share Unit Account of the
Participant to reflect in Common Share Units the value of the
Allstate distribution. All Allstate Share Units shall be credited
to Participants' Allstate Share Unit Account.
If Allstate Share Units exist in a Participant's Account on a
dividend record date for Allstate's common stock, Allstate Dividend
Equivalents shall be credited to the Participant's Allstate Share
Unit Account on the related dividend payment date, and shall be
converted into the number of Allstate Common Share Units which
could be purchased with the amount of Allstate Dividend Equivalents
so credited.
In the event of any change in Allstate's common stock outstanding,
by reason of any stock split or dividend, recapitalization, merger,
consolidation, combination or exchange of stock or similar
corporate change, the Secretary shall make such equitable
adjustments, if any, deemed appropriate by reason of any such
change, in the number of Allstate Common Share Units credited to
each Participant's Allstate Share Unit Account.
Subject to changes in the law, as to Participants who are directors
or executive officers of Allstate, the Allstate Common Share Units
will be treated as derivative securities as defined in the rules
promulgated under Section 16 of the Securities Exchange Act of
1934. A Participant may opt out of such treatment by irrevocably
waiving in writing the right to have amounts transferred out of
this Account, except incident to termination of membership on the
Board of Directors, death or disability.
For purposes of this Section 4(e):
"Allstate" shall mean The Allstate Corporation.
"Allstate Dividend Equivalent" shall mean an amount equal to the
cash dividend paid on one of Allstate's shares of common stock,
credited to a Participant's Allstate Share Unit Account for each
Allstate Share Unit credited to such Account.
"Allstate Fair Market Value" shall mean the closing price of
Allstate's common shares as reported by the Wall Street Journal or
other comparable source in a summary of composite transactions for
stocks listed on the New York Stock Exchange.
"Allstate Share Unit" shall mean a unit or fraction of a unit
calculated (except with respect to the initial allocation of such
units to Participants' accounts at the time of the Company's
distribution of Allstate stock) by dividing a dollar amount by the
Allstate Fair Market Value of one of Allstate's shares of common
stock.
f.Transfers Between Accounts. Transfers between Account #1,
Account #3 and Account #4 may be made at any time requested by the
Participant upon application to the Secretary.
Participants may transfer Deferred Amounts carried in Account #2 to
another Account, or from another Account into Account #2, only upon
application to and approval by the Secretary. Such transfers may be
made only during the ten business days commencing on the third and
ending on the twelfth business day following the release of
quarterly and annual summary statements of the Company's sales and
earnings. No more than two such transfers may be made in any
calendar year.
Participants who are directors or executive officers of Allstate
may transfer amounts into another Account from Account #5, only
upon application to and approval by the Secretary. Such transfers
may be made only during the ten business days commencing on the
third and ending on the twelfth business day following the release
of quarterly and annual summary statements of Allstate's sales and
earnings. No more than two such transfers may be made in any
calendar year. Participants who are not directors or executive
officers of Allstate may make transfers from Account #5 to another
Account at any time requested by the Participant upon application
to the Secretary. No Participant may make transfers to Account #5
from any other Account under any circumstances.
5.DISTRIBUTION
a.Except in the case of the death of a Participant, distribution of
Accounts shall commence as of the date specified by the Participant
in said Participant's applicable Notice of Election form, which
date shall be no later than one year after termination from the
Board. The Participant may revise the terms of distribution of the
Participant's Accounts by submitting a revised Notice of Election,
provided that (i) the revised Notice of Election form shall be
filed by the Participant with the Secretary not later than twelve
months prior to the Participant's normal retirement date from the
Board, and (ii) in any event, distribution of the Participant's
Accounts shall not commence earlier than twelve months after the
Participant's revised Notice of Election form is filed with the
Secretary.
b.Except in the case of the death of the Participant, payment of
the amount in each Account shall be either in the form of a lump-
sum or in annual installments over a period of years not to exceed
ten (10) years as selected by the Participant in the applicable
Notice of Election form. The amount of any installment payment
shall be determined by multiplying the amount to which the
Participant would be entitled as a lump sum on the installment date
by a fraction, the numerator of which is one and the denominator of
which is the number of remaining unpaid installments.
c.In the event of the Participant's death prior to the Distribution
Date, or after annual installments to the Participant have
commenced but before full distribution has been made, the then
remaining balance in each Account shall be paid in a lump-sum to
the Beneficiary or contingent Beneficiary designated in the Notice
of Election form, or to the estate of the deceased Participant if
there is no surviving Beneficiary or contingent Beneficiary. In
either such event the lump sum payment shall be valued as of the
first day of the month following the Participant's date of death.
A Participant may change the Beneficiary or contingent Beneficiary
from time to time by filing with the Secretary a written notice of
such change; provided, however, that no such notice of change of
Beneficiary shall be effective unless it had been received by the
Secretary prior to the date of the Participant's death.
d.Upon demonstration of Hardship by the Participant to the
Compensation Committee of the Board of Directors of the Company,
distribution of a Participant's Account, or the remaining balance
of any unpaid installments, as the case may be, may be made in a
lump sum.
6.MISCELLANEOUS
a.The Board of Directors of the Company may amend or terminate the
Plan at any time; however, any amendment or termination of the Plan
shall not affect the rights of Participants or Beneficiaries to
payment, in accordance with Section 5 of the Plan, of amounts
credited to Participants' Accounts at the time of such amendment or
termination. The Board of Directors and the Secretary may in their
discretion prescribe such provisions and interpretations of the
Plan as they shall deem necessary or advisable.
b.The Plan does not create a trust in favor of a Participant, a
Participant's designated Beneficiary or Beneficiaries, or any other
person claiming on a Participant's behalf, and the obligation of
the Company is solely a contractual obligation to make payments due
hereunder. In this regard, the balance in any Account shall be
considered a liability of the Company and a Participant's right
thereto shall be the same as any unsecured general creditor of the
Company. Neither a Participant nor any other person shall acquire
any right, title, or interest in or to any amount outstanding to a
Participant's credit under the Plan other than the actual payment
of such portions thereof in accordance with the terms of the Plan.
c.No right or benefit under the Plan shall be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance or
change, and any attempt to anticipate, alienate, sell, assign,
pledge, encumber or change the same shall be void. No right or
benefit hereunder shall in any manner be liable for or subject to
the debts, contracts, liabilities or torts of the person entitled
to such benefit.
d.Construction of the Plan shall be governed by the laws of
Illinois.
e.The terms of the Plan shall be binding upon the heirs, executors,
administrators, personal representatives, successors and assigns of
all parties in interest.
f.The headings have been inserted for convenience only and shall
not affect the meaning or interpretation of the Plan.
g.Any amount payable to or for the benefit of a minor, an
incompetent person or other person incapable of receipting therefor
shall be deemed paid when paid to such person's guardian or to the
party providing or reasonably appearing to provide for the care of
such person, and such payment shall fully discharge the Company and
the Board of Directors with respect thereto.
h.The Plan provisions contained in subsections 2.b., 2.g., 2.h.,
2.j., 2.k., 4.b and the second paragraph of subsection 4.f (as to
all Participants) and subsection 4.e and the third paragraph or
subsection 4.f (as to Participants who are directors or executive
officers of Allstate) shall not be amended more than once every six
months, other than to comport with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act of 1974, or the
rules thereunder.
<PAGE>
SEARS, ROEBUCK AND CO.
DEFERRED COMPENSATION PLAN
FOR DIRECTORS
Allstate Share Unit Account Election Form
I hereby elect to participate in the Allstate Common Share Unit
Account as described in Section 4.e of the Sears, Roebuck and Co.
(the "Company") Deferred Compensation Plan for Directors (the
"Plan"). I acknowledge that I have had an opportunity to review
the Plan, as amended to June 20, 1995. I further acknowledge that
this Election Form must be dated by the undersigned and received by
the Secretary of the Company no later than June 30, 1995.
_________________, 1995
[Date]
____________________________________________
[Signature of Participant]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME AND CASH
FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> JUL-01-1995
<CASH> 492
<SECURITIES> 0
<RECEIVABLES> 18,473
<ALLOWANCES> 811
<INVENTORY> 4,206
<CURRENT-ASSETS> 24,083
<PP&E> 8,737
<DEPRECIATION> 4,342
<TOTAL-ASSETS> 30,353
<CURRENT-LIABILITIES> 13,161
<BONDS> 9,331
<COMMON> 322
0
325
<OTHER-SE> 3,494
<TOTAL-LIABILITY-AND-EQUITY> 30,353
<SALES> 13,765
<TOTAL-REVENUES> 15,653
<CGS> 10,242
<TOTAL-COSTS> 10,242
<OTHER-EXPENSES> 3,803
<LOSS-PROVISION> 372
<INTEREST-EXPENSE> 682
<INCOME-PRETAX> 565
<INCOME-TAX> 223
<INCOME-CONTINUING> 342
<DISCONTINUED> 776
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,118
<EPS-PRIMARY> 2.82
<EPS-DILUTED> 0.00<F1>
<FN>
<F1>Not applicable
</FN>
</TABLE>
THE SAVINGS AND PROFIT SHARING FUND
OF
SEARS EMPLOYEES
In Effect Since July 1, 1916
Amended and Restated Effective as of June 30, 1995
<PAGE>
THE SAVINGS AND PROFIT SHARING FUND
OF SEARS EMPLOYEES
In Effect Since July 1, 1916
SECTION I
Introduction
A. Purposes. The Savings and Profit Sharing Fund of Sears Employees
(the "Plan") was established by Sears, Roebuck and Co. (the "Company")
for the following purposes:
(i) To permit eligible employees of the employers to share in the
profits of, and to acquire a proprietary interest in, the Company; and
(ii) To encourage the habit of saving; and
(iii) To provide a plan through which each eligible employee may
accumulate his own savings, his portion of the Employers' Contribution
and the earnings on his accumulations as a means of providing additional
income for himself at the close of his active business years.
It is intended that the Plan will furnish to those participants who
remain in the employ of the employers until they reach the age when they
retire from active service, a sum to provide for them in part
thereafter; and that even those who do not remain until retirement may
accumulate a sum to provide for their future security.
On December 20, 1989, an employee stock ownership plan feature (the
"ESOP") was added to the Plan. The Plan as amended and restated herein
effective as of June 30, 1995 (the "Effective Date") consists of a
profit sharing and stock bonus plan which is intended to qualify under
sections 401(a) and 401(k) of the Internal Revenue Code, and an employee
stock ownership plan which is intended to qualify as a stock bonus plan
under section 401(a) of the Internal Revenue Code and as an employee
stock ownership plan under section 4975(e)(7) of the Internal Revenue
Code. The assets of the ESOP shall consist of the Supplement C Shares
Fund, the Supplement C Cash Equivalents Fund and all other amounts
attributable to Employers' Contributions and participants' after-tax
deposits, including Employers' Contributions and participants' after-tax
deposits made with respect to plan years beginning before January 1,
1990. The assets of the ESOP shall be invested primarily in common
shares of the Company ("Company Shares") which qualify as "employer
securities" within the meaning of section 409(l) of the Internal Revenue
Code.
I Split Up of Plan. Prior to the Effective Date, the Plan included
assets attributable to a profit sharing and stock bonus plan feature, a
leveraged employee stock ownership plan feature ("ESOP") and a tax
credit employee stock ownership feature ("ESOF"). As of the Effective
Date the Plan was split into two separate plans: (1) a profit sharing
and stock bonus plan and leveraged employee stock ownership plan
providing benefits to eligible employees of the Company and its
affiliates (exclusive of The Allstate Corporation and its subsidiaries
(the "Allstate Group")), which continued to hold the assets attributable
to the profit sharing and stock bonus plan, ESOF and ESOP features of
the Plan which were allocable to employees and former employees of the
Company and its affiliates other than the Allstate Group and certain of
the assets held in the ESOP suspense account, and which continued to be
known as The Savings and Profit Sharing Fund of Sears Employees; and
(2) a profit sharing and stock bonus plan and leveraged employee stock
ownership plan providing benefits to eligible employees of the Allstate
Group, to which were transferred the assets attributable to the profit
sharing and stock bonus plan, ESOF and ESOP features of the Plan which
were allocable to employees and former employees of the Allstate Group
and certain of the assets held in the ESOP suspense account, and which
is known as The Savings and Profit Sharing Fund of Allstate Employees
(the "Allstate Plan").
II Spinoff of Dean Witter, Discover & Co. Prior to June 30, 1993, Dean
Witter, Discover & Co. ("DWDC") and its affiliates were members of the
controlled group of corporations (within the meaning of section 414(b)
of the Internal Revenue Code) that includes the Company. On June 30,
1993, all of the shares of DWDC held by the Company were distributed to
the shareholders of the Company as a spinoff dividend and DWDC thereby
ceased to be a member of the controlled group of corporations that
includes the Company. Effective as of June 29, 1993, participants in
the Plan who were employed by DWDC or an affiliate of DWDC following the
DWDC spinoff (the "Transferred DWDC Participants") ceased to actively
participate in the Plan. As a result of the spinoff of DWDC from the
Company, Company Shares which had been held in participants' accounts
under the Plan were converted into Company Shares and shares of DWDC
that were received as dividends with respect to such Company Shares.
The Company Shares and the dividended DWDC shares each represent a
portion of the value of pre-spinoff investments of participants'
accounts in Company Shares. Accordingly, the Company determined that in
order to provide participants with the opportunity to continue to hold
the same economic investment following the DWDC spinoff as before and
enhanced investment flexibility following the spinoff, the Plan shall
provide for not only a Company Shares Fund and a Supplement C Shares
Fund, but also a DWDC Shares Fund. As provided in subsection 5.3(a),
and subject to the provisions thereof, participants may elect to
continue holding shares of DWDC in their accounts under the Plan, or may
elect to sell all or a portion of such shares and reinvest the proceeds
in the Company Shares Fund. The DWDC Shares Fund is provided solely to
permit the continued holding of shares of DWDC allocated to
participants' accounts as a result of the spinoff of DWDC. Accordingly,
no future contributions or investment transfers may be made to the DWDC
Shares Fund.
III Spinoff of The Allstate Corporation. Prior to the Effective Date,
The Allstate Corporation ("Allstate") and its subsidiaries were members
of the controlled group of corporations (within the meaning of section
414(b) of the Internal Revenue Code) that includes the Company. As of
the Effective Date all of the shares of Allstate held by the Company
will be distributed to the shareholders of the Company as a spinoff
dividend and Allstate will thereby cease to be a member of the
controlled group of corporations that includes the Company. As a result
of the spinoff of Allstate from the Company on the Effective Date,
Company Shares held in participants' accounts under the Plan will be
converted into Company Shares and shares of Allstate that will be
received as dividends with respect to such Company Shares. The Company
Shares and the dividended Allstate shares will each represent a portion
of the value of pre-spinoff investments of participants' accounts in
Company Shares. Accordingly, the Company has determined that in order
to provide participants with the opportunity to continue to hold the
same economic investment following the Allstate spinoff as before and
enhanced investment flexibility following the spinoff, the Plan shall
provide for not only a Company Shares Fund, a Supplement C Shares Fund
and a DWDC Shares Fund, but also an Allstate Shares Fund. As provided
in subsection 5.3(b), and subject to the provisions thereof,
participants may elect to continue holding shares of Allstate in their
accounts under the Plan, or may elect to sell such shares and reinvest
the proceeds in Company Shares. The Allstate Shares Fund is provided
solely to permit the continued holding of shares of Allstate allocated
to participants' accounts as a result of the spinoff of Allstate.
Accordingly, no future contributions or investment transfers may be made
to the Allstate Shares Fund.
1.2 The Employers. The term "employers" shall mean the Company and
those affiliates of the Company whose employees are eligible to
participate in the Plan, as designated by the Company.
1.3 Administration. Title to all assets of the Plan is held by one or
more Trustees appointed by the Company. The Plan is administered by a
Profit Sharing Plan Administrator (the "Plan Administrator") appointed
by the Company, as described in subsection 8.5. Subject to the
provisions of section 8, the assets of the Plan are managed and
controlled by an Investment Committee appointed by the Company,
consisting of one or more individuals, none of whom is a Trustee. Each
participant in the Plan shall be a "named fiduciary" within the meaning
of section 402 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), to the extent that Company Shares or shares of
DWDC or Allstate, whether or not allocated to his accounts, are voted or
tendered according to the participant's directions. The Investment
Committee and the Company are "named fiduciaries," but solely to the
extent that they have any fiduciary responsibilities under the Plan and
the related trusts, including any responsibilities with respect to the
acquisition, retention and disposition of Plan assets.
1.4 Plan Year. The fiscal year of the Plan will commence on January 1
of each year and end on December 31 of the same year. The fiscal year
of the Plan shall be the "plan year" for purposes of ERISA.
1.5 Gender, Number and Terms. The masculine pronoun wherever used,
shall include the feminine pronoun, and where the context admits,
singular words shall include the plural thereof. The term "employees"
means all individuals who are employees of the employers, including
those designated as "associates" by their employer.
1.6 Supplements. From time to time the Company may adopt supplements
to the Plan. Each supplement will be attached to and will form a part
of the Plan and will supersede the provisions of the Plan to the extent
necessary to eliminate any inconsistencies between the Plan and such
supplement.
SECTION 2
Eligibility and Participation
2.1 Participation Voluntary. Participation in the Plan on the part of
eligible employees is voluntary. Employees who become eligible to make
deposits to the Plan will be notified by their employer of the date as
of which they are first eligible to do so, but thereafter neither the
employers, the Plan Administrator nor the Trustee shall have any duty to
remind eligible employees of their continuing eligibility. An employee
who, although eligible to make deposits, chooses not to make deposits
when first eligible to do so may elect to make deposits to the Plan and
become a participant as of the first day of any plan year thereafter so
long as such eligible employee remains in the employ of the employers.
The Plan Administrator may, from time to time, permit an open enrollment
period during which employees who were eligible to make deposits but
previously chose not to do so or who suspended deposits in a prior plan
year may elect to make or resume deposits to the Plan and become
participants in the Plan as of the date specified by the Plan
Administrator. Notwithstanding the preceding sentence, any such open
enrollment period shall not apply (i) to participants who have suspended
deposits during the plan year in which the open enrollment period
occurs, and (ii) at the discretion of the Plan Administrator, to
highly-compensated employees as defined in subparagraph (f) of
subsection 3.3.
2.2 Regular Employees. Each regular employee who was employed by an
employer prior to January 1, 1989 is eligible to become a participant
upon completion of one year of continuous service. Each other regular
employee of an employer will be eligible to make deposits to the Plan
and become a participant upon both attainment of age 21 years and
completion of one year of continuous service. A "regular employee"
shall mean any employee of an employer who regularly is scheduled to
work the full work week in the unit to which he is assigned, including
any individual who is treated, under the provisions of sections 406 and
407 of the Internal Revenue Code, as amended, as an employee of a
domestic corporation which is an employer, or a domestic parent
corporation which is an employer.
2.3 Part-Time Regular Employees. Each part-time regular employee who
was employed by an employer prior to January 1, 1989 is eligible to make
deposits to the Plan and become a participant upon completion of the
1,000 hours of service requirement. Each other part-time regular
employee of an employer will be eligible to make deposits to the Plan
and become a participant upon both attainment of age 21 years and
completion of the 1,000 hours of service requirement. A "part-time
regular employee" shall mean any employee of an employer who has
completed the 1,000 hours of service requirement and who regularly is
scheduled to work less than the full work week in the unit to which he
is assigned. The "1,000 hours of service requirement" means that an
employee must complete 1,000 hours of service within the 12-month period
commencing with the employee's employment commencement date and, if the
employee shall not have completed 1,000 hours of service within such
12-month period, then the employee must complete 1,000 hours of service
within any subsequent 12-month period, measured from any anniversary of
his employment commencement date. An "hour of service" means each hour
for which an employee is directly or indirectly paid or entitled to
payment by an employer or a controlled group member (as described in
subsection 2.4 below) for the performance of duties or for reasons other
than the performance of duties, including each hour for which backpay,
irrespective of mitigation of damages, has either been awarded or agreed
to by an employer or a controlled group member, determined and credited
in accordance with Department of Labor Regulations section 2530.200b-2,
or under any other section or sections of such regulations which may
amend, supplement or supersede said section of such regulations.
2.4 Continuous Service. An employee's "continuous service" shall be
the continuous period of service with an employer (including as an
employer for purposes of this subsection Sears Canada, Inc. and any
affiliate of the Company which qualifies as a member of a controlled
group of corporations within the meaning of section 1563(a) of the
Internal Revenue Code for purposes of section 414(b) of said Code)
commencing with the employment commencement date and ending with the
date of severance from service with all employers and all controlled
group members. Such severance shall occur when the employee resigns,
retires, is discharged or dies, or when any approved leave of absence
expires without the employee returning to employment, but not earlier
than the later of the first date of absence from active service for any
reason and the expiration of an employee's leave of absence without
returning to employment, as the case may be, where there is no severance
from service by reason of resignation, retirement or discharge occurring
during such absence. Continuous service shall include any period
subsequent to the date of severance from service if the employee is
reemployed by an employer within 12 months following the date of
severance from service due to resignation, retirement or discharge.
With respect to each employee of a member of the Allstate Group on the
Effective Date who transfers employment to the Company or an affiliate
of the Company (other than a member of the Allstate Group) within twelve
months following the Effective Date, continuous service shall also
include, to the extent not otherwise included in the above definition,
any continuous service credited to such employee under the Allstate Plan
as of the date of such employment transfer.
2.5 Participant and Restricted Participant. The term "participant"
means an eligible employee who has an account under the Plan or who is
making deposits to the Plan, and, to the extent provided in
subsection 2.6, also includes the beneficiary of a deceased participant.
The term "restricted participant" means a participant who has separated
from service with all of the employers and controlled group members, but
who has not yet received a complete distribution of his account
balances. Except to the extent permitted under subsection 7.1, a
restricted participant may not elect a withdrawal from his accounts
pursuant to subsection 3.6. For purposes of this subsection 2.5 and
3.6, a participant to whom distribution is permitted under the
disposition exception set forth in subsection 7.3 shall be considered a
restricted participant when he terminates employment with the employers
and controlled group members regardless of whether such termination also
constitutes a separation from service.
2.6 Period of Participation. When distribution of the interest of a
participant is deferred beyond or cannot be made until after the date of
severance from service, the participant (or, in the case of his death,
his beneficiary) will be considered and treated as a participant in the
Plan with respect to the undistributed interest of such participant for
all purposes, except as follows:
(a) The participant and his beneficiary will not share in the
Employers' Contribution after severance from service, except as provided
in subsection 6.5.
(b) The beneficiary of a participant cannot designate a beneficiary of
such undistributed interest under subsection 7.4.
(c) The beneficiary of a participant may not make investment elections
or transfers under subsections 5.3, 5.11 and 5.12.
(d) All amounts allocated to a participant's accounts shall
automatically be transferred to the Money Market Fund upon the
participant's death, except for amounts allocated to the participant's
Company Shares account, the participant's Supplement C Shares account,
the participant's DWDC Shares account, the participant's Allstate Shares
account, and Cash Equivalents accounts maintained for the participant.
2.7 Reemployment. A participant (or a regular employee or part-time
employee who on the date of severance was eligible to become a
participant) who severs from service with the employers due to
resignation, retirement or discharge, and who is reemployed by an
employer shall be eligible to make deposits to the Plan immediately upon
such reemployment subject to the following:
(a) In the case of an employee or participant who is reemployed during
the same plan year in which his severance from service occurred, the
percentage rates of his deposits under subsection 3.2 and the
participant's investment elections under subsection 5.11 which applied
prior to his severance also will apply following his reemployment; and
in the case of a participant who is reemployed subsequent to such plan
year, the percentage rates and the investment elections selected by him
when he rejoins the Plan shall be applicable until changed in accordance
with subsections 3.4 and 5.11;
(b) Any amount allocable to him under subsection 6.5 for the plan year
during which his reemployment date occurs will be calculated on the
basis of the aggregate of his basic pre-tax deposits during such plan
year after rejoining the Plan plus any basic pre-tax deposits previously
made by him for such plan year, but, in the case of a participant who
was reemployed during the same plan year in which his severance from
service occurred, any such amount as so calculated then will be reduced
by any amounts which previously shall have been credited and distributed
to him during such plan year in accordance with clause (v) of
subparagraph 6.5(a); and
(c) For the plan year during which his reemployment date occurs, he
will be permitted to make deposits following reemployment only with
respect to that part of his compensation received in such plan year
following such reemployment.
2.8 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 or in any other plan maintained by
an employer or a related company which is qualified under section 401(a)
of the Code, 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:
(a) 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 nonintegrated 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; or
(b) for any other period unless the leased employee provides
satisfactory evidence to the employer or related company that he meets
all of the conditions of this subsection 2.8 and applicable law required
for treatment as a leased employee.
For purposes of paragraph (a) above, "highly-compensated" shall have the
meaning set forth in paragraph 3.3(f).
SECTION 3
Employee Deposits and Withdrawals
3.1 Definition of Compensation. "Compensation" of an employee for any
plan year shall mean total cash compensation not in excess of the
maximum limitation described in section 401(a)(17) of the Internal
Revenue Code, as that limitation is adjusted from time to time by the
Secretary of Treasury to reflect cost of living increases, paid to such
employee for personal services rendered to an employer, including
salary, wages, pre-tax employee deposits under this or any other
qualified profit sharing or stock bonus plan maintained by an employer,
bonuses, incentive payments, commissions, overwrites, vacation pay, unit
closing allowances (except to the extent such allowances are paid in a
lump sum), employer payments for temporary military service and
short-term illness allowances, but excluding any awards under any
long-term executive compensation plan, service allowances, retirement or
profit sharing benefits, employer contributions on behalf of the
employee to a cafeteria plan of an employer pursuant to section 125 of
the Internal Revenue Code (except for applying the deferral percentage
under section 401(k)(3) and the contribution percentage under section
401(m)(2) of the Internal Revenue Code), long-term disability benefit
payments, prizes or awards, retainers, living expense allowances, moving
allowances, payments or reimbursements in connection with moving
expenses, special geographic differentials, medical expense
reimbursements, lump sum payments for vacations earned but not taken,
overseas compensation adjustments (as determined under the employer's
personnel policy), dividends paid with respect to shares of restricted
stock, cash payments received pursuant to stock options, other special
compensation of any kind and compensation paid to an insurance agent for
writing involuntary insurance business (i.e., business which is placed
through or reinsured with a plan, association or organization
established pursuant to a statute or regulation or a cooperative plan of
the insurance industry, to afford coverage for risks not generally
acceptable for insurance).
3.2 Amount and Types of Deposits. References in this section 3 and
elsewhere in the Plan to participants' deposits made on a "pre-tax" or
"after-tax" basis mean deposits made by them from their compensation
either before or after the imposition of federal income taxes,
irrespective of whether the deposits made from such compensation are
either before or after the imposition of state, local or other taxes.
Subject to the conditions and limitations of this subsection and
subsections 2.7 and 6.6, participants may elect to make deposits under
the Plan as follows:
(a) Basic Pre-Tax Deposits. Subject to the limitations of
subparagraph (e) below, a participant may elect to make "basic pre-tax
deposits" under the Plan from one percent through 5 percent, in whole
percentages, of the participant's compensation in order to share in the
Employers' Contribution; provided, however, to the extent that the
amount of a participant's basic pre-tax deposits for a plan year are
limited by the requirements of subparagraph (e) below, such deposits
will be reduced in order to comply with such requirements. Pursuant to
the participant's salary deferral authorization, such pre-tax deposits
shall be made by a reduction of the participant's compensation in the
percentage specified by the participant, and a contribution by the
employers under the Plan of the amount of such reduction.
(b) Additional Pre-Tax Deposits. Subject to the limitation in
subparagraph (e) below, a participant who is making basic pre-tax
deposits of 5 percent may elect to make "additional pre-tax deposits" of
a whole percentage, not exceeding 12 percent of the participant's
compensation; provided, however, to the extent that the amount of a
participant's additional pre-tax deposits for a plan year are limited by
the requirements of subparagraph (e) below, such deposits will be
reduced in order to comply with such requirements. Pursuant to the
participant's salary deferral authorization, such additional pre-tax
deposits shall be made by a reduction of the participant's compensation
in the appropriate percentage and a contribution by the employers of the
amount of such reduction. No Employers' Contribution will be allocated
under the Plan with respect to the participants' additional pre-tax
deposits.
(c) After-Tax Deposits. A participant may elect to make after-tax
deposits of a whole percentage not exceeding 10% of the participant's
"adjusted compensation," regardless of whether the participant is making
any basic pre-tax deposits. However, in no event shall a participant's
after-tax deposits for a plan year exceed $15,000. A participant's
"adjusted compensation" shall be in the amount of his compensation, as
defined in subsection 3.1, reduced by the amount of pre-tax deposits
made by such participant under the Plan. Deposits will be withheld from
the adjusted compensation payable to participants by the employers from
time to time, and each participant must execute a payroll deduction
authorization for such withholding. No Employers' Contribution will be
allocated with respect to participants' after-tax deposits, except as
provided in subparagraph 3.3(c).
(d) Maximum Deposits. The amount of a participant's pre-tax deposits
and after-tax deposits for a plan year may not in the aggregate exceed
17 percent of such participant's compensation for such year.
(e) Maximum Pre-Tax Deposits. The amount of a participant's pre-tax
deposits made under this plan and the amount of contributions made on a
pre-tax basis by such participant under all other cash or deferred
arrangements of the employers (as defined in subsection 2.4) intended to
meet the requirements of section 401(k) of the Internal Revenue Code
during a calendar year may not in the aggregate exceed the maximum
limitation described in section 402(g) of the Internal Revenue Code, as
that limitation is adjusted from time to time by the Secretary of
Treasury to reflect cost of living increases. Accordingly, to the
extent that a participant's deposits made pursuant to subparagraph (a)
or (b) above for any calendar year exceed the limitation described
above, such excess (and any earnings allocable thereto) shall be
distributed to him in cash as soon as is practicable after such excess
is discovered, but in no event later than the April 15 following the
close of the plan year in which such excess deposit was made.
Distribution of such excess shall be made first by reducing a
participant's additional pre-tax deposits made pursuant to
subparagraph (b) above, if any, and then by reducing a participant's
pre-tax deposits made pursuant to subparagraph (a) above. Upon a
participant's written notification and direction received by the Plan
Administrator that such participant's pre-tax deposits under this plan
and contributions made on a pre-tax basis under any other cash or
deferred arrangement that is not sponsored by the employers in which he
is a participant exceed the limitations described above for a calendar
year, such portion of the pre-tax deposits (and any earnings allocable
thereto) for such calendar year, as the participant shall specify in
such notification, shall be distributed to such participant.
Distributions to be made in accordance with the preceding sentence shall
be made as soon as is practicable following receipt by the Plan
Administrator of such written notification; provided, however, if such
written notification is received on or before the March 1 of the year
following the calendar year in which such excess occurred, such
distribution shall be made by not later than the next April 15.
3.3 Conditions and Limitations for Deposits. The making of deposits
under subsection 3.2 shall be subject to the following:
(a) Deposits made pursuant to a participant's salary deferral
authorization or payroll deduction authorization will be paid to the
Trustee as soon as practicable.
(b) Deposits may not be made by, or withheld from, the compensation of
any individual whose place of employment with an employer is outside of
the United States of America and who is neither a citizen nor a resident
of the United States of America.
(c) Participants who are residents of Puerto Rico may not make deposits
on a pre-tax basis. Therefore, such participants may make only
after-tax deposits from one percent through 10 percent, in whole
percentages of the participant's compensation. However, in no event
shall a participant's deposits for a plan year exceed $22,000. Such a
participant's basic after-tax deposits of up to the lesser of 5 percent
of compensation or an amount equal to the maximum amount of pre-tax
deposits permitted in accordance with subparagraph 3.2(e) will be
treated in the same manner as basic pre-tax deposits under the Plan,
except that for withdrawal purposes these deposits will be treated as
after-tax deposits. Any after-tax deposits in excess of the preceding
limitations shall be treated as after-tax deposits for all purposes of
the Plan. Accounting for such participants, and other limitations of
the Plan, shall be adjusted to reflect this fact.
(d) Participants' pre-tax deposits are intended to qualify as a cash or
deferred arrangement under section 401(k) of the Internal Revenue Code.
Accordingly, pre-tax deposits shall be monitored from time to time
during each plan year and to the extent, as of the end of the plan year,
the pre-tax deposits of highly-compensated employees (as defined in
subparagraph (f) below) would be in excess ("excess deposits") of the
limitations imposed on such deposits under the nondiscrimination
standards set forth in section 401(k)(3) of the Internal Revenue Code,
such deposits will be reduced first by reducing additional pre-tax
deposits and then basic pre-tax deposits on the basis of the respective
portions of the excess deposits attributable to each of such
highly-compensated employees. If a participant's pre-tax deposits are
required to be reduced for any plan year, such reduction shall be made
by first reducing the rate of such participant's pre-tax deposits for
the remainder of such year and then, to the extent any excess deposits
remain after such reduction, such remaining excess deposits and any
earnings thereon shall be distributed to him in cash.
(e) Participants' after-tax deposits and prospective Employers'
Contributions are intended to meet the contribution percentage
requirements of section 401(m) of the Internal Revenue Code.
Accordingly, to the extent the after-tax deposits of highly-compensated
employees or the Employers' Contributions to be allocated to
highly-compensated employees or both would be in excess ("excess
deposits" and "excess Employers' Contributions") of the limitations
imposed on such deposits and Employers' Contributions under the
nondiscrimination standards set forth in section 401(m), such deposits
by highly-compensated employees or the Employers' Contribution to be
allocated to such employees, or both, will be reduced on the basis of
the respective portions of the excess deposits or excess Employers'
Contributions, or both, attributable or allocable to each of such
highly-compensated employees. If a participant's after-tax deposits are
required to be reduced for any plan year, such reduction shall be made
first by reducing the rate of such participant's after-tax deposits for
the remainder of such year and then, to the extent any excess deposits
remain after such reduction, such remaining excess deposits and any
earnings thereon shall be distributed to him in cash. Excess Employers'
Contributions otherwise allocable to highly-compensated employees shall
be reallocated among the accounts of all non-highly-compensated
employees otherwise entitled to share in the Employers' Contributions in
accordance with subsection 6.5.
(f) A "highly-compensated employee" is an employee who, at any time
during the preceding plan year or during the current year, if during the
current year such employee is one of the 100 employees earning the
greatest compensation from the employers:
(i) received compensation from the employers for the year in excess of
$75,000 (or such greater amount as may be determined by the Commissioner
of Internal Revenue),
(ii) received compensation from the employers for the year in excess of
$50,000 (or such greater amount as may be determined by the Commissioner
of Internal Revenue) and was among the top 20 percent of employees of
the employers when ranked on the basis of compensation paid during the
plan year, or
(iii) was an officer of an employer and received compensation from the
employers for the year in excess of $45,000 (or 50 percent of the
limitation in effect under section 415(b)(1)(A) for the plan year),
provided that no more than 50 employees of the employers shall be
treated as officers.
"Employees" for the purposes of this subsection means all employees
meeting the requirements of subsections 2.2 and 2.3, irrespective of
whether or not they have elected to make basic pre-tax deposits for the
year.
(g) At the election of the Plan Administrator, the discrimination
testing and correction under paragraphs (d) and (e) of this subsection
3.3 may be performed separately with respect to different groups of
eligible employees and participants under the Plan, provided that each
such group meets the requirements of applicable regulations under
section 401(a)(4) of the Internal Revenue Code.
3.4 Variation of Rate or Type of Deposits. On or before November 15 of
each plan year (or such other dates as may be specified by the Plan
Administrator or an employer), a participant may elect to change the
rate of his deposits and the designation (i.e., pre-tax or after-tax) of
his deposits, which change will be effective with respect to
compensation received on and after the beginning of the next succeeding
plan year. Any election to make deposits at a specified rate or of a
designated type will continue in effect until changed by the participant
through an election made in accordance with this subsection.
3.5 Suspension of Deposits. At any time during a plan year a
participant may elect to suspend his pre-tax deposits, his after-tax
deposits or all deposits of both types. If a participant elects to
suspend deposits during any plan year, such suspension shall be
effective with respect to the first payroll period for which such
suspension can be made effective under his employer's payroll procedures
and shall continue until such participant elects to resume the type or
types of deposits suspended in accordance with subsection 3.2 and this
subsection 3.5 and such resumption becomes effective. A participant who
has suspended deposits under this subsection may elect to resume such
deposits on or before November 15 of each plan year (or such other dates
as may be specified by the Plan Administrator or an employer), which
resumption will be effective with respect to compensation received on
and after the beginning of the next succeeding plan year; provided,
however, that if such participant elects to resume deposits after
November 15 (or a later date specified by the Plan Administrator or an
employer) in a plan year but before the end of the plan year, such
resumption will be effective with respect to compensation received on
and after the beginning of the second next succeeding plan year, unless
the participant becomes eligible to resume deposits earlier during an
open enrollment period as described in subsection 2.1. Any election to
resume deposits will continue in effect until changed by the participant
through an election made in accordance with subsection 3.4 or a
suspension made in accordance with this subsection.
3.6 Partial Withdrawals from the Plan Without Terminating Employment.
Upon giving prior written notice, a participant other than a restricted
participant, may elect to withdraw from the Plan, without terminating
employment, an amount specified by him, which amount shall not exceed
the participant's entire "interest in the Plan," as defined in
subsection 6.1, reduced by an amount equal to the sum of the following:
(a) Unless the participant has participated in the Plan for at least 5
years, an amount equal to the participant's portion of the last two
Employers' Contributions credited to his account under subsection 6.5
preceding the date on which the withdrawal payment is made; plus
(b) An amount equal to the sum of the aggregate amount of any after-tax
deposits made by him since the end of the last preceding calendar year;
plus
(c) All pre-tax deposits and any earnings attributable thereto.
Notwithstanding the foregoing, a participant who has, except as provided
in subparagraph (e) below, withdrawn the maximum amount permitted in
accordance with the preceding provisions of this subsection and:
(d) Who has attained age 59-1/2 years may withdraw his pre-tax deposits
and the earnings thereon, except any pre-tax deposits made during the
plan year in which the withdrawal request is signed by the participant
may not be withdrawn. A participant described in this subparagraph is
permitted to make a withdrawal of pre-tax deposits even though he has
not withdrawn any part of his Company Shares account.
(b) Who (i) has not attained age 59-1/2; and (ii) is confronted by a
hardship (as defined below) may withdraw his pre-tax deposits (but not
in excess of the amount required by such financial emergency), but not
the earnings thereon, except any pre-tax deposits made during the plan
year in which the withdrawal request is made may not be withdrawn.
For purposes of subparagraph (e) 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:
(f) medical expenses described in section 213(d) of the Internal
Revenue Code incurred by the participant, the 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;
(g) purchase (excluding mortgage payments) of a principal residence for
the participant;
(h) payment of tuition for the next 12 months of postsecondary
education for the participant, his or her spouse, children or
dependents;
(i) the need to prevent the eviction of the participant from his
principal residence or foreclosure on the mortgage of the participant's
principal residence;
(j) 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; or
(k) funeral expenses.
To be considered a hardship withdrawal under subparagraph (e), 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 in writing to the Plan Administrator that the
need cannot be relieved:
(l) through reimbursement or compensation by insurance or otherwise;
(m) 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;
(n) by ceasing to make deposits to the Plan (or any other deferred
compensation plan); or
(o) by borrowing on reasonable commercial terms.
Notwithstanding the foregoing provisions of this subsection 3.6, a
participant may withdraw his interest in the ESOP portion of the Plan in
accordance with subsection C-9.
3.7 Sources of Withdrawals. Any partial withdrawal will be made from,
and will be charged to, the withdrawing participant's subaccounts,
subject to the limits on amounts available for partial withdrawals set
forth in subsection 3.6: first, from the portion of the participant's
subaccounts reflecting his after-tax deposits made prior to January 1,
1987; next, from the portions of the participant's subaccounts
reflecting his after-tax deposits made after December 31, 1986 and
reflecting the earnings on such after-tax deposits; next, from the
portion of the participant's subaccounts reflecting the earnings on his
after-tax deposits made prior to January 1, 1987 and from the portion of
the participant's subaccounts reflecting Employers' Contributions; and,
finally, from the participant's subaccounts reflecting his pre-tax
deposits. Unless otherwise requested by the participant, his various
investment accounts will be charged in the order and in such proportions
as the Plan Administrator may specify, provided that a participant
electing withdrawal in the form of Company Shares as provided below
shall first have his withdrawal charged against his Company Shares
account and his Supplement C Shares account and then from his accounts
under the other investment funds in the following order: Money Market
account, Fixed Income account, General Investments account, Equity
account, DWDC Shares account and Allstate Shares account. A participant
who makes a withdrawal may elect to have any specified amounts which
would otherwise be paid to him in cash or in shares of DWDC or Allstate
(other than amounts attributable to his pre-tax subaccount) used by the
Trustee to purchase and distribute whole shares of Company Shares to the
participant at a price determined in accordance with subsection 7.2.
3.8 Method of Making Elections, Revocations, etc. Except as provided
in the following sentence, all actions required of, or permitted to be
taken by, participants under this section 3 must be in writing on a form
prescribed by the Plan Administrator, or the Company, as the case may
be, must be dated and signed by the participant taking the action, and,
in order to be effective, must be given to the person entitled thereto
within any applicable time limit. In addition, to the extent procedures
therefore are established by the Plan Administrator, any action
permitted or required to be taken by a participant in this section 3 or
any other provision of this Plan (other than the election described in
the proviso to the second sentence of subsection 5.3(b)) may be made by
telephonic or electronic communication, as long as the participant has
signed and submitted to the Company an authorization form which
substitutes as a signature for all subsequent telephonic and electronic
actions taken by the participant.
SECTION 4
Employers' Contribution
4.1 Amount of Employers' Contribution. Subject to the terms and
conditions of the Plan, including Supplement C hereof, for each fiscal
year of the Company, the "Employers' Contribution" to the Plan for the
plan year which ends with or within each such fiscal year shall be an
amount equal to the lesser of (a) 70 percent of the basic pre-tax
deposits made on behalf of participants for such plan year, or (b) the
amount determined in accordance with subsection 4.2 for such fiscal
year; provided, however, that the Employers' Contribution otherwise
required under this subsection 4.1 for any plan year shall be reduced by
the fair market value (determined as of December 31 of that plan year)
of the Company Shares allocated to the accounts of participants in
accordance with paragraph C-8(b) of Supplement C. The Employers'
Contribution shall be allocated to participants' accounts (as described
in subsection 6.1) in accordance with the provisions of subsection 6.5.
4.2 Limitations on Amount of Contribution. Subject to the following
provisions of this subsection 4.2, in no event shall the sum of the
Employers' Contribution for any plan year ending within a fiscal year
exceed an amount equal to (a) 6 percent of the sum of (i) the Net Income
of the Company for such fiscal year and (ii) an amount designated by the
Company in its sole discretion, which amount shall be no greater than
the amount determined by the Company to be the total direct and indirect
expenses of the Company and the employers for such fiscal year
attributable in whole or in part to the maintenance of the Plan, less
(b) the amount determined under clause (ii) above.
4.3 Definition of Net Income of the Company. The term "Net Income of
the Company" for any fiscal year of the Company shall mean net income of
the Company (excluding all equity in net income of partially-owned
domestic companies accounted for under the equity method of accounting
and all equity in net income of foreign companies, whether or not they
are consolidated, except for those foreign companies primarily engaged
in financing activities of the Company and its domestic subsidiaries,
whether or not received as dividends, and excluding gains or losses on
the disposition of investments in such companies whose net income is
excluded hereby) and its wholly-owned domestic subsidiaries for such
fiscal year (excluding those directly and indirectly owned subsidiaries
described in Appendix A) before deduction of dividends to shareholders,
before provisions for Federal income taxes and profit sharing
contributions, before deduction for the expense related to the immediate
recognition of the transition obligation under Statement of Financial
Accounting Standards No. 106 and before deduction for that portion of
the administrative expenses and financing costs, as determined by the
Company, which are properly allocable to the group commonly referred to
as Sears Specialty Merchandising, but after deduction for all pension
plan expenses.
4.4 Medium of Employers' Contribution. The Employers' Contribution
will be made either in cash or in Company Shares, or partially in each.
Any Company Shares comprising a portion of the Employers' Contribution
shall be valued at the fair-market value thereof at the date or dates on
which any contribution in that form is made.
4.5 Time of Employers' Contribution. The Employers' Contribution will
be made annually as soon after the end of each fiscal year as an audit
of that year's operations will permit, but an employer, to comply with
the provisions of subsection 6.5 or at its option, may at any time or
times before the end of its fiscal year or prior to the completion of
such audit, make advancements to the Plan, either in cash or in Company
Shares, or partially in each, in anticipation of such employer's share
of the Employers' Contribution for such fiscal year. If the total of
any such advancements exceeds such employer's share of the Employers'
Contribution for such fiscal year, as determined under subsection 4.6,
such excess may be repaid by the Plan to the employer making such excess
advancements. Any Employers' Contribution that is made to the Plan
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 an Employers's Contribution with respect to such prior plan
year.
4.6 Allocation of Employers' Contribution Among Employers. The share
of each employer in the Employers' 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 said employer.
4.7 Determination of Net Income of the Company. The determination of
Net Income of the Company shall be made, except as otherwise expressly
provided, in conformity with generally accepted accounting principles
effective at the close of each fiscal year. The firm of independent
certified public accountants selected by the Company to make the annual
examination of the Company's financial statements shall certify the
amount of Net Income of the Company for purposes of the Plan, and such
certification shall be conclusive on all persons.
SECTION 5
Investments
5.1 In General. The interests of participants will be invested in
Company Shares and other Investment Funds in accordance with the
following provisions of this section 5.
5.2 Company Shares Fund and Supplement C Shares Fund.
(a) Company Shares Fund. Consistent with the stated purposes of the
Plan, the Trustee shall invest that portion of the assets of the Plan
consisting of the Employers' Contribution in Company Shares to the end
that, in the largest measure possible, participants may share in the
earnings of the Company and acquire a proprietary interest in the
Company; provided, however, that all Employers' Contributions made with
respect to plan years beginning on and after January 1, 1990 shall be
used to make payments on ESOP Loans (as described in Supplement C) to
the extent provided in such Supplement C. The Trustee will also invest
assets attributable to participants' after-tax deposits and amounts
allocated to participants' DWDC Shares accounts and Allstate Shares
accounts in Company Shares in accordance with participants' elections
under subsection 5.3 or subsection 5.11. Any Company Shares acquired
and held in accordance with this subsection 5.2 will be known and
referred to as the "Company Shares Fund." Any portion of each
participant's credits to his accounts which is invested in the Company
Shares Fund will be allocated to such participant's "Company Shares
account" for the beneficial ownership of such participant.
(b) Supplement C Shares Fund. Supplement C to the Plan provides that
amounts attributable to ESOP Loans will be invested in Company Shares.
Such Company Shares shall be held and invested in the "Supplement C
Shares Fund." Any portion of each participant's credits to his accounts
which is invested in the Supplement C Shares Fund will be allocated to
such participant's "Supplement C Shares account," for the beneficial
ownership of such participant.
5.3 DWDC Shares Fund and Allstate Shares Fund.
(a) DWDC Shares Fund. Shares of common stock of DWDC received as a
dividend with respect to Company Shares held in the Company Shares Fund
and with respect to Company Shares allocated to participants'
Supplement C Shares accounts held in the Supplement C Shares Fund in
connection with the spinoff of DWDC shall initially be invested in the
"DWDC Shares Fund" and shall be allocated to participants' "DWDC Shares
accounts." At such time and in such manner as the Plan Administrator
may specify, a participant may elect to transfer amounts allocated to
his DWDC Shares account to the Company Shares Fund to be allocated to
the participant's Company Shares account in such amounts as are allowed
under rules established by the Plan Administrator, subject to the
following determination of the Trustee. Notwithstanding the foregoing
provisions of this subsection 5.3(a), the rights of participants either
to continue to hold shares of DWDC for investment in their DWDC Shares
accounts or to direct that such shares be sold and the sale proceeds
reinvested in Company Shares shall be subject to a determination by the
Trustee that the continued holding or the sale of shares of DWDC, as the
case may be, is appropriate in light of prudent investment standards
including considerations of diversification, and the Trustee shall have
absolute discretion at any time to require either the sale or the
continued holding of all or any portion of the shares of DWDC allocated
to participants' DWDC Shares accounts without regard to any election or
the failure to elect by a participant with respect to such sale or
continued holding. In considering any sales of shares of DWDC in
connection with the foregoing determinations (whether such sales are to
be made at the election of participants or upon the determination of the
Trustee without regard to any election or failure to elect by
participants) the Trustee shall act in accordance with the best
interests of participants to protect the value of Plan assets. Shares
of common stock of DWDC received as a dividend with respect to Company
Shares credited to the Suspense Account of the Supplement C Shares Fund
in connection with the spinoff of DWDC were initially invested in the
DWDC Shares Fund and were credited to a Suspense Account of the DWDC
Shares Fund. Shares of DWDC which were credited to the Suspense Account
of the DWDC Shares Fund were sold (or exchanged for Company Shares) by
the former Institutional Trustee consistent with prudent investment
standards, and the proceeds of such sales were applied to the purchase
of Company Shares and invested in the Supplement C Shares Fund and
credited to the Suspense Account thereof until released in accordance
with subsection C-7.
(b) Allstate Shares Fund. Shares of common stock of Allstate received
as a dividend with respect to Company Shares held in the Company Shares
Fund (including Company Shares that were formerly held in the
Supplement A Shares Fund) and with respect to Company Shares allocated
to participants' Supplement C Shares accounts held in the Supplement C
Shares Fund in connection with the spinoff of Allstate shall initially
be invested in the "Allstate Shares Fund" and shall be allocated to
participants' "Allstate Shares accounts" or in the Supplement C Shares
Fund and allocated to participants' Supplement C Shares accounts, as
applicable. Subject to the following proviso, shares of Allstate held
in the Allstate Shares Fund or the Supplement C Shares Fund and
allocated to participants' accounts shall, as soon as possible following
the Effective Date as is consistent with prudent investment standards as
determined by the Trustee, be sold (or exchanged for Company Shares) and
the proceeds of such sales shall be applied to the purchase of Company
Shares which shall be held in the Company Shares Fund and allocated to
participants' Company Shares accounts or in the Supplement C Shares Fund
and allocated to participants' Supplement C Shares accounts, as
applicable; provided, however, that, at such time and in such manner as
the Plan Administrator may specify, a participant may elect to have the
Plan continue to hold all of the shares of Allstate which are allocated
to such participant's accounts, in which event all such shares of
Allstate held in the Supplement C Shares Fund shall be transferred to
the Allstate Shares Fund. A participant who, pursuant to the proviso
set forth in the preceding sentence, has elected to have the Plan
continue to hold all of the shares of Allstate allocated to such
participant's accounts, may, at such time and in such manner as the Plan
Administrator may specify, elect to transfer all or any portion of such
Allstate shares to the Company Shares Fund to be allocated to the
participant's Company Shares account in such amounts as are allowed
under rules established by the Plan Administrator, subject to the
following determination of the Trustee. Notwithstanding the foregoing
provisions of this subsection 5.3(b), the rights of participants either
to continue to hold shares of Allstate for investment in their accounts
or to direct that such shares be sold and the sale proceeds reinvested
in Company Shares shall be subject to a determination by the Trustee
that the continued holding or the sale of shares of Allstate, as the
case may be, is appropriate in light of prudent investment standards
including considerations of diversification, and the Trustee shall have
absolute discretion at any time to require either the sale or the
continued holding of all or any portion of the shares of Allstate
allocated to participants' accounts without regard to any election or
the failure to elect by a participant with respect to such sale or
continued holding. In considering any sales of shares of Allstate in
connection with the foregoing determinations (whether such sales are to
be made at the election of participants or upon the determination of the
Trustee without regard to any election or failure to elect by
participants) the Trustee shall act in accordance with the best
interests of participants to protect the value of Plan assets. Shares
of common stock of Allstate received as a dividend with respect to
Company Shares credited to the Suspense Account of the Supplement C
Shares Fund in connection with the spinoff of Allstate shall initially
be credited to the Suspense Account of the Supplement C Shares Fund.
Shares of Allstate credited to the Suspense Account of the Supplement C
Shares Fund shall, as soon as possible following the Effective Date as
is consistent with prudent investment standards as determined by the
Trustee, be sold (or exchanged for Company Shares) and the proceeds of
such sales shall be applied to the purchase of Company Shares which
shall be invested in the Supplement C Shares Fund and credited to the
Suspense Account thereof until released in accordance with subsection
C-7.
5.4 General Investments Fund. All cash, stocks, bonds, notes and other
securities and investments of any kind reflecting that portion of the
assets of the Plan which consists of participants' pre-tax or after-tax
deposits held as a part of the Plan, exclusive of (i) the Company Shares
Fund, (ii) the Supplement C Shares Fund, (iii) the Allstate Shares Fund,
(iv) the DWDC Shares Fund, (v) the Money Market Fund, (vi) the Fixed
Income Fund, (vii) the Equity Fund, (viii) any Cash Equivalents Fund,
and (ix) any other investment fund established under the Plan, will be
known and referred to as the "General Investments Fund." The General
Investments Fund shall consist primarily of a domestic equities
component comprising approximately 50% of the market value of the Fund
assets, a domestic fixed income component comprising approximately 50%
of the market value of the Fund assets, and a cash equivalents
component. The domestic equity component shall be primarily invested in
a manner which is intended to provide a rate of return over any ten-year
period which, to the extent possible, is consistent with the performance
of a capitalization-weighted index consisting of all listed securities
in the Standard & Poor's 500 Composite Stock Price Index, exclusive of
stock of the Company. The domestic fixed income component shall be
primarily invested in a manner which is intended to provide a rate of
return over any ten-year period which, to the extent possible, is
consistent with the performance of a value-weighted index consisting of
all listed securities in the Lehman Brothers Aggregate Bond Index,
exclusive of any debt securities issued by the Company. Any portion of
each participant's credits to his accounts which is invested in the
General Investments Fund will be allocated to such participant's
"General Investments account" for the beneficial ownership of such
participant.
5.5 Money Market Fund. Commercial paper, certificates of deposit,
short-term United States government and government agencies securities,
and similar short-term cash equivalents reflecting that portion of the
assets of the Plan which consists of participants' pre-tax or after-tax
deposits held as part of the Plan, exclusive of (i) the Company Shares
Fund, (ii) the Supplement C Shares Fund, (iii) the Allstate Shares Fund,
(iv) the DWDC Shares Fund, (v) the General Investments Fund, (vi) the
Fixed Income Fund, (vii) the Equity Fund, (viii) any Cash Equivalents
Fund, and (ix) any other investment fund established under the Plan,
will be known and referred to as the "Money Market Fund." Any portion
of each participant's credits to his accounts which is invested in the
Money Market Fund will be allocated to such participant's "Money Market
account" for the beneficial ownership of such participant.
5.6 Equity Fund. Equity securities reflecting that portion of the
assets of the Plan which consists of participants' pre-tax or after-tax
deposits held as part of the Plan, exclusive of (i) the Company Shares
Fund, (ii) the Supplement C Shares Fund, (iii) the Allstate Shares Fund,
(iv) the DWDC Shares Fund, (v) the General Investments Fund, (vi) the
Money Market Fund, (vii) the Fixed Income Fund, (viii) any Cash
Equivalents Fund, and (ix) any other investment fund established under
the Plan, will be known and referred to as the "Equity Fund." The
Equity Fund shall be primarily invested in a manner which is intended to
provide a rate of return over any ten-year period which, to the extent
possible, is consistent with the performance of a capitalization-
weighted index consisting of all listed securities in the Standard &
Poor's 500 Composite Stock Price Index, exclusive of stock of the
Company. Any portion of each participant's credits to his accounts
which is invested in the Equity Fund will be allocated to such
participant's "Equity account" for the beneficial ownership of such
participant.
5.7 Fixed Income Fund. Debt securities reflecting that portion of the
assets of the Plan which consists of participants' pre-tax or after-tax
deposits held as part of the Plan, exclusive of (i) the Company Shares
Fund, (ii) the Supplement C Shares Fund, (iii) the Allstate Shares Fund,
(iv) the DWDC Shares Fund, (v) the General Investments Fund, (vi) the
Money Market Fund, (vii) the Equity Fund, (viii) any Cash Equivalents
Fund, and (ix) any other investment fund established under the Plan,
will be known and referred to as the "Fixed Income Fund." The Fixed
Income Fund shall be primarily invested in a manner which is intended to
provide a rate of return over any ten-year period which, to the extent
possible, is consistent with the performance of a value-weighted index
consisting of all listed securities in the Lehman Brothers Aggregate
Bond Index, exclusive of any debt securities issued by the Company. Any
portion of each participant's credits to his accounts which is invested
in the Fixed Income Fund will be allocated to such participant's "Fixed
Income account" for the beneficial ownership of such participant.
5.8 Company Shares Cash Equivalents Fund. Commercial paper,
certificates of deposit, short-term United States government and
government agencies securities, and similar short-term cash equivalents
reflecting that portion of the assets of the Plan which consists of the
Employers' Contributions, dividends on Company Shares allocated to
participants' Company Shares accounts, dividends on shares of Allstate
allocated to participants' Allstate Shares accounts, dividends on shares
of DWDC allocated to participants' DWDC Shares accounts, dividends on
Company Shares allocated to participants' Supplement C Shares accounts
that are directed by the Investment Committee to be credited to
participants' Company Shares Cash Equivalents accounts and after-tax
deposits not yet invested in Company Shares, exclusive of (i) the
Company Shares Fund, (ii) the Supplement C Shares Fund, (iii) the
Allstate Shares Fund, (iv) the DWDC Shares Fund, (v) the General
Investments Fund, (vi) the Fixed Income Fund, (vii) the Equity Fund,
(viii) the Money Market Fund, and (ix) any other investment fund
established under the Plan, will be known and referred to as the
"Company Shares Cash Equivalents Fund." Any portion of each
participant's credits to his accounts which is invested in the Company
Shares Cash Equivalents Fund will be allocated to such participant's
"Company Shares Cash Equivalents account" for the beneficial ownership
of such participant.
5.9 Supplement C Cash Equivalents Fund. Commercial paper,
certificates of deposit, short-term United States government and
government agencies securities, and similar short-term cash equivalents
reflecting that portion of the assets of the Plan which consists of
Employers' Contributions and dividends on Company Shares and the income
allocated thereto which are to be used to make payments on an ESOP Loan
(as described in Supplement C) will be known and referred to as the
"Supplement C Cash Equivalents Fund." Amounts invested in the
Supplement C Cash Equivalents Fund shall be used solely for the purpose
of making payments of principal and interest on ESOP Loans, except as
otherwise provided by the Investment Committee.
5.10 Additional Investment Funds. One or more additional investment
funds may be established at the direction of the Investment Committee.
Participation in such fund or funds shall be subject to rules
established by the Plan Administrator and the Investment Committee. An
account reflecting each participant's interest in each such additional
investment fund shall be established by the Plan Administrator.
5.11 Investment Elections by Participants. Once each plan year, at such
time and in such manner as the Plan Administrator may specify, a
participant may elect in writing to invest his pre-tax and after-tax
deposits in the General Investments Fund, the Money Market Fund, the
Fixed Income Fund, the Equity Fund, an additional investment fund or
funds, or any combination of funds, in such proportions as are allowed
under rules established by the Plan Administrator. A participant may
also elect once each plan year to invest his after-tax deposits in the
Company Shares Fund at such time as the Investment Committee or
Investment Manager may specify, in such manner as the Plan Administrator
may specify and in such proportion as is allowed under rules established
by the Plan Administrator.
5.12 Investment Transfers by Participants. At such time and in such
manner as the Plan Administrator may specify, a participant may elect in
writing to transfer amounts allocated to his pre-tax subaccounts in the
General Investments Fund, the Money Market Fund, the Fixed Income Fund,
the Equity Fund, or an additional investment fund to or from any of
these funds, in such proportions as are allowed under rules established
by the Plan Administrator, subject to approval of the Investment
Committee or the Investment Manager. A participant may also elect at
such time and in such manner as the Plan Administrator may specify, to
transfer amounts allocated to his after-tax subaccounts in the General
Investments Fund, the Money Market Fund, the Fixed Income Fund, the
Equity Fund, or an additional investment fund to or from any of these
funds, in such proportions as are allowed under rules established by the
Plan Administrator, subject to approval of the Investment Committee or
the Investment Manager. Except for transfers from a participant's DWDC
Shares account or Allstate Shares account to his Company Shares account
(or for conversion of Allstate shares to Company Shares within a
participant's Supplement C Shares account) pursuant to subsection 5.3(a)
or 5.3(b), transfers may not be made to or from a participant's Company
Shares account, Supplement C Shares account or Company Shares Cash
Equivalents account. Each plan year, a participant may make one
election per calendar month to transfer amounts attributable to pre-tax
deposits and one election per calendar month to transfer amounts
attributable to after-tax deposits. Any transfer under this subsection
shall be made in accordance with procedures established by the Plan
Administrator. Participants will be notified in writing of the amounts
and effective dates of transfers.
SECTION 6
Accounting
6.1 Participants' Accounts and Subaccounts. The Plan Administrator
will maintain an account or accounts for each participant reflecting his
interest in each investment fund described in section 5. Each such
account other than the Company Shares account, the Company Shares Cash
Equivalents account, the Supplement C Shares account, the Allstate
Shares account, and the DWDC Shares account shall be divided into
subaccounts reflecting the source of the deposits invested in the
account. After-tax subaccounts will reflect a participant's after-tax
deposits and earnings thereon and pre-tax subaccounts will reflect a
participant's pre-tax deposits and earnings thereon. A participant's
"interest in the Plan" at any date will consist of the total amount
credited to all such subaccounts plus the total amount credited to the
participant's Company Shares account, Company Shares Cash Equivalents
account, Supplement C Shares account, Allstate Shares account, and DWDC
Shares account, after adjustments of all such accounts and subaccounts
required as of that date shall have been made.
6.2 Credits to Participants' Accounts. As of the last day of each plan
year, or as of the end of any monthly or quarterly period specified by
the Plan Administrator, each participant's accounts in any investment
fund (other than the Supplement C Shares account) will be credited with
the sum of the following:
(a) The total deposits made by such participant to such fund during
such period and not withdrawn before the end of such period;
(b) Dividends received by the Trustee (and dividends payable but not
received) with respect to (i) Company Shares credited to such
participant's Company Shares account or Supplement C Shares account,
(ii) shares of Allstate credited to such participant's Allstate Shares
account or Supplement C Shares account and (iii) shares of DWDC credited
to such participant's DWDC Shares account, as of the applicable record
date or dates for the payment of such dividends, shall be allocated to a
participant's Company Shares Cash Equivalents account, except to the
extent that such dividends are used to make payments of principal or
interest on an ESOP Loan in accordance with Supplement C; and
(c) Such participant's portion of the net earnings of each investment
fund in which his accounts are invested for that period.
Each participant's portion of the net earnings of an investment fund for
any period will be the same proportion thereof as the ratio of the net
credit balance in such participant's investment fund account as of the
beginning of such period, as adjusted in accordance with subsections 6.3
and 6.9, bears to the total of the net credit balances in that
investment fund of the accounts of all participants as of the beginning
of such period, as adjusted in accordance with subsections 6.3 and 6.9.
The "net earnings" of each investment fund for any period means the net
earnings accrued as dividends, interest, rents or other income with
respect to assets held as a part of that investment fund determined in
accordance with generally accepted accounting principles.
6.3 Allocation of Company Shares. As of the end of each plan year, and
as of the end of any monthly or quarterly period designated by the Plan
Administrator, Company Shares then held by the Trustee, other than in
the Supplement C Shares Fund, which shall not previously have been
allocated to the Company Shares accounts of participants shall be
allocated to the Company Shares accounts of all participants, pro rata,
according to the respective balances in their Company Shares Cash
Equivalents accounts at the beginning of such period, but after the
credits to participants' investment fund accounts in accordance with
subparagraphs 6.2(a) and (c) and adjustments to such accounts for
partial withdrawals since the beginning of such period shall have been
made in accordance with subsection 3.6. Following such allocation and
crediting of Company Shares to each participant's Company Shares account
at the end of each period, each participant's Company Shares Cash
Equivalents account shall be charged with an amount representing the
Company Shares (or any fraction thereof) so allocated and credited to
his Company Shares account on the basis of the average cost per share of
the Company Shares acquired by the Trustee (other than Company Shares
held in the Suspense Account or Supplement C Shares accounts) for the
period for which the allocation is made. Company Shares held by the
Trustee in the Suspense Account under Supplement C shall be allocated to
the Supplement C Shares accounts of participants as provided in
Supplement C.
6.4 Adjustment for Appreciation or Depreciation of Investment Funds.
As of the end of each plan year, or as of the end of any quarterly or
monthly period specified by the Plan Administrator, after adding the
credits to each participant's investment fund accounts in accordance
with subsection 6.2, and after allocation of Company Shares and charges
in accordance with subsection 6.3, the Plan Administrator shall further
credit (or charge) each participant's investment fund accounts (other
than his Company Shares account, Supplement C Shares account, Allstate
Shares account, and DWDC Shares account) with the net appreciation (or
net depreciation) in the market value of the assets of each investment
fund for that period, pro rata, according to the respective amounts in
their respective investment fund accounts at the beginning of such
period. For purposes of this subsection, the "net appreciation" in an
investment fund for any period shall be the excess, if any, of:
(a) the total market value of an investment fund as of the end of such
period reduced by the amount then to be allocated under subsection 6.2,
over
(b) the total market value of an investment fund as of the beginning of
such period.
The "net depreciation" in an investment fund for any period will be the
excess, if any, of (b) above for such period, over (a) above for such
period.
6.5 Allocation of Employers' Contribution. Subject to the provisions
of subsections 2.7 and 4.1 and the limitations of subsection 6.6,
(a) An amount equal to the Employers' Contribution for a plan year will
be allocated among and credited to the Company Shares Cash Equivalents
accounts of participants who made basic pre-tax deposits during such
plan year and who either
(i) Continued in the employ of the employers on or after December 31 of
such plan year; or
(ii) Terminated employment with all employers, became employed by a
controlled group member, were employed by such controlled group member
on December 31 of such plan year, and still maintained their accounts
under the Plan on December 31 of such plan year; or
(iii) Transferred employment from an employer to a controlled group
member and were employed by the controlled group member on December 31
of such plan year; or
(iv) Either (A) terminated employment with all employers or died on or
after attainment of age 55 years and completion of 10 or more years of
continuous service; or (B) terminated employment with all employers on
or after attainment of age 50 years and completion of 10 or more years
of continuous service either because of health problems or as a direct
result (as determined by the Company) of the closing or reorganization
of a unit (as hereinafter defined);
pro rata, according to the amount of each such participant's basic
pre-tax deposits for that year, not in excess of the lesser of (A) the
maximum amount permitted in accordance with section 402(g) of the
Internal Revenue Code, as such amount is adjusted from time to time by
the Secretary of Treasury to reflect cost of living increases, or
(B) five percent of compensation, except that for this purpose:
(v) In order to facilitate prompt distribution to participants
described in (iv) above, the Plan Administrator will calculate in the
manner described below the amount of the allocation to be made for any
plan year to any participant who is entitled to share in the allocation
of the Employers' Contribution for such plan year, but whose severance
from service with all employers occurs prior to the date on which the
exact amount of the Employers' Contribution for such plan year shall
have been ascertained, which amount
(A) in the case of any such participant whose severance occurs prior to
December 31 of such plan year, will be credited to such participant's
Company Shares account and Company Shares Cash Equivalents account after
any adjustments of such accounts required under subsection 6.9 shall
have been made; and
(B) in the case of any such participant whose severance occurs on or
after December 31 of such plan year, will be allocated, credited and
charged to such participant's Company Shares account and Company Shares
Cash Equivalents account in the proportions in which such calculated
amount would have been allocated, credited and charged to such accounts
pursuant to subsection 6.3 if the adjustments required by such
subsections had been made as of the date of severance.
In making the calculation described in (v) above, the Plan Administrator
first will determine the amount which would be the Employers'
Contribution based upon the results of operations covering the latest
12-month period most recently furnished to him by the Company. Next,
the amount so determined will be multiplied by a fraction, the numerator
of which will be the number of full months of the current plan year
which shall have elapsed as of the date the calculation is being made,
and the denominator of which will be 12. Next, the ratio of (I) the
amount determined in accordance with the preceding sentence, reduced by
an amount equal to the aggregate of the allocations theretofore made
under subparagraph (v) above for the current plan year to (II) the
amount of basic pre-tax deposits made by all current participants in the
current plan year up to the date of calculation (i.e., the "current
matching rate") will be determined, not exceeding 70 percent of basic
pre-tax deposits. Finally, the current matching rate will be applied to
the amount of basic pre-tax deposits made by any such participant in the
year of severance, and the resultant amount will be such participant's
share of the Employers' Contribution for the year in which severance
occurs. The Plan Administrator shall be fully protected in acting and
relying upon the results of operations for any 12-month period as most
recently furnished to him by the Company. For purposes of
subparagraph (iv) above:
(vi) a "unit" is defined as any operation or function or any service
provided by an employer which has its own identifying employer unit
number (but not including individual departments or divisions), and
which
(A) is an administratively separate entity; or
(B) is under its own management; or
(C) reports or accounts for its profit-and-loss performance separately
from any other facilities.
(b) The "normal retirement age" for purposes of the Plan is age 65.
The "normal retirement date" for a participant will be the first day of
the month following the date he attains normal retirement age. A
participant's rights under this subsection are subject to the provisions
of subsection 2.6. Subject to subsection 2.7, and subject to the
foregoing provisions of this subsection 6.5, participants who made basic
pre-tax deposits during any plan year but who terminated employment for
any reason before December 31 of that plan year will not share in the
Employers' Contribution for that plan year.
6.6 Limitations Imposed by Internal Revenue Code. Notwithstanding the
provisions of subsection 6.5:
(a) For each plan year, the "annual addition" (as defined below) to a
participant's accounts under the Plan shall not exceed the lesser of
(i) $30,000 (or, if greater, 1/4 of the dollar limitation in effect for
such plan year under section 415(b)(1)(A) of the Internal Revenue Code),
or (ii) 25 percent of the participant's compensation during that plan
year.
(b) For purposes of this subsection 6.6 (as well as paragraphs B-3 and
B-4 of Supplement B) a participant's compensation means, with respect to
any plan year, the compensation (as defined in Treasury Regulation
section 1.415-2(d) or any successor regulation) paid to him during that
year for services rendered to an employer or any other controlled group
member as an employee.
(c) Subject to the provisions of paragraph (d) below, the term "annual
addition" for any plan year beginning after December 31, 1986 means the
sum of the following amounts credited to a participant's accounts for
that year, excluding any amounts rolled over to a participant's accounts
for that year:
(i) Employers' Contribution;
(ii) after-tax deposits;
(iii) pre-tax deposits; and
(iv) employee contributions, employer contributions and forfeitures
with respect to the participant under any other defined contribution
plan (as defined in section 415(k) of the Internal Revenue Code)
maintained by the employers or a controlled group member.
(d) A participant's annual additions with respect to the Supplement C
Shares Fund shall be determined solely on the basis of contributions
thereto without regard to the value of Company Shares released from the
Suspense Account and, if no more than one third of the Employers'
Contributions to the Supplement C Shares Fund 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
employer contributions which are deductible under section 404(a)(9)(B)
of the Internal Revenue Code by reason of their applications to the
payment of interest on an ESOP Loan.
(e) Any participant's after-tax deposits which cannot be allocated to
the participant because of the foregoing limitations shall be returned
to him. Any Employers' Contribution which cannot be allocated to a
participant because of the foregoing limitations shall be reallocated to
the accounts of other participants to the extent permitted under this
subsection.
(f) In any case where a participant also participates in a defined
benefit pension plan maintained by an employer, the sum of the Defined
Contribution Fraction and the Defined Benefit Fraction for the
participant shall not exceed 1.0, and for this purpose:
(i) the "Defined Contribution Fraction" shall be a fraction (A) the
numerator of which is the sum of the annual additions to a participant's
account as of the close of the plan year and (B) the denominator of
which is the sum of the "maximum annual additions" (as defined below)
for such plan year and all prior years of service with the employers. A
participant's "maximum annual addition" for any plan year or year of
service means the lesser of: (C) 1.25 multiplied by the dollar
limitation in effect for such year determined under section 415(c)(1)(A)
of the Internal Revenue Code without regard to subsection (c)(6)
thereof; and (D) 1.4 multiplied by the amount which may be taken into
account under the percentage limitation set forth under section
415(c)(1)(B) of the Internal Revenue Code for such year. In determining
the Defined Contribution Fraction, the sum of a participant's maximum
annual addition for any years of service ending prior to January 1, 1983
shall not be less than an amount equal to the product of the maximum
annual addition in effect on January 1, 1982 multiplied by the
"transition fraction." The term "transition fraction" means a fraction,
the numerator of which is the lesser of $51,875 or 1.4 multiplied by 25%
of the participant's compensation for the year ended December 31, 1981
and the denominator of which is the lesser of $41,500 or 25% of the
participant's compensation for the year ended December 31, 1981. The
Plan Administrator shall apply such transitional rule in accordance with
the requirements of section 415(e)(6) of the Internal Revenue Code and
regulations thereunder; and
(ii) the "Defined Benefit Fraction" for any plan year shall be a
fraction (A) the numerator of which is the participant's "projected
annual benefit" (as defined below) and (B) the denominator of which is
his "maximum projected annual benefit." A participant's "projected
annual benefit" is his noncontributory projected annual benefit under
the defined benefit pension plan in which he participates, and which is
actuarially equivalent to an annual benefit payable for life only as of
the close of the plan year. A participant's "maximum projected annual
benefit" is the lesser of: (C) 1.25 multiplied by the dollar limitation
in effect under section 415(b)(1)(A) of the Internal Revenue Code for
such plan year, and (D) 1.4 multiplied by the amount that may be taken
into account under the percentage limitation set forth under section
415(b)(1)(B) of the Internal Revenue Code for such plan year. If an
individual was a participant in the defined benefit plan on or before
December 31, 1986, the maximum projected annual benefit shall not be
less than 1.25 multiplied by the individual's accrued benefit as of
December 31, 1986.
Effective on January 1, 1988 and each January 1 thereafter, the dollar
limitation referred to in subparagraph (b)(ii) above shall automatically
be adjusted to a new dollar limitation determined by the Commissioner of
Internal Revenue for that calendar year. For purposes of the foregoing
limitations, all defined contribution plans maintained by the employers
shall be treated as one plan and all defined benefit plans maintained by
the employers also shall be treated as one plan. If, by applying the
foregoing provisions of this subsection 6.6, the sum of the Defined
Contribution Fraction and the Defined Benefit Fraction for a participant
would have exceeded 1.0 as of December 31, 1986, the numerator of the
Defined Contribution Fraction shall thereafter be permanently reduced by
an amount equal to the product of (1) the amount by which the sum of
such fractions would have exceeded 1.0, times (2) the denominator of the
Defined Contribution Fraction as of December 31, 1986. If, but for the
foregoing limitations the sum of a participant's Defined Benefit
Fraction and Defined Contribution Fraction would exceed 1.0, the
benefits that otherwise would have been payable to the participant under
the defined benefit plans of the employers in which he participates will
be adjusted to the extent necessary so that the sum of all such
fractions does not exceed 1.0.
6.7 Employers' Contribution Considered Made on Last Day of Plan Year.
The Employers' Contribution for any plan year will be considered to have
been made on the last day of the plan year for which made, regardless of
whether received by the Trustee at a later or an earlier date.
6.8 Dividends, Stock Dividends, Stock Splits, etc., with Respect to
Company Shares, Allstate Shares and DWDC Shares. Except as otherwise
provided below, any cash dividends received on Company Shares (exclusive
of Supplement C shares) or on shares of Allstate or DWDC which are held
for a participant's benefit will be credited to his Company Shares Cash
Equivalents account in accordance with subsection 6.2. In the event a
participant makes a partial withdrawal in accordance with subsection
3.6, any dividends on Company Shares (exclusive of Supplement C shares)
or on shares of Allstate or DWDC held for such participant as of the
date the withdrawal is made will be credited to such participant's
Company Shares Cash Equivalents account. Any additional Company Shares
received by the Trustee with respect to Company Shares allocated to a
participant's Company Shares account and any additional shares of
Allstate or DWDC received by the Trustee with respect to shares of
Allstate or DWDC allocated to a participant's Allstate Shares account or
DWDC Shares account and held for his benefit as a result of any stock
dividends or stock splits shall be credited to the Company Shares
account, Allstate Shares account and DWDC Shares account, respectively,
of such participant. Cash dividends, stock dividends and stock splits
with respect to Supplement C shares shall be allocated and credited as
provided in Supplement C.
6.9 Adjustment of Investment Fund Accounts of Participants. Whenever
a distribution is made to, or a withdrawal is made by, or a transfer is
elected by, a participant from an investment fund account, the balance
in such account as of the beginning of the period in which the
applicable valuation date occurs shall be adjusted by the adjustment and
earnings factors for such valuation date. The "adjustment factor" for
any valuation date shall be a percentage factor which reflects the
amount by which the market value of all investment fund assets as of the
applicable valuation date exceeds, or is less than, the market value of
all investment fund assets as of the beginning of the period in which
the applicable valuation date occurs. The market value of investment
fund assets may be determined for each business day of the plan year, or
at such other time or for such other periods as the Trustee deems that
circumstances warrant or make it advisable or desirable to do so, but
shall be determined at least annually. The "earnings factor" for any
valuation date shall be a percentage factor which reflects net earnings
on investment fund assets and accrued dividends. Whenever the estimated
amount of any participant's share of the Employers' Contribution for any
plan year is determined in accordance with subparagraph 6.5(a), such
estimated amount will be added to such participant's investment fund
accounts after making the adjustments of such accounts otherwise
required by the foregoing provisions of this subsection 6.9.
6.10 Applicable Valuation Dates. For purposes of subsection 6.9, the
"applicable valuation date" means the applicable one of the following:
(a) In the case of a participant to whom a lump sum distribution is
being made because of severance of employment with all employers for any
reason or a partial withdrawal from his accounts made by a participant
in accordance with section 3, the latest valuation date for which
investment fund account market adjustments and earnings factors have
been provided to the Plan Administrator preceding the date on which
payment is made, except for converted Company Shares, converted shares
of Allstate and converted shares of DWDC, which will be valued at the
mean between the high and low prices as of the distribution date.
(b) In the case of transfers from one investment fund to another, the
date determined by the Plan Administrator.
6.11 Rounding. In making allocations and adjustments under this
section 6, the Plan Administrator may allocate or adjust by rounding to
the nearest whole figure.
SECTION 7
Distributions
7.1 Normal Form of Distribution. Except as requested in writing by an
eligible participant, distribution of a participant's interest in the
Plan shall commence as soon as practicable after his termination of
employment with all employers and controlled group members, retirement
on or after his normal retirement age, or retirement on an early
retirement date at or after attainment of age 55, but not later than the
60th day after the close of the calendar year in which occurs the later
of (i) the participant's termination of employment; and (ii) the date on
which he attains age 65; provided, in any event, if a participant
attains age 70-1/2 on or after January 1, 1988, distribution shall
commence not later than April 1 of the calendar year following the
calendar year in which the participant attains age 70-1/2. If a
participant's total account balances are $3,500 or less, he shall
receive his distribution as soon as practicable after his termination of
employment regardless of whether he consents. A participant whose
account balances exceed $3,500 may elect to have his account balances
distributed in a lump sum payment as of any valuation date coinciding
with or following his termination of employment that precedes or
coincides with his attainment of age 70. A restricted participant whose
employment terminates (for reasons other than his death) after
(i) attainment of age 55 years and completion of 20 or more years of
continuous service, (ii) attainment of age 60 years and completion of 10
or more years of continuous service, or (iii) attainment of age 50 years
and completion of 10 or more years of continuous service for a reason
specified in subparagraph 6.5(a)(iv)(B) shall remain eligible for
withdrawals pursuant to subsection 3.6 for a period not to exceed 15
months following the date of his termination of employment. All
restricted participants shall be eligible to make investment elections
in accordance with subsection 5.12. Any distribution made to a
participant who terminates employment will be made not earlier than the
day following the date of such termination and, except as otherwise
expressly provided in subsection 7.2, will consist of the number of
whole Company Shares then distributable from his Company Shares account
and his Supplement C Shares account and the number of whole shares of
Allstate and DWDC then distributable from his Allstate Shares account
(or Supplement C Shares account, if applicable) and DWDC Shares account,
plus cash representing the sum of:
(a) The amount of his investment fund accounts, after all adjustments
thereof required under section 6 shall have been made; plus
(b) Any unwithdrawn deposits made by him since the last preceding
valuation date; plus
(c) The value of any fractional Company Shares distributable from his
Company Shares account and his Supplement C Shares account and the value
of any fractional shares of Allstate or DWDC distributable from his
Allstate Shares account (or Supplement C Shares account, if applicable)
or DWDC Shares account; plus
(d) Any dividends received by the Trustee, or payable but not received
by the Trustee, on Company Shares held in his Company Shares account and
his Supplement C Shares account and on shares of Allstate or DWDC held
in his Allstate Shares account (or Supplement C Shares account, if
applicable) or DWDC Shares account, but only to the extent that such
dividends shall not already have been allocated to the Company Shares
account or Company Shares Cash Equivalents account, applied to the
payment of principal or interest on an ESOP Loan and replaced with
Company Shares released from the Suspense Account under Supplement C, or
paid to such participant or his beneficiary prior to the applicable
valuation date.
Any partial withdrawal to an eligible restricted participant in
accordance with this subsection 7.1 and subsection 3.6 will be charged
to his accounts in the order specified in subsection 3.7. Any
participant who has received a distribution of his accounts and who
continues employment with any of the employers beyond the April 1 of the
calendar year following the calendar year in which he attains age 70-1/2
shall continue to receive distributions by no later than each subsequent
April 1 of all amounts credited to his accounts during the preceding
year.
7.2 Acquisition of Company Shares, Allstate Shares and DWDC Shares
from or on behalf of Participants. Since fractional Company Shares and
fractional shares of Allstate or DWDC cannot be issued, any fractional
Company Share held in a participant's Company Shares account or his
Supplement C Shares account and any fractional share of Allstate or DWDC
held in a participant's Allstate Shares account (or Supplement C Shares
account, if applicable) or DWDC Shares account as a part of his
distributable, withdrawable or transferable interest will be purchased
by the Trustee. Except as otherwise expressly provided in subsection
6.10, any such purchases of fractional shares (referred to in the Plan
as "converted Company Shares," "converted shares of Allstate" or
"converted shares of DWDC") shall be made at the mean between the high
and low prices per share for such shares on the applicable valuation
dates, as reported by any recognized reporting system as may be selected
by the Investment Committee or a duly authorized Investment Manager.
Notwithstanding the provisions of subsection 7.1, a participant who
terminates employment after December 31, 1989 may elect to have any
specified dollar amount which would otherwise be paid to him in cash
(other than amounts attributable to his pre-tax subaccount) used by the
Trustee to purchase and distribute whole shares of Company Shares to the
participant. The price of any Company Shares so purchased shall be
equal to (i) the mean between the high and low prices for Company Shares
on the date of processing of the participant's distribution request, as
reported by any recognized reporting system selected by the Investment
Committee or a duly authorized Investment Manager (or, if no Company
Shares are reported on such reporting system for that date, on the next
preceding date on which shares are reported), plus (ii) a fee equal to
the commission rate charged to the Plan as of that date for purchases of
Company Shares on the open market. Any participant who receives a lump
sum distribution of his entire interest in the Plan pursuant to
subsection 7.1 during the period beginning on May 1, 1994 and ending on
April 30, 1996, and who at the applicable valuation date as described in
subsection 6.10(a) has a total of fifty or fewer whole Company Shares in
his Company Shares account and Supplement C Shares account, may elect to
have the Trustee purchase such total shares at the mean between the high
and low price per share for such shares on the applicable valuation
date, as reported by any recognized reporting system as may be selected
by the Investment Committee or a duly authorized Investment Manager.
Notwithstanding the preceding sentence, the right to request the Trustee
to purchase fifty or fewer whole Company Shares may be suspended at any
time if a duly authorized Investment Manager advises the Investment
Committee that sources of cash for the purchase of Company Shares are
insufficient to comply with the Investment Committee's Investment
Objectives, Policy and Guidelines, as amended from time to time, which
govern the purchase of Company Shares on a dollar averaging method, and
such suspension shall continue until the duly authorized Investment
Manager advises the Investment Committee that the available cash sources
have been restored to sufficient levels to maintain the dollar averaging
method.
7.3 Distribution Only Upon Separation From Service. Notwithstanding
any other provision of the Plan to the contrary, a participant may not
commence distribution of his account pursuant to this section 7, even
though his employment with the employers and controlled group members
has been terminated, unless or until he also has a "separation from
service" within the meaning of section 401(k)(2)(B) of the Internal
Revenue Code. The foregoing restriction shall not apply, however, if
the participant's termination of employment occurs in connection with
the disposition by an employer or controlled group member to an
unrelated corporation of at least 85 percent of the assets of a trade or
business, or the disposition of its interest in a subsidiary to an
unrelated entity or person, provided (a) the participant remains
employed in such trade or business or by such subsidiary after the
disposition, (b) the employers continue to maintain the Plan after the
disposition, and (c) the participant requests distribution of his
account under the Plan by the end of the second calendar year after the
year in which the disposition occurs.
7.4 Designation of Beneficiary. Each participant from time to time,
by signing a form furnished by the Plan Administrator, may designate any
person or persons (who may be designated concurrently or contingently)
to whom his interest in the Plan is to be paid if he dies before he
receives all of such interest. A beneficiary designation form will be
effective and valid and will cancel all beneficiary designation forms
previously filed with the Plan Administrator or the employer only
(i) when the form is filed with the Plan Administrator or the employer
while the participant is alive; and (ii) if the participant is married
at the date of his death and has designated a person or persons other
than, or in addition to, his surviving spouse as his primary beneficiary
or beneficiaries, if the participant's surviving spouse has consented in
writing to such election and acknowledged the effect of such consent and
such consent has been witnessed by a notary public; provided, however,
that any beneficiary designation form signed by a participant before
October 1, 1991, that has not been re-signed by the participant on or
after October 1, 1991, shall be invalid and shall not be given effect.
If a deceased participant failed to designate a beneficiary as provided
above, if the beneficiary designated by a deceased participant dies
before him and no other designated beneficiary exists or if a
beneficiary designation is invalid, the Trustee, at the direction of the
Plan Administrator, shall pay the participant's interest in the Plan to:
(a) His surviving spouse, if any; or
(b) If there is no surviving spouse, the estate of the last to die of
the deceased participant and his designated beneficiary.
The term "designated beneficiary" as used herein means the person or
persons designated by a participant as his beneficiary in the last
effective beneficiary designation form filed with the Plan Administrator
or the employer under this subsection. The term "beneficiary" as used
herein means the person or persons to whom a deceased participant's
interest in the Plan is payable under this subsection.
7.5 Missing Participants or Beneficiaries. Each participant and each
designated beneficiary must file with the Plan Administrator from time
to time, in writing, his post office address and each change of post
office address. Any communication, statement or notice addressed to
such a participant or beneficiary at his last post office address so
filed will be binding on the participant and his beneficiary for all
purposes of the Plan. Neither the Plan Administrator nor any employer
shall be required to search for or locate such a participant or
beneficiary. If the Plan Administrator notifies a participant or
beneficiary that he is entitled to a distribution and also notifies him
of the provisions of this subsection, and the participant or beneficiary
fails to make his whereabouts known to the Plan Administrator within
three years after due notification, the benefits of the participant or
beneficiary will be disposed of, to the extent permitted by applicable
law, as follows:
(a) If the whereabouts of the participant then are unknown to the Plan
Administrator, but the whereabouts of the participant's designated
beneficiary are known to the Plan Administrator, payment will be made to
the designated beneficiary.
(b) If the whereabouts of the participant and the participant's
designated beneficiary (who is a person other than the participant's
spouse) then are unknown to the Plan Administrator, payment will be made
to the participant's spouse.
(c) If the whereabouts of the participant, his designated beneficiary
(if other than his spouse) and his spouse then are unknown to the Plan
Administrator, the benefits of such participant or beneficiary will be
disposed of in an equitable manner permitted by law under rules adopted
by the Plan Administrator.
7.6 Non-Alienation of Benefits. Except as otherwise expressly provided
herein, no participant or beneficiary shall be entitled to withdraw,
transfer, assign or hypothecate the money and securities, or any part
thereof, credited to the participant's accounts in the Plan. No
interest in the Plan shall be anticipated, charged or encumbered by any
participant or beneficiary. Except as may be required by the tax
withholding provisions of any statute or by a domestic relations order,
judgment or decree which the Plan Administrator determines to be a
"qualified domestic relations order" (as defined in section 414(p)(1)(A)
of the Internal Revenue Code and the regulations thereunder), the
interest or interests of each and every participant or beneficiary in
the Plan shall not be subject to, or reached by, any legal process in
satisfaction of any debt, claim, liability or obligation, prior to the
receipt thereof by the participant or beneficiary. Notwithstanding any
other provision of the Plan to the contrary, such domestic relations
order may permit distribution of the entire portion of the account
balance of a participant awarded to his alternate payee, in a lump sum
payment as soon as practicable after the Plan Administrator 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 amount at that time.
7.7 Facility of Payment. When a person entitled to distributions from
the Plan is under legal disability or, in the opinion of the Plan
Administrator, is in any way incapacitated so as to be unable to manage
his financial affairs, the Trustee, at the direction of the Plan
Administrator, may make such distributions to such person's legal
representative or to a relative or friend of such person for such
person's benefit or apply such distribution for the benefit of such
person. Any distribution made in accordance with the preceding sentence
shall be a full and complete discharge of any liability for such
distribution under the Plan.
7.8 Direct Rollover Option. In accordance with uniform rules
established by the Plan Administrator, 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 meanings accorded such terms under section 401(a)(31) of the Code
(or any successor provision thereto) and applicable regulations
thereunder.
SECTION 8
Administration
8.1 The Trustees. 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.
8.2 General Powers, Rights and Duties of the Trustee. The powers,
rights and duties of the Trustee shall be set forth in the applicable
Trust Agreement.
8.3 Secretary, Controller and Treasurer. The Company shall appoint a
Secretary, Treasurer and Controller of the Plan, who may but need not be
employees of the Company.
8.4 Voting and Tendering of Company Shares and Shares of Allstate and
DWDC. Notwithstanding any other provisions of this Plan:
(a) Company Shares 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 Company
Shares allocated to the participant's account under the Plan on the
latest valuation date preceding the record date for such meeting for
which the number of such shares has been provided to the Plan
Administrator, less any partial withdrawal since that valuation date.
Upon timely receipt of such instructions, such shares shall be voted as
instructed.
(ii)If the Trustee receives timely voting instructions with regard to at
least fifty percent of the total outstanding Company Shares allocated to
participants' accounts according to subsection 8.4(a)(i), then Company
Shares of any class for which the Trustee does not receive timely voting
directions, including those shares which are not allocated to
participants' accounts, shall be voted in the same proportion as all
Company Shares of that class held under the Plan (including shares held
in a separate trust fund) with respect to which directions are received
by the Trustee or by any other trustee acting under the Plan. If the
Trustee receives timely voting instructions with regard to less than
fifty percent of the total outstanding Company Shares allocated to
participants' accounts, then the Trustee shall vote unallocated and
undirected allocated shares in its sole discretion.
(b) Tender and exchange rights with respect to Company Shares 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, Company
Shares, together with an appropriate form on which such participant may
instruct the Trustee with respect to the tender or exchange of Company
Shares allocated to his account. Company Shares as to which the Trustee
has received timely instructions shall be tendered or exchanged in
accordance with such instructions.
(ii) Company Shares allocated to participants' accounts for which
instructions are not timely received shall not be tendered or exchanged.
(iii) Company Shares 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 such record keeper 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 8.4.
(e) Voting, tender and exchange rights with respect to shares of
Allstate and DWDC held by the Trustee shall be exercised in the same
manner as such rights are exercised with respect to Company Shares as
described in this subsection 8.4.
8.5 General Powers, Rights and Duties of Plan Administrator. Except
as otherwise expressly provided herein or in the trust agreements, and
in addition to the powers, rights and duties specifically given to the
Plan Administrator elsewhere herein and in the trust agreements, the
Plan Administrator shall be the plan administrator for all purposes of
ERISA, and shall have the following discretionary authority, powers,
rights and duties, and any decision made by the Plan Administrator
pursuant to this subsection 8.5 (or any other provision of the Plan or
trust agreements granting him such authority) shall be final:
(a) To adopt such rules of procedure and regulations as, in his
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 as may be adopted by him;
(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, and to remedy any ambiguities,
inconsistencies or omissions of whatever kind;
(d) To maintain and keep adequate records concerning the Plan in such
form and detail as he may decide;
(e) To direct all payments of benefits under the Plan;
(f) To perform the functions of "plan administrator" as defined in
section 414(g) of the Internal Revenue Code for purposes of section 6
and for purposes of establishing and implementing procedures to
determine the qualified status of domestic relations orders (in
accordance with section 414(p) of the Internal Revenue Code) and to
administer distributions under such qualified orders; and
(g) To employ agents, attorneys, accountants and other persons (who
also may be employed by or represent the Company) for such purposes as
he considers necessary or desirable to discharge his duties.
The Company and the other employers and their affiliates may provide
administrative and asset management services, including the provision of
office space, to the Plan and shall be reimbursed for the direct
expenses thereof in accordance with subsection 8.3 and the terms of the
trust agreement or agreements between the Company and the Trustee;
provided, however, that such services (other than services as an
Investment Manager) shall be rendered in accordance with policies and
procedures approved by the Company's Vice President of Human Resources,
acting as a named fiduciary of the Plan. Services rendered as an
Investment Manager shall be subject to the terms of the trust agreement
or trust agreements regarding the appointment, retention and removal of
Investment Managers.
8.6 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 an Investment Committee
consisting 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.
8.7 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 provisions of subsection 5.3 and
Supplement C, the Trustee shall invest that portion of the assets of the
Plan consisting of Employers' Contributions and earnings thereon in
Company Shares 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 properly to 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; and
(e) Without limiting the generality of (d) above, to appoint an
investment manager as defined in section 3(38) of ERISA ("Investment
Manager") to manage (with power to acquire and dispose of) the assets of
the Plan, which Investment Manager 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 Sears Investment Management Co., 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.
8.8 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.
8.9 Compensation and Expenses. All fees, expenses, taxes and charges
incurred by or with respect to the Plan (including, to the extent
permitted by law, all direct expenses incurred by the Company or any
employer in providing administrative and asset management services and
office space to the Plan or otherwise incurred by them in connection
with the Plan) shall be expenses of the Plan and shall be paid or
reimbursed from Plan assets in accordance with the terms of the trust
agreement or agreements between the Company and the Trustees.
8.10 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
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.
SECTION 9
General Provisions
9.1 Action by Company. Any action required or permitted to be taken
by the Company under the provisions hereof shall be by resolution of its
Board of Directors, resolution of a duly authorized committee of its
Board of Directors, or by a person or persons authorized by its Board of
Directors or any such committee.
9.2 Waiver of Notice. Any notice required hereunder may be waived by
the person entitled to such notice.
9.3 Controlling Law. Except to the extent superseded by laws of the
United States, the laws of Illinois shall be controlling in all matters
relating to the Plan.
9.4 Employment Rights. The provisions of the Plan do not constitute a
contract of employment and participation in the Plan will not give any
employee the right to be retained in the employ of the employers or any
right or claim to any benefit under the Plan unless such right or claim
is specifically accrued under the provisions of the Plan.
9.5 Litigation by Participants. If a legal action begun against the
Trustee, the Plan Administrator, any employers, the Investment Committee
or any member or members thereof, or their agents, or an Investment
Manager, by or on behalf of any person results adversely to such person,
or if a legal action arises because of conflicting claims to the
benefits of a participant or beneficiary, the cost to the Trustee, the
Plan Administrator, the employers, the Investment Committee or any
member or members thereof or their agents, or any Investment Manager of
defending such action shall be charged, to the extent permitted by law,
to the sums, if any, which were involved in the action or were payable
to the participant or beneficiary concerned.
9.6 Absence of Guarantee. Neither the Trustee nor the Investment
Committee nor any members thereof, nor any Investment Manager, nor any
employer in any way guarantees the assets of the Plan from loss or
depreciation. Unless otherwise required by law, the liability of the
Trustee, the Plan Administrator, the Investment Committee, any
Investment Manager or any other person to make any payment under the
Plan will be limited to the assets held by the Trustee which are
available for that purpose.
9.7 Evidence. Evidence required of anyone under the provisions of the
Plan may be by certificate, affidavit, document or other information
which the person acting in reliance thereon considers pertinent and
reliable and to have been signed, made or presented by the proper party
or parties.
9.8 Information to be Furnished by Participants and Employers. Each
participant and beneficiary entitled to benefits under the Plan shall
furnish the Trustee and the Plan Administrator with such documents,
evidence, data or information as the Trustee and the Plan Administrator
consider necessary or desirable for purposes of administering the Plan.
The employers shall furnish the Trustee and the Plan Administrator with
such data and information within their possession as the Trustee and the
Plan Administrator may deem necessary or desirable in order to
administer the Plan. The records of the employers as to an employee's
period of employment, termination of employment and the reason therefor,
leave of absence, reemployment and compensation will be conclusive on
all persons.
9.9 Uniform Rules. The plan shall be administered on a reasonable and
nondiscriminatory basis and uniform rules shall be applied to all
persons similarly situated.
9.10 Claims Review. The Plan Administrator shall establish a claims
review procedure which:
(a)Gives notice in writing to any participant or beneficiary whose
request for benefits had been wholly or partially denied;
(b)States the specific reason for such denial; and
(c)Affords a reasonable opportunity to such participant and beneficiary
for a full and fair review of any decision.
The Plan Administrator or any person or persons as he may designate
shall review and make decisions on claim denials.
9.11 Inspection of Plan Records. No participant in the Plan, other
than one who may be utilized by the Trustee or the Plan Administrator in
order to perform their respective duties under the Plan, shall have any
right to inspect the records of the Plan relating to the accounts of any
other participant.
SECTION 10
Amendment and Termination
10.1 Amendment, Termination and Discontinuance of the Employers'
Contribution by Company. The Company may amend the provisions hereof
(including any Supplement) from time to time, may terminate the Plan, as
applied to all employers, at any time, and may permanently discontinue
the Employers' Contribution at any time, except that no amendment,
termination or discontinuance of the Employers' Contribution shall vest
in any employer any right, title or interest in or to the assets of the
Plan, or allow any part of the assets of the Plan to be used for, or
diverted to, purposes other than for the exclusive benefit of
participants and their beneficiaries; and except that the Plan
provisions contained in section 4 and subsections 6.5, 6.7, C-6, C-7 and
C-8 shall not be amended more than once every six months, other than to
comport with changes in the Internal Revenue Code, ERISA, or the rules
thereunder.
10.2 Withdrawal from Plan. An employer (other than the Company) or a
division of the Company or of another employer shall be deemed to have
withdrawn from the Plan:
(a) On the date such employer is judicially declared bankrupt or
insolvent; or
(b) On the date such employer ceases to be a member of the controlled
group of corporations (within the meaning of section 414(b) of the
Internal Revenue Code) that includes the Company; or
(c) On the date such employer or division is sold, merged into,
consolidated with, liquidated into, or otherwise transferred to a firm,
person or corporation (other than the Company or another employer
hereunder) any such employer or division so sold, merged, consolidated,
liquidated or transferred being referred to below as a "withdrawing
employer" or "withdrawing division."
10.3 Effect of Withdrawal. If any employer other than the Company or
any division withdraws from the Plan (or is deemed to have withdrawn
from the Plan pursuant to subsection 10.2), and if subsection 10.4 does
not apply, then, to the extent permitted by law, the assets of the Plan
representing the interests therein of participants who do not
concurrently enter into the employ of one of the other employers shall
be distributed to them as soon as practicable. The interests in the
Plan of all participants formerly employed by a withdrawing employer or
withdrawing division who, concurrent with such withdrawal, enter into
the employ of one of the other employers shall be retained in the Plan
for distribution in accordance with its terms and such participants
shall be eligible to continue to participate in the Plan.
10.4 Transfer to Other Qualified Trust. If any employer or division
withdraws from the Plan (or is deemed to have withdrawn from the Plan
pursuant to subsection 10.2) and at the time of withdrawal, or within
six months thereafter (or within such longer period as the Trustee may
deem appropriate under the circumstances) such withdrawing employer or
the transferee of the assets of any withdrawing employer or withdrawing
division either is maintaining, or has established, another "qualified
trust" within the meaning of section 401(a) of the Internal Revenue
Code, as amended, to which assets representing the interest in the Plan
of participants who are continuing in the employ of such withdrawing
employer or transferee may be transferred for their benefit, then
subject to the provisions of subsection 10.5, the assets of the Plan
representing the interest of such participants shall be transferred to
such other qualified trust.
10.5 Fund Merger, Consolidation, etc. In the case of any merger or
consolidation with, or transfer of assets or liabilities to, any other
plan or trust which is a qualified plan or trust within the meaning of
the Internal Revenue Code, as amended, each participant's benefits under
such transferee plan, if such transferee plan were terminated
immediately following such merger, consolidation or transfer shall be
equal to or greater than the benefits he would have been entitled to
receive if the Plan had terminated immediately before the merger,
consolidation or transfer.
10.6 Termination of Plan. If the Plan, as applied to all employers,
is terminated by the Company, and if subsection 10.4 does not apply,
then no other employees of the employers shall be eligible to become
participants in the Plan and, to the extent permitted by law, the assets
of the Plan shall be distributed as soon as practicable to all
participants and beneficiaries of participants on the basis of their
respective interests therein.
<PAGE>
SUPPLEMENT A
TO
THE SAVINGS AND PROFIT SHARING FUND
OF SEARS EMPLOYEES
(Effective January 1, 1983)
<PAGE>
SUPPLEMENT A
TO
THE SAVINGS AND PROFIT SHARING FUND
OF SEARS EMPLOYEES
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 Shares
Fund.
As a result of the spinoff of DWDC from the Company on June 30, 1993,
the Company Shares which had been credited to the Supplement A Shares
Fund were converted into Company Shares and shares of DWDC ("ESOF DWDC
Shares") that were received as dividends with respect to such Company
Shares. Each participant's ESOF DWDC Shares were, as soon as possible
following June 30, 1993 as was consistent with prudent investment
standards as determined by the former Institutional Trustee, sold and
the proceeds of such sales were applied to the purchase of Company
Shares.
<PAGE>
SUPPLEMENT B
TO
THE SAVINGS AND PROFIT SHARING FUND
OF SEARS EMPLOYEES
(Effective January 1, 1984)
<PAGE>
SUPPLEMENT B
TO
THE SAVINGS AND PROFIT SHARING FUND
OF
SEARS EMPLOYEES
Special Rules for Top-Heavy Plans
B-1. Purpose and Effect. The purpose of this Supplement B is to comply
with the requirements of section 416 of the Internal Revenue Code of
1986. The provisions of this Supplement B shall be effective for each
plan year beginning after December 31, 1983 in which the Plan is a
"top-heavy plan" within the meaning of section 416(g) of the Internal
Revenue Code.
B-2. Top-Heavy Plan. In general, the Plan will be a top-heavy plan for
any year if, as of the last day of the preceding plan year (the
"determination date"), the aggregate account balances of participants
who are key employees (as defined in section 416(i)(l) of the Internal
Revenue Code) exceed 60 percent of the aggregate account balances of all
participants. In making the foregoing determination, the following
special rules shall apply:
(a)A participant's account balances shall be increased by the aggregate
distributions, if any, made with respect to the participant during the
5-year period ending on the determination date.
(b)The account balances of a participant who was previously a key
employee, but who is no longer a key employee, shall be disregarded.
(c)The accounts of a beneficiary of a participant shall be considered
accounts of the participant.
B-3. Key Employee. In general, a "key employee" is a participant who,
at any time during the 5-year period ending on the determination date,
is:
(a)an officer of an employer (provided that only the 50 highest-paid
participants shall be considered officers);
(b)one of the ten participants owning the largest interests in the
employers;
(c)a 5-percent owner of an employer; or
(d)a 1 percent owner of an employer receiving annual compensation from
an employer of more than $150,000.
B-4. Minimum Employers' Contribution. For any plan year in which the
Plan is a top-heavy plan, the Employers' Contribution credited to each
participant who is not a key employee shall not be less than 3 percent
of such participant's compensation for that year. In no event, however,
shall the Employer's Contribution be credited in any year to a
participant who is not a key employee (expressed as a percentage of such
participant's compensation) exceed the maximum Employers' Contribution
credited in that year to a key employee (expressed as a percentage of
such key employee's compensation up to $200,000).
B-5. Maximum Earnings. For any plan year in which the Plan is a
top-heavy plan, a participant's earnings in excess of $200,000 (or such
greater amount as may be determined by the Commissioner of Internal
Revenue for that plan year) shall be disregarded for purposes of
subsection 6.5 of the Plan.
B-6. Commencement of Distributions. Payment of a key employee's
benefits must be made (or installment payments must commence) no later
than the first December 31 on which both of the following have occurred:
(a)The Plan is then a top-heavy plan; and
(b)the key employee has attained age 70-1/2.
B-7. Aggregation of Plans. In accordance with section 416(g)(2) of the
Internal Revenue Code, other plans maintained by the employers may be
required or permitted to be aggregated with the Plan for purposes of
determining whether the Plan is a top-heavy plan.
B-8. No Duplication of Benefits. If the employer maintains more than
one plan, the minimum Employers' Contribution otherwise required under
paragraph B-4 above may be reduced in accordance with regulations of the
Secretary of the Treasury to prevent inappropriate duplication of
minimum contributions or benefits.
B-9. Adjustment of Combined Benefit Limitations. For any plan year in
which the Plan is a top-heavy plan, the determination of the Defined
Contribution Fraction and Defined Benefit Fraction under subsection 6.6
of the Plan shall be adjusted in accordance with the provisions of
section 416(h) of the Internal Revenue Code.
B-10. Use of Terms. All terms and provisions of the Plan shall apply
to this Supplement B, except that where the terms and provisions of the
Plan and this Supplement B conflict, the terms and provisions of this
Supplement B shall govern.
<PAGE>
SUPPLEMENT C
TO
THE SAVINGS AND PROFIT SHARING FUND
OF SEARS EMPLOYEES
(Effective December 20, 1989)
<PAGE>
Supplement C
TO
THE SAVINGS AND PROFIT SHARING FUND
OF
SEARS EMPLOYEES
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
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-2Effective Date. The effective date of this Supplement C is
December 20, 1989.
C-3Participation. 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-4ESOP Loans. The Trustee is authorized to incur debt (an "ESOP Loan")
for the purpose of acquiring Company Shares 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.
Company Shares acquired with the proceeds of an ESOP Loan shall be held
in a Supplement C Shares Fund and shall be credited to a "Suspense
Account" until released in accordance with subsection C-7. The Plan
Administrator shall maintain or cause to be maintained a Supplement C
Shares account in the name of each participant to reflect his interest
in the Supplement C Shares Fund and the portion thereof which is
attributable to each ESOP Loan.
C-5Supplement C Cash Equivalents Fund. All cash dividends on Company
Shares held in the Supplement C Shares Fund 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
Employers' Contributions made under subsection C-6 with respect to plan
years beginning on or after January 1, 1990 shall be credited to the
Supplement C Cash Equivalents Fund pending their application to ESOP
Loan payments. Except as provided under paragraph 7.1(d), all such
dividends and all earnings of the Supplement C Cash Equivalents Fund
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 Company Shares allocated to
participants' Supplement C Shares accounts shall be credited
proportionately to such participants' Company Shares Cash Equivalents
accounts pending investment in the Company Shares 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.Employers' Contribution. For each plan year beginning on or after
January 1, 1990, 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.
The Employers' Contribution otherwise required by subsection 4.1 for any
plan year shall be reduced by the fair market value (determined as of
December 31 of that plan year) of the Company Shares allocated to the
Supplement C Shares accounts of participants in accordance with
paragraph C-8(b). In addition to the foregoing contributions, in any
plan year, the employers may make supplemental contributions to be used
by the Trustees to prepay any ESOP loan, to pay expenses of the Plan and
any related trust and to satisfy the dividend requirements for that year
with respect to Company Shares allocated to participants' Supplement C
Shares accounts. All Employers' 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 Company Shares From Suspense Account. As of the last day
of each plan year, or of each calendar quarter in the case of Company
Shares allocable for the year as dividend replacements under paragraph
C-8(a), throughout the duration of an ESOP Loan, a portion of the
Company Shares acquired with the proceeds of such ESOP Loan shall be
withdrawn from the Suspense Account and allocated to eligible
participants' Supplement C Shares accounts in accordance with the
provisions of subsection C-8.
(a)Subject to the provisions of paragraph (b) below, the number of
Company Shares 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 Company Shares 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.
(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 Company Shares 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 Company Shares 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.
C-8.Allocation and Crediting of Company Shares to Supplement C Shares
Fund Accounts and Application to Plan Limitations. Company Shares
released from the Suspense Account during any plan year shall be
allocated and credited as follows:
(a)To the extent that dividends on Company Shares previously allocated
to the Supplement C Shares account of a participant have been used to
make payments on an ESOP Loan, such account shall be credited with
Company Shares 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 each December 31, any Company Shares released from the Suspense
Account during the plan year ending on that date and not credited in
accordance with paragraph (a) shall be credited to the Supplement C
Shares accounts of eligible participants pursuant to subsection 6.5,
except to the extent that any such allocations would duplicate
advancements credited in accordance with subparagraph 6.5(a)(v).
(c)For purposes of subsection 6.6 of the Plan, Employers' Contributions
for any plan year which are 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 Company Shares released
from the Suspense Account are credited in accordance with paragraph (b)
above, without regard to the value of the Company Shares released from
the Suspense Account.
(d)All Company Shares allocated to participants in accordance with
paragraph (b) above shall be treated as Employers' Contributions for
purposes of subsection 3.3 and as "Matching Contributions" for purposes
of section 401(m) of the Internal Revenue Code.
C-9.Withdrawal 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 participant during each of his qualified election periods (as
defined below), may elect to withdraw 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 (including his
Company Shares account, Supplement C Shares account, DWDC Shares account
and Allstate Shares account) plus his prior withdrawals under this
subsection C-9; 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 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 participant election required under this subsection shall be by
writing filed with the Plan Administrator in such form 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 participating employee, 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 Company Shares, DWDC shares and Allstate
shares 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 Company Share or a share of DWDC or Allstate as of
any date means the closing price of a share of such stock on that date
as reported in a summary of composite transactions for stocks listed 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 most recent
trading date.
<PAGE>
APPENDIX A
The following describes the directly- or indirectly-owned subsidiaries
which are to be excluded in applying the provisions of subsection 4.3 of
the Plan in determining Net Income of the Company:
-The group of companies commonly referred to as "Sears Specialty
Merchandising" and their wholly-owned subsidiaries.
-Allstate Holdings, Inc.
<PAGE>
APPENDIX B
The business groups of Sears, Roebuck and Co. are the participating
employers within the two groups commonly known as:
Sears Merchandise Group
Corporate Group
Exhibit 99(b)
THE SAVINGS AND PROFIT SHARING FUND
OF
SEARS EMPLOYEES
TRUST AGREEMENT
As amended and restated
effective as of June 30, 1995
<PAGE>
THE SAVINGS AND PROFIT SHARING FUND
OF
SEARS EMPLOYEES
TRUST AGREEMENT
This agreement ("Trust Agreement"), as of June 30, 1995 (the
"Effective Date") by and between Sears, Roebuck and Co., a New York
corporation (the "Company"), and The Northern Trust Company of New
York, a Limited Purpose Trust Company organized under the laws of
the state of New York, as Trustee (the "Trustee").
ARTICLE
History and Background
1.1 In General. This Trust Agreement constitutes an amendment,
restatement and continuation, effective as of the day and year
first above written, of the Trust Agreement entered into by and
between the Company and the Trustee as of January 1, 1995 under The
Savings and Profit Sharing Fund of Sears Employees (the "Plan").
The Plan consists of both a profit sharing plan 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
intended to qualify as a stock bonus plan under section 401(a) of
the Code and as an employee stock ownership plan under section
4975(e)(7) of the Code. The parties intend the Trust to be a long-
term investor in common shares of the Company ("Company Shares"),
and that, regardless of the short-term effects of a continuing
investment in the Company Shares, the Trustee shall not dispose of
any such Shares except to the extent required for the day-to-day
administration of the Plan and except as provided in accordance
with Section 4.5 hereof.
Prior to December 20, 1989, the Plan consisted solely of a profit
sharing plan. Effective as of that date, the Plan was amended to
add a leveraged employee stock ownership feature in order to permit
employees to participate more fully in shareholder decisions and
the enhancement of shareholder value and to thereby assure an
employee work force motivated by the long-term interests of the
Company. Company Shares acquired with the proceeds of the employee
stock ownership loan are held under a separate trust agreement with
The United States Trust Company of New York until such shares are
released for allocation to the accounts of Plan participants and
transferred to this Trust.
1.2 Split Up of Plan. Prior to the Effective Date, the Plan
included assets attributable to a profit sharing and stock bonus
plan feature, a leveraged employee stock ownership plan feature
("ESOP") and a tax credit employee stock ownership feature
("ESOF"). As of the Effective Date the Plan was split into two
separate plans: (1) a profit sharing and stock bonus plan and
leveraged employee stock ownership plan providing benefits to
eligible employees of the Company and its affiliates (exclusive of
The Allstate Corporation and its subsidiaries (the "Allstate
Group")), which continued to hold the assets attributable to the
profit sharing and stock bonus plan, ESOF and ESOP features of the
Plan which were allocable to employees and former employees of the
Company and its affiliates other than the Allstate Group and
certain of the assets held in the ESOP suspense account, and which
continued to be known as The Savings and Profit Sharing Fund of
Sears Employees; and (2) a profit sharing and stock bonus plan and
leveraged employee stock ownership plan providing benefits to
eligible employees of the Allstate Group, to which were transferred
the assets attributable to the profit sharing and stock bonus plan,
ESOF and ESOP features of the Plan which were allocable to
employees and former employees of the Allstate Group, and which is
known as The Savings and Profit Sharing Fund of Allstate Employees.
1.3 Spinoff of Dean Witter, Discover & Co. Prior to June 30,
1993, Dean Witter, Discover & Co. ("DWDC") and its affiliates were
members of the controlled group of corporations (within the meaning
of Section 414(b) of the Code) that included the Company. On June
30, 1993, all of the shares of DWDC held by the Company were
distributed to the shareholders of the Company as a spinoff
dividend and DWDC thereby ceased to be a member of the controlled
group of corporations that includes the Company. As a result of
the spinoff of DWDC from the Company, Company Shares which had been
held in participants' accounts under the Plan were converted into
Company Shares and shares of DWDC that were received as dividends
with respect to such Company Shares. The Company Shares and the
dividended DWDC shares each represent a portion of the value of the
pre-spinoff investments of participants' accounts in Company
Shares. Accordingly, the Company determined that in order to
provide participants with the opportunity to continue to hold the
same economic investment following the DWDC spinoff as before and
enhanced investment flexibility following the spinoff, the Plan
shall provide for not only a Company Shares Fund and a Supplement
C Shares Fund, but also a DWDC Shares Fund. Subject to the
provisions of the Plan, participants may elect to continue holding
shares of DWDC in their accounts under the Plan, or may elect to
sell all or a portion of such shares and reinvest the proceeds in
the Company Shares Fund. Any election by a participant pursuant to
the immediately preceding sentence shall constitute a direction by
such participant, and the absence of an affirmative election by a
participant to sell any portion of the DWDC shares allocated to his
or her account shall constitute a direction by such participant for
such portion of his or her account to remain invested in DWDC
shares. Notwithstanding the foregoing, if the Trustee determines
that any direction by a participant as aforesaid is not "proper"
under Section 403(a) of ERISA, and that following such direction
would constitute a violation of ERISA, the Trustee shall have the
absolute discretion to disregard such direction and to take such
action or actions as it deems appropriate under the circumstances
to properly discharge its fiduciary duties. In particular, the
rights of participants either to continue to hold shares of DWDC
for investment in their accounts or to direct that such shares be
sold and the sale proceeds reinvested in Company Shares shall be
subject to a determination by the Trustee that the continued
holding or the sale of shares of DWDC and reinvestment in Company
Shares, as the case may be, is appropriate in light of prudent
investment standards including considerations of diversification,
and the Trustee shall have absolute discretion at any time to
require either the sale and reinvestment in Company Shares or the
continued holding of all or any portion of the shares of DWDC
allocated to participants' accounts without regard to any election
or the failure to elect by a participant with respect to such sale
or continued holding. In considering any sales of shares of DWDC
in connection with the foregoing determinations (whether such sales
are to be made at the election of participants or upon the
determination of the Trustee without regard to any election or
failure to elect by participants) the Trustee shall act in
accordance with the best interests of participants to protect the
value of Plan assets. The DWDC Shares Fund is provided solely to
permit the continued holding of shares of DWDC allocated to
participants' accounts as a result of the spinoff of DWDC.
Accordingly, no future contributions or investment transfers may be
made to the DWDC Shares Fund.
1.4 Spinoff of The Allstate Corporation. Prior to the Effective
Date, The Allstate Corporation ("Allstate") and its subsidiaries
were members of the controlled group of corporations (within the
meaning of section 414(b) of the Internal Revenue Code) that
includes the Company. As of the Effective Date all of the shares
of Allstate held by the Company will be distributed to the
shareholders of the Company as a spinoff dividend and Allstate will
thereby cease to be a member of the controlled group of
corporations that includes the Company. As a result of the spinoff
of Allstate from the Company on the Effective Date, Company Shares
held in participants' accounts under the Plan will be converted
into Company Shares and shares of Allstate that will be received as
dividends with respect to such Company Shares. The Company Shares
and the dividended Allstate shares will each represent a portion of
the value of pre-spinoff investments of participants' accounts in
Company Shares. Accordingly, the Company has determined that in
order to provide participants with the opportunity to continue to
hold the same economic investment following the Allstate spinoff as
before and enhanced investment flexibility following the spinoff,
the Plan shall provide for not only a Company Shares Fund, a
Supplement C Shares Fund and a DWDC Shares Fund, but also an
Allstate Shares Fund. Subject to the provisions of the Plan,
shares of Allstate allocated to participants' accounts under the
Plan shall, as soon as possible following the Effective Date as is
consistent with prudent investment standards as determined by the
Trustee, be sold (or exchanged for Company Shares) and the proceeds
of such sales shall be applied to the purchase of Company Shares
which shall be allocated to participants' accounts; provided,
however, that at such time and in such manner as the Plan
Administrator may specify, participants may elect to continue
holding shares of Allstate in their accounts under the Plan.
Participants who, pursuant to the election described in the
preceding sentence, have elected to continue holding shares of
Allstate in their accounts under the Plan, may, at such time and in
such manner as the Plan Administrator may specify, elect to sell
all or a portion of such shares and reinvest the proceeds in
Company Shares. Any election by a participant pursuant to the
immediately preceding sentence shall constitute a direction by such
participant, and the absence of an affirmative election by a
participant to sell any portion of the Allstate shares allocated to
his or her account shall constitute a direction by such participant
for such portion of his or her account to remain invested in
Allstate shares. Notwithstanding the foregoing, if the Trustee
determines that any direction by a participant as aforesaid is not
"proper" under Section 403(a) of ERISA, and that following such
direction would constitute a violation of ERISA, the Trustee shall
have the absolute discretion to disregard such direction and to
take such action or actions as it deems appropriate under the
circumstances to properly discharge its fiduciary duties. In
particular, the rights of participants either to continue to hold
shares of Allstate for investment in their accounts or to direct
that such shares be sold and the sale proceeds reinvested in
Company Shares shall be subject to a determination by the Trustee
that the continued holding or the sale of shares of Allstate and
reinvestment in Company Shares, as the case may be, is appropriate
in light of prudent investment standards including considerations
of diversification, and the Trustee shall have absolute discretion
at any time to require either the sale and reinvestment in Company
Shares or the continued holding of all or any portion of the shares
of Allstate allocated to participants' accounts without regard to
any election or the failure to elect by a participant with respect
to such sale or continued holding. In considering any sale of
shares of Allstate in connection with the foregoing determinations
(whether such sales are to be made at the election of participants
or upon the determination of the Trustee without regard to any
election or failure to elect by a participant) the Trustee shall
act in accordance with the best interests of participants to
protect the value of Plan assets. The Allstate Shares Fund is
provided solely to permit the continued holding of shares of
Allstate allocated to participants' accounts as a result of the
spinoff of Allstate. Accordingly, no future contributions or
reinvestment transfers may be made to the Allstate Shares Fund.
1.5 Qualification of Trust. The Company intends that the Trust
herein created shall form a part of the Plan with respect to that
portion of the Plan's assets as may be allocated to this Trust from
time to time in accordance with the terms of this Trust Agreement
and shall qualify under Section 401(a) of the Code for tax-exempt
status under Section 501(a) of the Code; until advised to the
contrary, the Trustee may assume the Trust is so qualified. The
Company shall notify the Trustee of the name of the trustee of any
other trust which is established by the Company from time to time
as a part of the Plan.
ARTICLE II
Definitions
When used herein, the following terms shall have the following
meanings. Unless otherwise specified, other terms used herein
shall have the same definitions as provided in the Plan.
"Allstate" means The Allstate Corporation.
"Code" means the Internal Revenue Code of 1986, as from time to
time amended.
"Committee" or "Investment Committee" means the committee provided
for in Section 4.7 hereof.
"Company" means Sears, Roebuck and Co., a New York corporation, and
any successor thereto that adopts this Trust Agreement as provided
in Section 11.4 hereof.
"Company Shares" means common shares of the Company.
"Controlled Group Member" means a corporation, trade, or business
if it and the Company are members of (a) a controlled group of
corporations as defined in Section 414(b) of the Code, (b) under
common control as defined in Section 414(c) of the Code, or (c)
members of an affiliated service group as defined in Section 414(m)
of the Code.
"DWDC" means Dean Witter, Discover and Co.
"Employer" means any entity (including the Company) that adopts the
Plan and this Trust Agreement for the benefit of its employees.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as from time to time amended.
"Investment Manager" means an investment manager as defined in
Section 3(38) of ERISA and appointed pursuant to the provisions of
this Trust Agreement to manage part or all of the Trust Fund.
"Investment Portfolio" means the portion of the Trust Fund invested
at the direction of an Investment Manager, as described in Section
4.8(e) hereof.
"Plan" means The Savings and Profit Sharing Fund of Sears
Employees, as amended from time to time.
"Plan Administrator" means the Profit Sharing Plan Administrator
provided for in Section 4.6 hereof.
"Plan Year" means the fiscal year of the Plan, commencing January
1 of -each year and ending December 31 of the same year.
"Rollover Contribution" means a contribution to the Plan of an
eligible rollover distribution, as described in Section 402(c)(4)
of the Code or a rollover contribution as described in Section
408(d)(3) of the Code, resulting from a distribution from a defined
contribution plan which is maintained by a Controlled Group Member
and which meets the requirements of Section 401(a) of the Code.
"Supplement C" means Supplement C to the Plan, which provides for
a leveraged employee stock ownership feature.
"Trust" means the trust established and maintained for the purposes
of the Plan, which is administered by the Trustee in accordance
with the provisions of this Trust Agreement.
"Trust Agreement" means this agreement between the Company and the
Trustee as amended from time to time.
"Trust Fund" means, as of any date, all assets of the Plan held by
the Trustee under this Trust Agreement as of such date.
"Trustee Transfer" means, as the context requires (a) a transfer to
the Trust Fund of an amount on behalf of a participant directly by
the trustee or custodian of a trust or custodial account maintained
by a Controlled Group Member forming a part of a defined
contribution plan meeting the requirements of Section 401(a) of the
Code, and (b) a transfer by the Trustee on behalf of a participant
of amounts credited to his account under the Plan to the trustee or
custodian of a trust or custodial account forming part of a defined
contribution plan which is maintained by a Controlled Group Member
and which meets the requirements of Section 401(a) of the Code.
"Trustee" means The Northern Trust Company of New York, and any
successor bank or trust company which shall accept the appointment
to execute the duties of the Trustee as set forth herein.
"Valuation Date" means the last day of each Plan Year, or the end
of any monthly or quarterly period specified by the Company, the
Plan Administrator or the Investment Committee.
ARTICLE III
Contributions to and Distributions from the Trust Fund
3.1 Receipt of Contributions and Transfers. The Trustee shall
receive and hold as part of the Trust Fund any participants'
deposits, Employers' Contributions, transfers from the ESOP Trust,
Trustee Transfers, and Rollover Contributions under the Plan paid
to the Trustee from time to time; provided, however, that (1)
participants' deposits shall be paid in cash, (2) Employers'
Contributions shall be paid in cash or Company Shares, except that
the Trustee may agree in writing to accept other specific non-cash
Employers' Contributions, and (3) if any Trustee Transfer or
Rollover Contribution includes property other than money or Company
Shares, the Trustee may in its sole discretion refuse to accept
such Trustee Transfer or Rollover Contribution, or may condition
its acceptance of such Trustee Transfer or Rollover Contribution
upon such terms and conditions as the Trustee may deem reasonable.
The Trustee shall also receive and hold as part of the Trust Fund
shares of DWDC in the DWDC Shares Account of the Trust and shares
of Allstate in the Allstate Shares Account of the Trust. The
Trustee shall not be required to determine that any contributions
or deposits are in compliance with the Plan and shall be
accountable only for the funds and other property actually received
by it.
3.2 Distributions from the Trust Fund. The Trustee, upon the
written direction of the Plan Administrator, shall (i) make
distributions or Trustee Transfers, from the Trust Fund to such
persons, in such manner, at such times, in such amounts, and such
purposes as may be specified in such written direction, and upon
such distribution being made, the amount thereof shall no longer
constitute a part of the Trust Fund, or (ii) transfer funds to such
commercial checking account in a federally insured banking
institution (which may include the Trustee) as directed by the Plan
Administrator, or otherwise in accordance with agreed upon
procedures in which event the Plan Administrator shall be
responsible for the issuance of benefit checks drawn on such
account and associated tax withholding remittance and reporting,
and the Trustee shall have no responsibility to account for funds
held in or disbursed therefrom.
3.3 Withholding of Taxes. Notwithstanding Section 3.2 hereof,
the Trustee may, in the absence of a contrary direction from the
Plan Administrator, pay out of the Trust Fund or any benefit
distributable therefrom, any estate, inheritance, income or other
tax, charge or assessment (whether federal, state or local)
attributable thereto. The Trustee shall give the Plan
Administrator notice of its intention to make such payments as far
in advance of each such payment as may be practicable, except that,
with respect to federal income taxes, the Trustee may give a
general notice of its intention to make such payments as required
by law. The Trustee shall defer any payment described in this
section if the Plan Administrator so requests and the Trustee is
indemnified to its satisfaction. The Plan Administrator, and the
Trustee, or either of them before making payment of any benefit,
may require such release or other documents from any lawful taxing
authority and such indemnity from the intended payee as they
respectively consider necessary for their protection.
3.4 No Reversion to Employers. No part of the corpus or income
of the Trust Fund shall revert to any Employer or be used for, or
diverted to, purposes other than for the exclusive benefit of
participants and other persons entitled to benefits under the Plan
provided, however, that:
(a) The contributions of each Employer under the Plan are
conditioned upon the deductibility thereof under Section 404 of the
Code, and, to the extent any such deduction is disallowed, the
Trustee shall, upon written request of that Employer, return the
amount of the contribution (to the extent disallowed), reduced by
the amount of any losses thereon, to that Employer within one year
after the date the deduction is disallowed; and
(b) If a contribution or any portion thereof is made by any
Employer by a mistake of fact, the Trustee shall, upon written
request of that Employer, return the amount of the contribution or
such portion, reduced by the amount of any losses thereon, to that
Employer within one year after the date of payment to the Trustee
ARTICLE IV
Investment and Management of Trust Fund
4.1 Title to Assets. Subject to the following provisions of this
Trust Agreement, the Trustee is vested with title to all the assets
of the Trust and shall have full power and authority to do all acts
necessary to carry out its duties hereunder.
4.2 Investment Powers of the Trustee. Except to the extent
inconsistent with other provisions of this Trust Agreement or any
provision of ERISA, the Trustee shall have the following powers
with respect to the Trust and the Trust Fund:
(a) Investment in Company Shares. The Trustee shall invest the
following portions of the Trust Fund in Company Shares:
(1) Except to the extent otherwise required for the day to day
administration of the Plan, the entire portion of the Trust Fund
which is attributable to Employers' Contributions (other than DWDC
shares and Allstate shares held in accordance with the provisions
of Article XII) shall be invested in Company Shares.
(2) Trust Fund assets attributable to participants' after tax
deposits under the Plan shall be invested in Company Shares to the
extent elected by participants in accordance with the terms of the
Plan.
(3) Earnings and dividends on Company Shares, DWDC shares and
Allstate shares and amounts transferred from the DWDC Shares
Account or the Allstate Shares Account pursuant to subsection
12.3(c) shall be reinvested in Company Shares except as otherwise
required by law or for day to day administration of the Plan.
(4) Pending investment in Company Shares, the amounts described in
paragraphs 1 through 3 above may be retained on a short-term basis
in cash or cash equivalents and may be deposited in any depository
or any collective trust fund described in paragraph 4.2(b)(5).
(5) The Trustee shall not sell Company Shares to, or acquire
Company Shares from, a party in interest (as defined in ERISA) or
a disqualified person (as defined in the Code) unless (i) such sale
or acquisition is for a price not less favorable to the Plan than
the price determined under Section 408(e)(1) of ERISA and (ii) no
commission is charged with respect to such sale or acquisition.
(b) Other Investments. With respect to the portion of the Trust
Fund which is not invested in Company Shares in accordance with the
provisions of subsection 4.2 (a) hereof or in DWDC shares or
Allstate shares in accordance with Article XII hereof, the Trustee
shall have the following powers:
(1) to invest and reinvest the principal and income of the Trust
Fund and keep the Trust Fund invested, without distinction between
principal and income, in stocks, bonds, debentures, notes, deposits
which bear a reasonable rate of return, options, or shares of
investment companies as defined in the Investment Company Act of
1940, or other securities, futures or other commodities, mortgages,
real estate (including qualifying Employer real property within the
meaning of Section 407(d)(5) of ERISA), real estate improvements,
leaseholds, or in any income-producing securities or property, real
or personal, and to enter into insurance contracts, including but
not limited to group annuity contracts, deposit administration
contracts, guaranteed income contracts and immediate participation
guarantee contracts;
(2) to acquire, manage, sell, contract to sell, exchange, convey,
transfer or otherwise dispose of any property held by it by private
sale or contract or at public auction and to sell put and covered
call options, and no person dealing with the Trustee shall be bound
to see to the application of the purchase money or to inquire into
the validity, expediency or propriety or any such sale or other
disposition;
(3) to vote (or refrain from voting), either in person or by
general or limited proxy, any corporate securities for any purpose,
provided that, in the case of securities held in any Investment
Portfolio, such action shall be taken solely at the direction of
the Investment Manager managing the Investment Portfolio in which
such securities are held;
(4) to exercise or sell any conversion privileges, subscription
rights or other options and to make any payments incidental
thereto; to consent to and to join in or oppose any voting trusts,
corporate
reorganizations, consolidations, mergers, foreclosures,
liquidations or other changes affecting corporate securities (other
than Company Shares) and to delegate discretionary powers, to
deposit securities and accept and hold other property received
therefor and to pay any assessments or charges in connection
therewith; and to generally exercise any powers of any owner with
respect to stocks, bonds, securities or other property held in the
Trust Fund;
(5) to invest all or any part of the assets of the Trust Fund in
any collective trust fund, including a collective trust fund of the
Trustee or of its affiliate, which is maintained as a medium for
the collective investment of funds of pension, profit sharing or
other employee benefit plans, and which is qualified under Section
401(a) and exempt from taxation under Section 501(a) of the Code
and any assets invested in such collective trust fund shall be held
and invested pursuant to the terms and conditions of the trust
agreement or declaration of trust establishing such trust, which
are hereby incorporated by reference and shall prevail over any
contrary provisions of this Trust Agreement;
(6) to grant, purchase, sell, exercise, permit to expire, permit
to be held in escrow, and otherwise to acquire, dispose of, hold
and generally deal in any manner with and in short-term money
market investments, options and futures contracts (and options on
futures contracts) with respect to financial instruments, interest
rates or interest rate indices, and any group or index of
securities (or any interest therein or based on the value thereof),
in any combination and in connection therewith, to make any margin
or option premium payments required by any futures commission
merchant registered pursuant to the Commodity Exchange Act, and to
deposit any property as collateral or make any margin or option
premium payments to a broker-dealer registered under the Securities
Exchange Act of 1934;
(7) to lend securities held by the Trustee and to receive and
invest collateral provided by the borrower, all pursuant to a
written agreement with the Investment Committee; the terms of the
agreement between the Investment Committee and the Trustee shall be
consistent with Department of Labor Prohibited Transaction
Exemption 81-6 or any applicable successor exemption;
(8) to invest the assets of the Trust Fund in foreign investments
and to cause global custodian services to be provided therefor; and
(9) to perform any and all other acts which are appropriate for
the proper management, investment and reinvestment of the Trust
Fund.
4.3 Trustee's Administrative Powers. Except as otherwise
expressly provided below, and in addition to the powers, rights and
duties specifically given to the Trustee elsewhere herein, the
Trustee shall exercise the following powers, rights and duties:
(a) to keep such reasonable portion of the Trust Fund (including
but not limited to Investment Portfolios) in cash or cash balances
(regardless of whether interest is paid on such balances and
notwithstanding the Trustee's receipt of "float" from uninvested
cash balances) with a bank or trust company (including the Trustee
or an affiliate of the Trustee or any other organization acting as
a fiduciary with respect to the Plan and the Trust) as the Trustee
may from time to time deem to be in the best interests of the
Trust, and the Trustee shall not be liable for any loss of interest
on cash so held; provided that, if the Trustee shall not have
received contrary instructions from the Investment Manager of an
Investment Portfolio, the Trustee shall invest any cash of that
Investment Portfolio in its custody in bonds, notes or other
evidences of indebtedness having a maturity date not beyond five
years from the date of purchase, United States Treasury bills,
commercial paper, banker's acceptances and certificates of deposit,
undivided interests or participations therein and (if subject to
withdrawal on a daily or weekly basis) participations in common or
collective funds composed thereof and regulated investment
companies;
(b) to make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other
instruments that may be necessary or appropriate to carry out the
powers herein granted;
(c) to cause any investment held in the Trust Fund to be held in
a corporate depository or federal book entry account system or
registered in its own name or in the name of a nominee and to hold
any investment in bearer form, but the books and records of the
Trustee shall at all times show that all such investments are part
of the Trust Fund;
(d) to borrow money from any lender, to extend or renew any
existing indebtedness and to mortgage or pledge any assets;
(e) to transfer the situs of any assets to any jurisdiction,
appointing a substitute trustee (who may be an affiliate of the
Trustee) to act with respect thereto and in connection therewith,
to delegate to the substitute trustee any or all of the powers
given to the Trustee, which may elect to act as advisor to the
substitute trustee; and to remove any acting substitute trustee and
appoint another, or reappoint itself; provided that the indicia of
ownership of assets of the Trust Fund shall not be maintained
outside the jurisdiction of the district courts of the United
States other than as permitted by regulations promulgated by the
Department of Labor;
(f) to execute and deliver necessary instruments and give full
receipts and discharges; and
(g) at the direction of the Investment Committee, to accept and
hold as a part of the Trust Fund the assets held by any trustee
acting under any other trust which forms a part of the Plan, and to
transfer all or any part of the Trust Fund to any other trustee
acting under any other trust forming a part of the Plan.
4.4 Trustee's Discretionary Powers. Except as otherwise
expressly provided herein and in the Plan, the Trustee in its sole
discretion shall have the power:
(a) after consultation with the Investment Committee, to employ
suitable agents, custodians, counsel and accountants (who may but
need not be counsel to or accountants for the Company) and other
persons they deem necessary or desirable to manage or protect the
Trust Fund and to properly carry out the administration thereof and
to pay them reasonable compensation; and to delegate to them and
allocate among them, in writing, such powers, rights and duties
(other than trustee responsibilities within the meaning of Section
405(c)(3) of ERISA) as the Trustee may consider necessary or
advisable properly to carry out the Trustee's responsibilities, and
in the same manner to revoke such delegation and allocation; the
acceptance of such written delegation or allocation 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 Trustee; the Trustee shall not be liable for the acts or
omissions of delegates or persons to whom responsibilities have
been allocated except as required by law;
(b) to begin, maintain or defend any litigation necessary in
connection with the administration of the Trust, and to compromise,
contest, arbitrate, prosecute or abandon claims in favor of or
against the Trust Fund;
(c) to retain any funds or property subject to any dispute without
liability for payment of interest, and to withhold payment or
delivery thereof until final adjudication of the dispute by a court
of competent jurisdiction or until an appropriate release is
obtained;
(d) to furnish the Employers with such information as may be
required by them for tax or other purposes in connection with the
Plan and Trust Fund; and
(e) to do all acts whether or not expressly authorized which the
Trustee may deem necessary or proper for the protection of the
property held hereunder.
4.5 Voting and Tendering of Company Shares and Shares of DWDC and
Allstate. Notwithstanding any other provisions of this Trust
Agreement:
(a) Subject to the provisions of paragraph (d) below, Company
Shares held by the Trustee shall be voted as follows:
(1) 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 Company Shares allocated to the participant's
account under the Plan on the latest valuation date preceding the
record date for such meeting for which the number of such shares
has been provided to the Plan Administrator, less any partial
withdrawal since that valuation date. Upon timely receipt of such
instructions, such shares shall be voted as instructed.
(2) If the Trustee receives timely voting instructions with regard
to at least fifty percent of the total outstanding Company Shares
allocated to participants' accounts according to Section 4.5(a)(1),
then Company Shares of any class for which the Trustee does not
receive timely voting directions, including those shares which are
not allocated to participants' accounts, shall be voted in the same
proportion as all Company Shares of that class held under the Plan
(including shares held in a separate trust fund) with respect to
which directions are received by the Trustee or by any other
trustee acting under the Plan. If the Trustee receives timely
voting instructions with regard to less than fifty percent of the
total outstanding Company Shares allocated to participants'
accounts, then the Trustee shall vote unallocated and undirected
allocated shares in its sole discretion.
(B) Subject to the provisions of paragraph (d) below, tender and
exchange rights with respect to Company Shares held by the Trustee
shall be exercised as follows:
(1) Each participant shall be furnished with a notice of any
tender or exchange offer for, or a request or invitation for tender
of, Company Shares, together with an appropriate form on which such
participant may instruct the Trustee with respect to the tender or
exchange of Company Shares allocated to his account. Company
Shares as to which the Trustee has received timely instructions
shall be tendered or exchanged in accordance with such
instructions.
(2)Company Shares allocated to participants' accounts for which
instructions are not timely received shall not be tendered or
exchanged.
(3)Company Shares 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 such record keeper agrees to
keep such information confidential. The Trustee shall cooperate
with the trustee or trustees of any other trust forming a part of
the Plan to the extent necessary to facilitate the exercise of
voting, tender and exchange rights in accordance with the terms of
the applicable trust agreement;
(d) Notwithstanding the foregoing, in the event that the Trustee
determines that any direction by a participant pursuant to the
provisions of paragraph (a) or (b) above is not "proper" under
Section 403(a) of ERISA, and that following such direction would
constitute a violation of ERISA, the Trustee shall have the
absolute discretion to disregard such direction and to take such
action or actions as it deems appropriate under the circumstances
to properly discharge its fiduciary duties.
(e) The Trustee is hereby authorized to execute such ballots,
proxies or other instruments as may be necessary or desirable in
order to effectuate the provisions of this Section 4.5;
(f) The Trustee may request an independent auditor to provide
within 120 days after any meeting of the Company's shareholders
held, a report that certifies whether (i) Company Shares allocated
to Plan participants' accounts were voted by the Trustee in
accordance with the directions of Plan participants, and (ii) to
the extent required by Section 4.5(a)(2), Company shares allocated
to participants' accounts for which proper instructions were not
received and unallocated Company Shares were voted by Trustee in
the same proportions as the Company Shares voted in accordance with
participants' instructions. The Plan Administrator shall promptly
disclose the information provided in such report to Plan
participants in a manner that the Plan Administrator deems
appropriate; and
(g) Voting, tender and exchange rights with respect to shares of
DWDC and shares of Allstate held by the Trustee shall be exercised
in the same manner as such rights are exercised with respect to
Company Shares as described in this Section 4.5, except that the
provisions of subsection 4.5 (f) shall not apply.
4.6 Administration of the Plan. The Trustee has no
responsibility for administration of the Plan, which is the sole
responsibility of the Profit Sharing Plan Administrator.
4.7 The Investment Committee. The members of the Investment
Committee shall be appointed by the Company and shall serve at the
pleasure of the Company.
4.8 General Powers, Rights and Duties of Investment Committee and
Investment Managers. Except as otherwise specifically provided,
and in addition to the powers, rights and duties specifically given
to the Investment Committee elsewhere herein, the Investment
Committee shall have the following rights, powers and duties:
(a) to determine the portion of the Plan assets that shall be held
under each trust which forms a part of the Plan and, with respect
to that portion of the Trust Fund which is not invested or required
to be invested in Company Shares, DWDC shares or Allstate shares,
to direct the Trustee with respect to the acquisition, retention
and disposition of Plan assets, and to monitor the diversification
of the investments of the Trust Fund:
(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 Investment 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 (or among members of the Investment Committee),
in writing, such powers, rights and duties as the Investment
Committee may consider necessary or advisable properly to carry out
the Investment Committee's
responsibilities, and in the same manner to revoke such delegation
and allocation; the acceptance of such written delegation or
allocation 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 (other than a member to whom
responsibilities have been allocated) shall be liable for the acts
or omissions of such delegates or persons to whom responsibilities
have been allocated except as required by law; and
(e) without limiting the generality of (d) above, to appoint and
remove an Investment Manager to manage (with power to acquire and
dispose of) all or such portions of the Trust Fund as shall be
specified in writing (the "Investment Portfolio") which Investment
Manager 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 Trustee or the
Investment Committee hereunder (including the power to delegate and
the power, with notice to the Investment Committee, to appoint an
Investment Manager), in which event the Trustee shall follow such
instructions and shall be under no duty to determine whether any
direction received from the Investment Manager is proper or within
the terms of this Trust Agreement; 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. An Investment Manager so appointed shall furnish the
Trustee with the name and specimen signature of each individual who
is authorized to act on behalf of the Investment Manager.
Thereafter, the Trustee shall have no authority, responsibility or
liability to the Investment Committee, the Company, any other
Employer or any participant in or beneficiary of the Trust for
acting upon any direction received from any such individual unless
and until the Investment Committee revokes the authority of such
individual or of the Investment Manager by written direction to the
Trustee.
With respect to each Investment Portfolio, the Investment Manager
thereof shall direct the Trustee with respect to the exercise of
the investment powers granted to it under Article IV. Any
limitations on an Investment Manager's powers and discretionary
authority shall be contained in the written agreement appointing
the Investment Manager. Except as modified in this Section, the
Trustee's powers and duties with respect to an Investment Portfolio
shall be the same as their powers and duties with respect to other
aspects of the Trust Fund. The fees and expenses of an Investment
Manager, except to the extent paid by an Employer, shall be paid
from the Trust Fund.
4.9 Investment Committee and Plan Administrator Instructions to
the Trustee. The Company shall certify to the Trustee and the
custodian the name of the Plan Administrator and the names of the
members of the Investment Committee acting from time to time, and
the Trustee shall not be charged with knowledge of a change in the
membership of the Investment Committee until so notified by the
Company. The Trustee may rely upon an instrument of designation
signed by the Plan Administrator or by such one or more of the
Secretary or members of the Investment Committee, or by such other
person or persons as shall be designated by either the Plan
Administrator or the Investment Committee to act on its behalf and
filed with the Trustee and shall have no responsibility for any
action taken by them in accordance with any such written direction,
or for the failure to act in the absence of such written direction.
Notwithstanding the foregoing, the Trustee may act on directions
given by telephone or other telephonic means, which directions
shall be promptly confirmed in writing.
4.10 Named Fiduciaries. Each participant shall be a "named
fiduciary" within the meaning of Section 402 of ERISA to the extent
of his authority under Section 4.5 to exercise voting, tender and
exchange rights with respect to Company Shares, shares of DWDC and
shares of Allstate allocated to his accounts under the Plan and
with respect to a proportionate share of the unallocated Company
Shares and the allocated Company Shares, shares of DWDC and shares
of Allstate for which other participants do not give timely voting
instructions to the Trustee in accordance with Section 4.5. Each
participant shall also be a "named fiduciary" within the meaning of
Section 402 of ERISA to the extent of his authority to elect either
the continued holding of DWDC shares or Allstate shares or the sale
of such shares and reinvestment of proceeds in Company Shares, as
set forth in subsections 5.3(a) and 5.3(b) of the Plan.
ARTICLE V
Accounting
5.1 Valuation of Trust Fund. As of each Valuation Date, the
Trustee shall determine the fair market value of the Trust Fund and
each investment fund or account thereof and shall notify the Plan
Administrator within 60 days after the Valuation Date in writing of
the determination. The fair market value of the Trust Fund shall
be the fair market value of all securities and other assets then
held in such fund, including all income received during the
valuation period. If the Plan holds any Company securities which
are not readily tradable on an established securities market, such
securities shall be valued by an independent appraiser within the
meaning of Section 401(a)(28) of the Code. Subject to the
preceding sentence, in determining fair market value, the Trustee
may rely upon any information it believes to be reliable, including
appraisals, reports of sales and of bid and asked prices of issues
listed on an exchange as disclosed in newspapers of general
circulation or in generally recognized financial services,
quotations with respect to unlisted issues as supplied by any
reputable broker or investment bank or from any other source that
the Trustee believes to be reliable, or the Trustee may make such
determination based upon their own analysis of such records or
reports of any company issuing such stock or other securities as
are made available to them; provided that the Trustee may rely
conclusively upon the determination of the Investment Manager of
each Investment Portfolio with respect to the fair market value of
those assets allocated to such Investment Portfolio which the
Trustee deems not to have a readily ascertainable value, and the
Trustee shall have no responsibility with respect thereto. The
Trustee's determination with respect to fair market value shall be
final and conclusive upon all persons.
5.2 Recordkeeping for Trust Fund. The Trustee shall keep
accurate and detailed accounts of all investments, receipts,
disbursements and other transactions hereunder, in accordance with
generally accepted accounting principles for profit sharing plans,
and shall keep such other records and accounts as the Company may
specify. All accounts, books and records relating to such
transactions shall be open to inspection and audit at all
reasonable times by any person designated by the Company. Unless
otherwise agreed in writing, the Trustee shall have no duty to
maintain records showing the interests of each participant under
the Plan.
5.3 Annual and Final Accounts. Within 120 days following the
close of each Plan Year or, at the request of the Company, Plan
Administrator, Investment Committee or any Trustee (including the
removed Trustee) upon the removal or resignation of the Trustee as
provided in Section 8.1 hereof, the Trustee shall file with the
Company a written account setting forth all investments, receipts,
disbursements, and other transactions effected by the Trustee
during such Plan Year or during the period from the close of the
last Plan Year to date of such removal or resignation, and setting
forth the current value of the Trust Fund. In addition, within 120
days of the end of the Plan Year, the Trustee shall render to the
Plan Administrator a list showing each asset of the Trust Fund as
of the last day of the Plan Year and its cost and its fair market
value.
If there is a disagreement between the Trustee and anyone as to any
act or transaction reported in any accounting, the Trustee shall
have the right to a settlement of its account by any appropriate
court.
An account of the Trustee may be approved by the Company and
Investment Committee by written notice delivered to the Trustee or
by failure to object to the account by written notice delivered to
the Trustee within 180 days of the date upon which the account was
delivered to the Company and Investment Committee. To the extent
permitted by applicable law, the approval of an account shall
constitute a full and complete discharge of the Trustee as to all
matters set forth in that account as if the account had been
settled by a court of competent jurisdiction in an action or
proceeding to which the Trustee, the Company and the Investment
Committee were parties. In no event shall the Trustee be precluded
from having the accounts of the Trustee settled by a judicial
proceeding.
ARTICLE VI
Expenses and Compensation of Trustee
6.1 Compensation and Expenses. The Trustee shall pay from the
Trust fund all of the Trustee's expenses, taxes and charges
(including fees of persons employed by it in accordance with
Section 4.4(a)) and such reasonable compensation to the Trustee as
may from time to time be agreed upon in writing by the Company or
an officer thereof incurred in connection with the collection,
administration, management, investment, protection and distribution
of the Trust Fund, except to the extent such expenses, taxes and
charges are paid by the Employers. To the extent that the
foregoing expenses are paid directly by the Employers, the Trustee
shall reimburse the Employers from the Trust Fund to the extent
directed by the Company. All other costs and expenses incurred
with respect to the collection, administration, management,
investment, protection and distribution of the Trust Fund and
administration of the Plan (including, to the extent permitted by
law all direct expenses incurred by the Company or any Controlled
Group Members in providing administrative and asset management
services and office space to the Plan or otherwise incurred by them
in connection with the Plan or Trust Fund) shall be paid from or
reimbursed out of the Trust Fund in accordance with the directions
of the Company.
ARTICLE VII
Protection of Trustee
7.1 Fiduciary Responsibility. The Trustee, any Investment
Manager, and any other fiduciaries with respect to the Plan or
under this Trust Agreement shall discharge their duties hereunder
or thereunder solely in the interest of participants and
beneficiaries, for the exclusive purpose of providing benefits and
defraying reasonable expenses of administration, 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, by diversifying
the investments of the Plan (except insofar as the assets of the
Plan are invested in Company Shares) so as to minimize the risk of
large losses and in accordance with the documents and instruments
governing the Plan and Trust Fund insofar as such documents and
instruments are consistent with ERISA.
7.2 Trustee Protected in Following Documents. The Trustee shall
not be responsible in any way for the adequacy of the Trust Fund to
meet and discharge any or all liabilities under the Plan, for
guaranteeing the assets of the Plan from loss or depreciation, for
ascertaining whether any direction received by the Trustee from the
Plan Administrator, Investment Committee, any Investment Manager,
or the Company is proper and in compliance with the terms of the
Plan or the Trust Agreement or to see to the application of any
distribution or, with respect to deposits made to a commercial
banking account by the Plan Administrator, to account for funds
retained therein or disbursed by the Plan Administrator or to
prepare any informational returns for tax purposes as to
distributions made from such commercial banking account or the
Trust Fund, unless otherwise agreed.
The Trustee may seek clarification when the directions it receives
from the Plan Administrator, Investment Committee, Investment
Manager or the Company are unclear or ambiguous and the Trustee
will not be required to act upon such directions until
clarification is obtained. In the event that the Trustee receives
conflicting directions from the Investment Committee and an
Investment Manager, the direction of the Investment Committee shall
prevail.
Unless otherwise required by law, the liability of the Trustee, the
Plan Administrator, the Investment Committee, any Investment
Manager, the Company or any other person to make any payment under
the Plan shall be limited to the assets held by the Trustee which
are available for that purpose. The powers, duties and
responsibilities of the Trustee shall be limited to those set forth
in this Trust Agreement, and nothing contained in the Plan, either
expressly or by implication, shall be deemed to impose any
additional powers, duties or responsibilities on the Trustee.
The Trustee shall be accountable only to the Employers for any
payment, allocation, or distribution made by them in good faith on
the order or direction of the Plan Administrator or the Company.
The Trustee shall not be liable for any distribution made in good
faith without actual notice or knowledge of the changed condition
or status of any recipient. If any distribution made by the
Trustee is returned unclaimed or is not presented for payment
within a reasonable time, the Trustee shall notify the Plan
Administrator and shall dispose of the distribution as the Plan
Administrator shall direct. Except as required by ERISA, neither
the Trustee, the Plan Administrator nor any Employer shall be
required to search for or locate a participant or beneficiary whose
distribution is returned unclaimed or is not presented for payment.
The Trustee shall be fully protected in acting upon any instrument,
certificate or paper believed by it to be genuine and to be signed
or presented by the proper person or persons, and the Trustee shall
be under no duty to make any investigation or inquiry as to any
statement contained in any such writing, but may accept the same as
conclusive evidence of the truth and accuracy of the statements
therein contained.
7.3 Indemnification of the Trustee. The Trustee shall be
indemnified, held harmless and promptly reimbursed by the Company
against all claims, liabilities, fines and penalties and all
expenses (including, but not limited to, attorney fees) reasonably
incurred by or imposed upon the Trustee which arise as a result of
its actions or failure to act by reason of serving as Trustee, to
the extent lawfully allowable provided that notwithstanding the
foregoing, (a) the Trustee shall not be indemnified for its
negligence, for willful breach of responsibility, for actions or
failures to act taken in bad faith, or for its violations of ERISA
with respect to the specific duties allocated to the Trustee under
this Trust Agreement, and (b) the Company shall not indemnify the
Trustee for any such amount incurred through any settlement or
compromise of any action unless the Company consents in writing to
such settlement or compromise.
7.4 Indemnification of Other Fiduciaries. To the maximum extent
permitted by law, none of the Plan Administrator, any present or
former Investment Committee member, nor any person who is or was a
director, officer, or employee of an Employer, shall be personally
liable for any act done or omitted to be done in the administration
of the Plan or this Trust Agreement, or the investment of the Trust
Fund, unless such person acted dishonestly. Any employee of an
Employer to whom the Investment Committee, the Plan Administrator,
or the Company has delegated any portion of its responsibilities
under the Plan, any person who is or was a director or officer of
an Employer, the Plan Administrator, members and former members of
the Investment Committee, and each of them, shall, to the maximum
extent permitted by law, be indemnified and saved harmless by the
Employers (to the extent not indemnified and saved harmless under
any liability insurance or other indemnification arrangement with
respect to the Plan, the Trust Fund or this Trust Agreement) from
and against any and all liability or claim of liability to which
they may be subjected by reason of any act done or to be done in
connection with the administration of the Plan or this Trust or the
investment of the Trust Fund, including all expenses reasonably
incurred in their defense if the Employers fail to provide such
defense, unless such person acted dishonestly.
Any final judgment or decree which may be rendered against the
Plan, 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 assets and not from
the individual assets of the members of the Investment Committee or
other fiduciaries.
If a legal action begun against the Plan Administrator, any
Employer, the Investment Committee or any member or members
thereof, or their agents, or an Investment Manager, by or on behalf
of any person results adversely to such person, or if a legal
action arises because of conflicting claims to the benefits of a
participant or beneficiary, the cost to the Plan Administrator, the
Employers, the Investment Committee or any member or members
thereof or their agents, or any Investment Manager of defending
such action shall be charged, to the extent permitted by law, to
the sums, if any, which were involved in the action or were payable
to the participant or beneficiary concerned.
The indemnification provisions of this Agreement shall be binding
upon and inure to the benefit of the assigns, successors and legal
representatives of the parties hereto. The Company hereby agrees
that in the event of a sale of all or substantially all of its
assets to another person, it will endeavor to take such actions as
are necessary to provide for fulfillment of its obligations
hereunder.
ARTICLE VIII
Change of Trustee
8.1 Resignation. The Trustee may resign at any time by giving
forty--five days' advance written notice to the Company and the
Employers.
8.2 Removal of Trustee. The Company may remove the Trustee by
giving 10 days' advance written notice to the Trustee and the
Employers, subject to providing the removed Trustee with
satisfactory written evidence of the appointment of a successor
Trustee and of the successor Trustee's acceptance of the
trusteeship.
8.3 Duties of Resigning or Removed Trustee and of Successor
Trustee. If the Trustee resigns or is removed, it shall promptly
transfer and deliver the assets of the Trust Fund to the successor
Trustee, after reserving such reasonable amount as it shall deem
necessary to provide for its fees and expenses and any sums
chargeable against the Trust Fund for which it may be liable.
Within 120 days, the resigned or removed Trustee shall furnish to
the Investment Committee and the successor Trustee an account of
its administration of the Trust from the date of its last account.
Each successor Trustee shall succeed to the title to the Trust Fund
vested in its predecessor without the signing or filing of any
further instrument, but any resigning or removed Trustee shall
execute all documents and do all acts necessary to vest such title
of record in any successor Trustee. If any assets in the Trust
Fund have been invested in a collective investment trust or group
trust, any resigning or removed Trustee shall, at the direction of
the Investment Committee, cause such investment to be liquidated at
the earliest practical time after notice has been given or received
by the trustee of such resignation or removal. Each successor
shall have all the powers, rights and duties conferred by this
Trust Agreement as if originally named Trustee. No successor
Trustee shall be personally liable for any act or failure to act of
a predecessor Trustee.
ARTICLE IX
Amendment and Termination
9.1 Amendment. The Company reserves the right at any time and
from time to time to amend, retroactively, if necessary, in whole
or in part, any or all of the provisions of this Trust Agreement;
provided that (a) no such amendment which substantially affects the
rights, or increases the duties or responsibilities of the Trustee
may be made without the Trustee's consent and (b) no such amendment
shall authorize or permit any part of the corpus or income of the
Trust Fund to be used or diverted to purposes other than for the
exclusive benefit of participants, and their beneficiaries, or
permit any portion of the Trust Fund to revert to or become the
property of any Employer, except as may be permitted under the Plan
or under Section 3.4 hereof or if required to obtain or retain
qualification under section 401(a) of the Code, and (c) no
amendment shall deprive any participant or any beneficiary of any
of the benefits to which he is entitled under the Plan with respect
to contributions previously made. Notice of such amendment shall
be in writing and delivered promptly to the Trustee, the Investment
Committee and the Plan Administrator.
9.2 Termination. In the event of the termination or partial
termination of the Plan as provided therein, the Trustee shall
dispose of the Trust Fund, in cash or in kind or partly in each as
directed by the Investment Committee; provided that the Trustee may
reserve such reasonable amount as the Trustee may deem necessary to
satisfy outstanding and accrued charges against the Trust Fund. At
no time shall any part of the corpus or income of the Trust Fund be
used to satisfy or be diverted to purposes other than for the
exclusive benefit of participants and their beneficiaries, except
as may be permitted under the Plan or under Section 3.4 hereof or
required to obtain or retain qualification under Section 401(a) of
the Code.
ARTICLE X
Adoption by Controlled Group Members
10.1 Employer Joinder. Any entity which has adopted the Plan and
Trust pursuant to the provisions of the Plan shall become a party
to this Trust Agreement and shall be an Employer hereunder.
Thereafter the Trustee shall receive and hold, as part of the Trust
Fund and subject to the provisions of this Trust Agreement, the
contributions made under the Plan by such Employer, and the
deposits made by the participants who are employees of such
Employer.
When the Trust is adopted by an Employer, such Employer shall be
bound by the decisions, instruments, actions and directions of the
Trustee, Investment Committee, Investment Manager, Plan
Administrator and the Company under this Trust Agreement. The
Trustee shall not be required to give notice to, or obtain the
consent of any such Employer with respect to any action which is
taken by the Trustee pursuant to this Trust Agreement, and the
Investment Committee, Investment Manager, Plan Administrator and
the Company shall have the sole authority to enforce this Trust
Agreement on behalf of any such Employer.
10.2 Withdrawal by an Employer. In the event a division or an
Employer other than the Company withdraws from the Plan and Trust,
the Trustee, upon receipt of written notice authorizing the
withdrawal in accordance with the Plan, shall segregate the accrued
benefits of participants who are employees of the withdrawing
division or Employer (as determined by the Plan Administrator and
specified in writing to the Trustee) and make disposition thereof
in accordance with the direction of the Plan Administrator.
10.3 Common Fund. The Trustee shall not be required to make any
separate investment of the Trust Fund for the accounts of the
several Employers and employees or former employees employed by
them, respectively (or their beneficiaries) and may administer and
invest all Employer Contributions and all deposits by participants
made under the Plan as one Trust Fund. If, for any purpose, it
becomes necessary to determine the portion of the Trust Fund
allocable to all, or any group of, employees or former employees of
any one of the Employers (or their beneficiaries) as of any date,
such portion of the Trust Fund shall be an amount equal to the
aggregate of the account balances under the Plan of all such
persons, after all accounting adjustments under the Plan required
as of such date shall have been made.
10.4 Employers. Any "Related Company" (as defined below) which is
an Employer under the Plan shall be a party to this Trust
Agreement. The Committee shall provide written notice to the
Trustee of all such Related Companies which have adopted the Plan
and shall provide such evidence thereof as the Trustee may
reasonably require. The term "Related Company" means any trade or
business, whether or not it is incorporated, during any period that
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 (c) of the Code.
ARTICLE XI
Miscellaneous
11.1 Action by the Company. Any action required to be taken by
the Company hereunder shall be by resolution of its Board of
Directors or by written direction of such one or more of its
officers or agents as shall be designated by resolution of its
Board of Directors to act for the Company.
The Trustee may rely upon a certified copy of a resolution or other
written direction filed with the Trustee and shall have no
responsibility for any action taken in accordance with any such
resolution or direction.
11.2 Litigation. Necessary parties to any accounting, litigation,
or other proceedings against the Plan shall include only the
Trustee or the Plan Administrator in their capacity as such.
11.3 Invalidity of Certain Provisions. If any provision of this
Trust Agreement shall be held illegal, invalid or unenforceable,
such illegality, invalidity or unenforceability shall not affect
any other provisions hereof and this Trust Agreement shall be
construed and enforced as if such provisions, to the extent
illegal, invalid or unenforceable, had not been included.
11.4 Company Merger. In the event that any successor corporation
to the Company, by merger, consolidation, purchase or otherwise,
shall elect to adopt the Plan, such successor corporation shall be
substituted hereunder for the Company, upon the filing in writing
of its election to do so with the Trustee, the Investment Committee
and the Plan Administrator.
11.5 Counterparts. This Trust Agreement may be executed in two
or more counterparts, any one of which will be an original without
reference to the others.
11.6 Successors. This Trust Agreement shall be binding on all
persons entitled to benefits under the Plan and their respective
heirs and legal representatives, on the Employers and their
successors and assigns, on the Trustee and its successors, and on
the Investment Committee members and their successors.
11.7 Gender and Number. Except when the context indicates to the
contrary, when used herein, masculine terms shall be deemed to
include the feminine, and singular the plural.
11.8 Headings. The headings of Articles and Sections are
included solely for convenience of reference, and if there is any
conflict between such headings and the text of this Trust
Agreement, the text shall control.
11.9 Law Governing. This Trust Agreement shall be construed
according to the laws of the state of New York, other than its law
respecting choice of law, except to the extent such laws are
superseded by the laws of the United States. Notwithstanding any
provision herein to the contrary, the Trustee shall exercise its
duties and responsibilities under this Trust Agreement in
accordance with the applicable provisions of ERISA.
11.10 Warranty. The Employers warrant that the bonding
requirements of Section 412 of ERISA have been met.
11.11 Disagreement as to Acts. If there is a disagreement
between the Trustee and anyone as to any act or transaction
reported in any accounting, the Trustee shall have the right to
have its account settled by a court of competent jurisdiction.
11.12 Persons Dealing With Trustee. No person dealing with the
Trustee shall be required to see to the application of any money
paid or property delivered to the Trustee, or to determine whether
or not the Trustee is acting pursuant to any authority granted to
it under this Trust Agreement.
11.13 Evidence. Evidence required of anyone under this Trust
Agreement may be by certificate, affidavit, document or other
instrument which the person acting in reliance thereon considers
pertinent and reliable, and signed, made or represented by the
proper party.
11.14 Waiver of Notice. Any notice required under this Trust
Agreement may be waived by the person entitled thereto.
11.15 Service of Legal Process. If the Trustee receives service
of summons, subpoena or other legal process of any court with
respect to any action relating to any Plan or this Trust Agreement,
it shall promptly inform the Company of such service and, at the
request of the Company, shall provide it with a copy of the
document served.
11.16 Facsimile and Electronic Transmissions. Facsimile and
electronic transmissions shall be deemed to be "written" for all
purposes of this Trust Agreement.
ARTICLE XII
DWDC Shares Account and Allstate Shares Account
12.1 Establishment of DWDC Shares Account and Allstate Shares
Account. Prior to January 1, 1995, The Northern Trust Company
served as the Institutional Trustee for the DWDC Shares Sub-Trust,
which was part of The Savings and Profit Sharing Fund of Sears
Employees Trust Agreement, which had responsibilities and rights
different than the remainder of the Trust Fund. Because The
Northern Trust Company of New York, effective as of January 1,
1995, commenced to serve as Trustee for all assets in the Trust
Fund, the need for a separate DWDC Shares Sub-Trust was eliminated;
however, because of the unique limitations which apply to the DWDC
Shares in the Trust Fund, the former DWDC Shares Sub-Trust was
changed to the "DWDC Shares Account" of the Trust. The DWDC Shares
Account will hold all of the shares of DWDC that were received as
dividends with respect to Company Shares held by the Trust. There
shall also be established hereunder an "Allstate Shares Account"
that will hold all of the shares of Allstate that are received as
dividends with respect to Company Shares held by the Trust.
12.2 Management Of the DWDC Shares Account and Allstate Shares
Account. The Trustee shall have full power and authority to do all
acts necessary to carry out its duties hereunder with respect to
the DWDC Shares Account and the Allstate Shares Account. Subject
to the following provisions of this Article XII,
(a) the Trustee shall have, with respect to the DWDC Shares
Account and the Allstate Shares Account, all of the powers
(including, without limitation, the investment powers,
administrative powers and discretionary powers) granted under this
Trust Agreement to the Trustee with respect to the Trust and the
Trust Fund, provided, however, the Trustee may exercise any such
powers in its sole discretion without the receipt of a direction
from another fiduciary;
(b) the Trustee shall have the power to make the determinations
described in Article I hereof and subsection 5.3(a) or 5.3(b) of
the Plan; and
(c) all of the provisions of this Trust Agreement shall be deemed
to have been incorporated into this Article XII as an agreement
(the "DWDC Shares Account and Allstate Shares Account Agreement")
between the Company and the Trustee governing the management and
administration of the DWDC Shares Account and the Allstate Shares
Account.
12.3 DWDC Shares Account and Allstate Shares Account Assets. (a)
Except as otherwise required by ERISA, the assets of the DWDC
Shares Account and the Allstate Shares Account shall consist solely
of (i) shares of DWDC or Allstate, respectively, received as
dividends with respect to Company Shares held by the Trust, (ii)
any additional shares of DWDC or Allstate, respectively, received
by the Trustee as a result of any stock dividends or stock splits;
(b) All cash dividends received with respect to shares of DWDC
held in the DWDC Shares Account or shares of Allstate held in the
Allstate Shares Account shall be transferred from the DWDC Shares
Account or Allstate Shares Account and invested pursuant to
subsection 4.2(a)(3) hereof; and
(c) All cash or other proceeds received upon the disposition of
shares of DWDC held in the DWDC Shares Account or shares of
Allstate held in the Allstate Shares Account shall be transferred
from the DWDC Shares Account or Allstate Shares Account and
invested pursuant to subsection 4.2(a)(3) hereof.
IN WITNESS WHEREOF, the Company has caused this Trust Agreement to
be signed and its corporate seal to be hereunto affixed and
attested by its duly authorized officers, and the Trustees have
executed this Trust Agreement, on the day and year first above
written.
SEARS, ROEBUCK AND CO.
By:/s/JAMES M. DENNY
James M. Denny
Vice Chairman
ATTEST:
/s/DAVID SHUTE
Secretary
By:/s/PHILIP OLDMAN
The Northern Trust Company
of New York as Trustee
Vice President
SEARS, ROEBUCK AND CO.
EMPLOYEE STOCK OWNERSHIP TRUST
As amended and Restated as of June 30, 1995
June 30, 1995
<PAGE>
SEARS, ROEBUCK AND CO.
EMPLOYEE STOCK OWNERSHIP TRUST
THIS TRUST AGREEMENT, made and entered into this 30th day of June,
1995 (the "Effective Date"), by and among United States Trust
Company of New York, a New York banking corporation, as trustee
(the "Trustee"), SEARS, ROEBUCK AND CO., a New York corporation
(the "Company") and certain subsidiaries of the Company which
become a party to the Trust in accordance with the provisions of
Article IX of this Agreement (which subsidiaries and the Company
are referred to below individually as an "Employer" and
collectively as the "Employers"),
WITNESSETH THAT:
WHEREAS, the Company and its subsidiaries have maintained a profit
sharing plan with a cash or deferred arrangement within the meaning
of sections 401(a) and 401(k) of the Internal Revenue Code of 1986,
as amended ("Code"), known as the "The Savings and Profit Sharing
Fund of Sears Employees" (the "Plan"); and
WHEREAS, the Company determined that it was and is in the best
interests of the participants in the Plan and the shareholders of
the Company to provide a mechanism for the employees to participate
more fully in shareholder decisions and the enhancement of
shareholder value and, thereby, to assure an employee workforce
motivated by the long-term interests of the Company, and amended
the Plan accordingly to consist of both a profit sharing plan
intended to qualify under section 401(a) and 401(k) of the Code and
an employee stock ownership plan (the "ESOP") intended to qualify
as a stock bonus plan under section 401(a) of the Code and as an
employee stock ownership plan under section 4975(e)(7) of the Code;
and
WHEREAS, it was and is intended that the ESOP be a long-term
investor in the Company regardless of the short term effects of the
continuing investment in the Company, and shall be invested
primarily in shares of the Company ("Company Shares") of any class
or series which qualify as "employer securities" under section
409(1) of the Code, and that this Trust form a part of the Plan
with respect to that portion of the Plan's assets as may be
allocated to this Trust from time to time in accordance with the
terms of this Agreement; and
WHEREAS, the Company entered into a Trust Agreement with The
Northern Trust Company on December 20, 1989, which Trust Agreement
terminated upon the execution of the predecessor to this Trust
Agreement with United States Trust Company of New York on
November 15, 1994; and
WHEREAS, as of the Effective Date the Plan was split into two
separate plans: (1) a profit sharing, stock bonus and employee
stock ownership plan providing benefits to eligible employees of
the Company and its affiliates (exclusive of The Allstate
Corporation and its subsidiaries (the "Allstate Group")), which
continued to hold the assets attributable to the profit sharing,
stock bonus and ESOP features of the Plan which were allocable to
employees and former employees of the Company and its affiliates
other than the Allstate Group and certain of the assets held in the
ESOP suspense account, and which continued to be known as The
Savings and Profit Sharing Fund of Sears Employees; and (2) a
profit sharing, stock bonus and employee stock ownership plan
providing benefits to eligible employees of the Allstate Group to
which were transferred the assets attributable to the profit
sharing, stock bonus and ESOP features of the Plan which were
allocable to employees and former employees of the Allstate Group
and certain of the assets held in the ESOP suspense account, and
which is known as The Savings and Profit Sharing Fund of Allstate
Employees; and
WHEREAS, as of the Effective Date all of the shares of The Allstate
Corporation ("Allstate") held by the Company will be distributed to
the shareholders of the Company as a spinoff dividend and Allstate
will thereby cease to be a member of the controlled group of
corporations that includes the Company; and
WHEREAS, subject to the provisions of the Plan, all of the Allstate
shares received as a spinoff dividend with respect to Company
Shares held by the Trustee in the ESOP suspense account under this
Trust shall, as soon as possible following the Effective Date as is
consistent with prudent investment standards as determined by the
Trustee, be sold (or exchanged for Company Shares) and the proceeds
of such sales shall be applied to the purchase of Company Shares
which shall be held in the ESOP suspense account under this Trust
until released therefrom and allocated to participants' accounts in
accordance with the provisions of the Plan; and
WHEREAS, this Trust Agreement constitutes an amendment, restatement
and continuation, effective as of the Effective Date, of the Trust
Agreement entered into with United States Trust Company of New York
on November 15, 1994; and
NOW, THEREFORE, IT IS AGREED by and between the parties hereto that
the Trustee hereby accepts its continuing appointment as such under
this Agreement, effective as of the day and year first above
written.
IT IS FURTHER AGREED, by and between the parties hereto, as
follows:
ARTICLE I
Name
This Trust Agreement and Trust hereby evidenced shall continue to
be known as "Sears, Roebuck and Co. Employee Stock Ownership
Trust".
ARTICLE II
Management and Control of the Plan
and Trust Fund Assets
II-1 Plan Administration, Identification of Fiduciaries. The Plan
generally is administered by the administrator provided for in the
Plan (the "Plan Administrator"). The Secretary or an Assistant
Secretary of the Company will certify to the Trustee the persons
who are, from time to time, the Plan Administrator and the members
of the Investment Committee and who, as such, are "named
fiduciaries", as described in Section 402 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The
term "named fiduciaries" shall also include each person entitled to
benefits under the Plan to the extent of his authority under
Article V to exercise voting, tender, and exchange rights with
respect to the Company Shares allocated to his account under the
Plan and with respect to a proportionate share of the unallocated
Company Shares and the allocated Company Shares for which other
participants do not give timely voting instructions to the Trustee
in accordance with Article V. The Secretary or an Assistant
Secretary of the Company shall also certify to the Trustee and
provide specimen signatures of the person or persons authorized to
act on behalf of the Plan Administrator or Investment Committee.
The Trustee may rely on the latest certificate without further
inquiry or verification.
II-1 The Trust Fund. The Trust Fund as at any date means all
property of every kind then held by the Trustee under this Trust
Agreement.
II-3 The trustee. The "trustee" means any trustee acting under
any other trust which forms a part of the Plan other than the
Trustee.
II-4 General Powers. Subject to the provisions of Article V, with
respect to the Trust Fund, the Trustee shall have the following
powers, rights and duties in addition to those provided elsewhere
in this Trust Agreement or, except to the extent inconsistent
herewith, by law:
(a) to receive and hold all contributions paid to it under the
Plan; provided, however, that the Trustee shall have no duty to
require any contributions to be made to it, or to determine that
the contributions received by it comply with the provisions of any
Plan or with any resolution of the Board of Directors of any
Employer providing therefor;
(b) at the direction of the Investment Committee, to accept and
hold as a part of the Trust Fund the assets held by any trustee
acting under any other trust which forms a part of the Plan or any
other plan intended to meet the requirements of section 401(a) of
the Code;
(c) at the direction of the Investment Committee, to transfer all
or any part of the Trust to any other trustee acting under any
other trust forming a part of the Plan:
(c) to borrow on a short-term unsecured basis to cover any
overdraft;
(d) to the extent permitted by paragraph IV-1, to retain in cash
or in cash equivalents (pending investment, reinvestment or payment
of benefits), without liability for interest, any reasonable
portion of the Trust Fund and deposit cash in any depositary,
including the banking department of the bank acting as Trustee, or
in the Trustee's STIF fund:
(e) at the direction of the Company or of an investment manager
(as defined in section 3(38) of ERISA) appointed by the Company,
and otherwise to the extent permitted under paragraph IV-1, to
purchase Company Shares in the open market (whether on stock
exchanges, in privately negotiated transactions or otherwise) or
from any other source, including a private purchase from the
Company of treasury shares, and, provided that any such purchase
which is from a party-in-interest (as defined in section 3(14) of
ERISA) or a disqualified person (as defined in section 4975 of the
Code) shall be without payment of any commissions and for an amount
which is no greater than adequate consideration (as defined in
section 3(18) of ERISA) for such Company Shares;
(f) to compromise, contest, arbitrate, settle or abandon claims
and demands:
(g) to begin, maintain or defend any litigation necessary in
connection with the investment, reinvestment and administration of
the Trust;
(h) to hold securities or other property in the name of the
Trustee or its nominee, or nominees, or in such other form as it
determines best, with or without disclosing the trust relationship,
provided that the records of the Trustee shall indicate the actual
ownership of such securities or other property;
(i) to participate in and use the Federal book-entry account
system, a service provided by the Federal Reserve Bank for its
member banks for deposit of Treasury securities;
(j) to deposit securities with a clearing corporation, in which
event, the certificates representing securities, including those in
bearer form, may be held in bulk form with, and may be merged into,
certificates of the same class of the same issuer which constitute
assets of other accounts or owners, without certification as to the
ownership attached; provided that the Trustee shall at all times
maintain a separate and distinct record of the securities owned by
the Trust Fund;
(k) to retain any funds or property subject to any dispute without
liability for the payment of interest, and to decline to make
payment or delivery thereof until final adjudication is made by a
court of competent jurisdiction;
(l) to furnish to the Company, at least annually, an account
showing all investments, sales, income and expenses of the Trust
Fund and showing all receipts, disbursements and other transactions
made by the Trustee during the accounting period, and also showing
the assets of the Trust Fund held at the end of the period, which
account shall be conclusive on all persons, including the Employers
to the extent permitted by law except as to any act or transaction
as to which the Company or any Employer files with the Trustee
written exceptions or objections within six months after receipt of
the account;
(m) after consultation with the Investment Committee, to employ
agents, attorneys, actuaries, accountants or other persons (who
also may be employed by or represent the Plan Administrator, the
Investment Committee or any Employer) for such purposes as the
Trustee considers desirable;
(n) to the extent permitted by paragraph IV-I, to invest assets of
the Trust Fund in a collective investment trust established for the
purpose of investing in cash equivalents which then provides for
the pooling of the assets of plans described in section 401(a) and
exempt from tax under section 501(a) of the Code, or any comparable
provisions of any future legislation that amends, supplements or
supersedes those sections, including any such trust which is then
maintained by the bank acting as Trustee hereunder (whether or not
such collective investment trust provides for the pooling of assets
of other tax exempt trusts), provided that such collective
investment trust is exempt from tax under the Code or regulations
or rulings issued by the Internal Revenue Service; the provisions
of the document governing such collective investment trust, as it
may be amended from time to time, shall govern any investment
therein and are hereby made a part of this Trust Agreement;
(o) at the direction of the Company, to take all actions necessary
to issue ESOP Loans (as defined in paragraph IV-2), whether in the
form of notes or other obligations;
(p) to make payments from the Trust Fund in accordance with
paragraph II-6 and to dispose of Company Shares to the extent
provided by Article V or required for the day-to-day administration
of the Trust; and
(q) to assume, until advised to the contrary, that the Trust
evidenced by this Trust Agreement is qualified under sections
401(a) and 4975(e)(7) of the Code, and is entitled to tax exemption
under section 501(a) thereof.
II-5 Compensation and Expenses. The Trustee shall pay from the
Trust Fund all of the Trustee's expenses, taxes and charges
(including fees of persons employed by it in accordance with
subparagraph II-4(n)) and such reasonable compensation to the
Trustee as may from time to time be agreed upon in writing by the
Company or an officer thereof incurred in connection with the
collection, administration, management, investment, protection and
distribution of the Trust Fund, except to the extent such expenses,
taxes and charges are paid by the Employers. To the extent that
the foregoing expenses are paid directly by the Employers, the
Trustee shall reimburse the Employers from the Trust Fund to the
extent directed by the Company. All other costs and expenses
incurred with respect to the collection, administration,
management, investment, protection and distribution of the Trust
Fund and administration of the Plan (including, to the extent
permitted by law, all direct expenses incurred by the Company or
any Controlled Group Members in providing administrative and asset
management services and office space to the Plan or otherwise
incurred by them in connection with the Plan or Trust Fund) shall
be paid from or reimbursed out of the Trust Fund in accordance with
the directions of the Company.
II-6 Payments From the Trust Fund. The Trustee shall make
payments and distributions of Company Shares from the Trust Fund to
persons entitled thereto under the terms of the Plan, in such
manner, at such times and in such amounts as the Plan Administrator
shall direct, subject to the following:
(a) The Plan Administrator may make payments from the Trust Fund
through a commercial banking account held in the name of the Trust
in a federally insured banking institution (including the Trustee)
to which the Trustee shall make such deposits from the Trust Fund
as the Plan Administrator may from time to time direct in writing.
The Trustee shall have no responsibility to account for funds
retained in any such commercial banking account or disbursed by the
Plan Administrator or to prepare any informational returns for tax
purposes as to distributions made therefrom.
(b) The Trustee shall have no responsibility to inquire as to
whether a payee is entitled to the payment, or as to whether a
payment is proper, and shall have no liability for a payment made
in good faith without actual notice or knowledge of the changed
condition or status of the payee.
(c) If any check for any payment directed to be made from the
Trust Fund has been mailed by the Trustee, by regular United States
mail, to the last address of the payee furnished to the Trustee by
the Plan Administrator is returned unclaimed, the Trustee shall
notify the Plan Administrator of that fact and shall destroy such
check and take such further action as the Plan Administrator shall
direct
(d) The Trustee may reserve such reasonable amount from any
payment or distribution or any deposit as it shall deem necessary
to pay any estate, inheritance, income or other tax, charge or
assessment attributable to any payment or deposit or may require
such release or other document from any taxing authority and such
indemnity from the intended payee as the Trustee shall deem
necessary for its protection.
II-7 Exercise of Trustee's Duties. Subject to the provisions of
Article VII, the Trustee shall discharge its duties hereunder
solely in the interest of the participants and other persons
entitled to benefits under the Plan; and
(a) for the exclusive purpose of:
(i) providing benefits to participants and other persons
entitled thereto under the Plan; and
(ii) defraying reasonable expenses of administering the Trust;
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 like character and with like aims.
ARTICLE III
Indemnification of Trustee
The Trustee shall be indemnified, held harmless and promptly
reimbursed by the Company against all claims, liabilities, fines
and penalties and all expenses (including, but not limited to,
attorney fees) reasonably incurred by or imposed upon it which
arise as a result of its actions or failures to act by reason of
serving as Trustee, to the extent lawfully allowable; provided
that, notwithstanding the foregoing, (a) the Trustee shall not be
indemnified for its negligence, for willful breach of
responsibility, for actions or failures to act taken in bad faith,
or for any breach of ERISA and (b) the Company shall not indemnify
the Trustee for any such amount incurred through any settlement or
compromise of any action unless the Company consents in writing to
such settlement or compromise.
ARTICLE IV
Provisions Related to
Investment in Company Shares
IV-1 Investment in Company Shares. The Trustee shall invest all
assets of the Trust Fund, including earnings thereon, within a
reasonable time after receipt thereof, exclusively in Company
Shares in accordance with directions given under paragraph II-4 (f)
subject, in either case, to retention in cash or cash equivalents
of the following amounts: (i) the proceeds of any ESOP Loan
pending the use of such proceeds, within a reasonable period, to
acquire Company Shares or to repay all or any portion of that ESOP
Loan or any outstanding ESOP Loan; (ii) cash dividends received on
Company Shares pending the use of such dividends to make payments
of principal or interest on an ESOP Loan or pending their
reinvestment in Company Shares or distribution to participants, as
directed by the Plan Administrator; (iii) contributions to the
Trust pending the use thereof to make payments of principal or
interest on an ESOP Loan, (iv) such other amounts as may be
required to be transferred to other investment funds under the Plan
or distributed in accordance with the diversification requirements
of Code section 401(a)(28), as directed by the Plan Administrator;
and (v) such other amounts as may be required for the proper
administration of the Trust.
IV-2 ESOP Loans. The Trustee may from time to time incur debt (an
"ESOP Loan") for the purpose of acquiring Company Shares or for the
purpose of repaying all or any portion of such ESOP Loan or any
outstanding ESOP Loan, subject to the following:
(a) Each ESOP Loan shall be for a specific term.
(b) The interest rate with respect to an ESOP Loan may be fixed or
variable; provided, however, that in either case such rate shall
not be in excess of a reasonable rate of interest taking into
account all relevant factors, including the amount and duration of
the ESOP Loan, the security and the guarantee, if any, and the
credit standing of the Plan and the guarantor, if any.
(c) The only Trust assets which may be given as collateral for an
ESOP Loan are Company Shares acquired with the loan proceeds, or
with the proceeds of any prior ESOP Loan to the extent that such
prior ESOP Loan is repaid with the proceeds of the current ESOP
Loan. Any such collateral shall be released as provided in
paragraph IV-3.
(d) Under the terms of the ESOP Loan, no person entitled to
payment thereunder shall have any right to any Plan assets other
than (i) collateral, if any, given for the ESOP Loan in accordance
with subparagraph (c) above, (ii) contributions (other than
contributions of employer securities) that are made to enable the
Trust to meet its obligations under the ESOP Loan, and
(iii) earnings attributable to such collateral and to the
investment of such contributions.
(e) Subject to paragraph (d) next above, the ESOP Loan shall be
without recourse against the Plan.
(f) Payments during any plan year on all outstanding ESOP Loans
shall not exceed an amount equal to the sum for all Plan Years of
all contributions described in subparagraph IV-2(d)(ii) and
earnings on assets of the ESOP, reduced by all prior payments on
ESOP Loans during all prior plan years.
(g) In the event of a default under the ESOP Loan, the value of
Plan assets transferred in satisfaction of the ESOP Loan shall not
exceed the amount of the default. If the Lender is a disqualified
person (as defined in section 4975(e) of the Code) or a party in
interest to the Plan (as defined in section 3(14) of ERISA), the
ESOP Loan shall provide for a transfer of Plan assets upon default
only upon and to the extent of the failure of the Plan to meet the
payment schedule of the ESOP Loan.
(h) The Trustee shall maintain adequate records to identify at any
time the Company Shares held under the Trust Fund which were
acquired with the proceeds of each ESOP Loan.
IV-3 Release of Company Shares From Collateral. Subject to the
following provisions of this paragraph IV-3, for each Plan Year
during the duration of an ESOP Loan, the number of Company Shares
which shall be released from encumbrance shall be determined by the
Plan Administrator and shall be equal to the product of the number
of Company Shares, if any, which serve as collateral for such ESOP
Loan multiplied by a fraction, the numerator of which is the amount
of principal and interest paid on the loan for that year and the
denominator of which is the amount of principal and interest paid
or payable on the loan for that year and for all future years. For
purposes of determining the preceding fraction for any Plan Year,
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 that Plan Year.
Notwithstanding the foregoing provisions of this paragraph, any
ESOP Loan may provide that Company Shares shall be released from
encumbrance in amounts proportionate to principal payments only,
provided that:
(a) 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;
(b) 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
(c) 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 Company Shares that are released from
encumbrance at any time under this paragraph shall be based solely
on the repayment of the ESOP Loan to which such Company Shares are
attributable.
IV-4 Payments on ESOP Loans. All cash contributions made by an
Employer to enable the Trustee to make payments of principal or
interest on an ESOP Loan shall be promptly so applied by the
Trustee. To the extent the Trustee is so directed by the Company,
cash dividends on Company Shares received by the Trustee or
transferred to the Trustee by the trustee acting under any other
trust which forms a part of the Plan shall be applied by the
Trustee as soon as practicable thereafter to make payments on
outstanding ESOP Loans.
IV-5 Put Option and Independent Appraiser. If any Company Shares
are not readily tradable on an established market (within the
meaning of section 409(h)(1)(B) of the Code), (i) any participant
who is entitled to a distribution of such shares from the Plan
shall have a right to require the Company to repurchase such shares
in accordance with section 409(h)(1)(B) of the Code and (ii) all
valuations of such Company Shares with respect to activities
carried on by the Plan shall be by an independent appraiser within
the meaning of section 401(a)(28)(C) of the Code. Subject to the
preceding sentence, Company Shares acquired with the proceeds of an
ESOP Loan shall not be subject to a put, call or other option or a
buy-sell or similar arrangement either while held by the Plan or
when distributed to or on account of a participant whether or not
any portion of the Plan is then an ESOP.
IV-6 Stock Dividends, Splits and Other Capital Reorganizations.
Any stock received by the Trustee as a stock split or dividend and
any cash or securities received as a result of a reorganization or
other recapitalization of the Company shall be allocated under the
Plan in the same manner as the Company Shares to which the payment
is attributable are then allocated.
IV-7 Disposition of Trades or Businesses. Notwithstanding the
foregoing provisions of this Article IV, in the event of the sale
of an Employer or the sale of substantially all of the assets used
by an Employer in a trade or business, the Trustee shall, if the
Company so directs:
(a) transfer a pro rata portion of each outstanding ESOP Loan, and
the Company Shares acquired with the proceeds of such ESOP Loan
which have not been allocated to the accounts of participants under
the Plan, to any successor plan which is intended to qualify under
sections 401(a) and 4975(e)(7) of the Code and to be exempt from
taxation under section 501(a) of the Code; or
(b) sell a pro rata portion of the Company Shares acquired with
the proceeds of each ESOP Loan which have not been allocated to the
accounts of participants under the Plan and use the proceeds
thereof to prepay such ESOP Loan;
provided, however, that no such action shall be taken by the
Trustee unless the Trustee has received a satisfactory opinion of
counsel (which may be counsel to the Company) that such action will
not violate the applicable provisions of any state or Federal
securities laws or the requirements of the Code applicable to plans
qualified under sections 401(a), 409, 501(a) and 4975(e)(7) of the
Code, will not violate the terms of the ESOP Loan, and will not
cause the ESOP Loan to fail to qualify for the prohibited
transaction exemption provided by section 4975(d)(3) of the Code
and ERISA section 408(b)(3). For purposes of this Section IV-7,
the pro rata portion of any ESOP Loan attributable to an Employer
or any trade or business will be determined on the basis of the
ratio of the portion of the Employers' Contribution allocated to
such Employer or trade or business (as determined under the terms
of the Plan) for the Plan Year preceding the date as of which the
determination is made to the total Employers' Contribution for such
Plan Year.
IV-8 Disposition of Allstate Shares. The Trustee shall, as soon
as possible following the Effective Date as is consistent with
prudent investment standards as determined by the Trustee, sell (or
exchange for Company Shares) all of the Allstate shares received as
a spinoff dividend with respect to Company Shares held by the
Trustee in the ESOP suspense account under this Trust and shall
apply the proceeds of such sales to the purchase of Company Shares
which shall be held in the ESOP suspense account under this Trust
until released therefrom and allocated to participants' accounts in
accordance with the provisions of the Plan.
ARTICLE V
Voting Tender and Exchange of Stock
V-1 Voting of Shares. Notwithstanding any other provision of this
Trust Agreement, the Company Shares held in the Trust Fund shall be
voted by the Trustee as follows:
(a) Before each meeting of the Company's shareholders, the trustee
shall furnish each participant in the Plan 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 Company Shares allocated to his account
under the Plan on the latest valuation date preceding the record
date for such meeting for which the number of such shares has been
provided to the Plan Administrator, less any partial withdrawal
since that valuation date. Upon timely receipt of such
instructions, such shares shall be voted as instructed.
(b) If the Trustee receives advice satisfactory to itself from
another trustee as to timely voting instructions with regard to at
least fifty percent of the total outstanding Company Shares
allocated to participants' accounts according to Article V-1(a),
then Company Shares of any class held in this Trust Fund shall be
voted in the same proportion as all Company Shares of that class
held under the Plan (including shares held in a separate trust
fund) with respect to which directions are received by any other
trustee acting under the Plan. If the Trustee receives advice
satisfactory to itself from another trustee as to timely voting
instructions with regard to less than fifty percent of the total
outstanding Company Shares allocated to participants' accounts,
then the Trustee shall vote unallocated shares held in this Trust
Fund in its sole discretion.
V-2 Tender and Exchange Rights. Notwithstanding any other
provision of the Trust, tender and exchange rights with respect to
Company Shares held in the Trust Fund shall be exercised as
follows:
(a) The trustee shall furnish each participant with a notice of
any tender or exchange offer for, or a request or invitation for
tender of, Company Shares, together with an appropriate form on
which such participant may instruct another trustee of the Plan
with respect to the tender or exchange of Company Shares allocated
to his account. Company Shares as to which another trustee of the
Plan receives timely instruction shall be tendered or exchanged in
accordance with such instructions.
(b) Company Shares allocated to participants' accounts for which
directions are not received shall not be tendered or exchanged.
(c) Company Shares which are not allocated to participants'
accounts and held in this Trust Fund shall be tendered or exchanged
by the Trustee in its sole discretion.
(d) Notwithstanding the provisions of paragraphs (a) and (b) of
Section V-l and paragraphs (a) and (b) above, in the event that the
Trustee determines that any direction received by it or another
trustee with respect to the tender or voting of Company Shares is
not proper or is contrary to the provisions of ERISA, the Trustee
shall disregard such direction and assume responsibility for the
voting or tendering of Company Shares held in this Trust Fund.
V-3 Confidentiality and Cooperation. 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 such record keeper agrees to keep such information
confidential. The Trustee shall cooperate with the trustee or
trustees of any other trust forming a part of the Plan to the
extent necessary to facilitate the exercise of voting, tender and
exchange rights in accordance with the terms of the applicable
trust agreements.
V-4 Execution of Documents. The Trustee shall execute such
ballots, proxies or other instruments as may be necessary or
desirable in order to effectuate the provisions of this Article V.
V-5 Allstate Shares. Voting, tender and exchange rights with
respect to shares of Allstate held by the Trustee shall be
exercised in the same manner as such rights are exercised with
respect to Company Shares as described in this Article V.
ARTICLE VI
Miscellaneous
VI-1 Warranty. The Employers warrant that the bonding
requirements of Section 412 of ERISA have been met.
VI-2 Disagreement as to Acts. If there is a disagreement between
the Trustee and anyone as to any act or transaction reported in any
accounting, the Trustee shall have the right to have its account
settled by a court of competent jurisdiction.
VI-3 Persons Dealing With Trustee. No person dealing with the
Trustee shall be required to see to the application of any money
paid or property delivered to the Trustee, or to determine whether
or not the Trustee is acting pursuant to any authority granted to
it under this Trust Agreement.
VI-4 Evidence. Evidence required of anyone under this Trust
Agreement may be by certificate, affidavit, document or other
instrument which the person acting in reliance thereon considers
pertinent and reliable, and signed, made or represented by the
proper party.
VI-5 Waiver of Notice. Any notice required under this Trust
Agreement may be waived by the person entitled thereto.
VI-6 Counterparts. This Trust Agreement may be executed in any
number of counterparts, each of which shall be deemed an original
and no other counterpart need be produced.
VI-7 Governing Laws. This Trust Agreement shall be construed and
administered according to the laws of the State of New York to the
extent that such laws are not preempted by the laws of the United
States of America.
VI-8 Successors, Etc. The provisions of this Trust Agreement
shall be binding on the Company, the Employers, the Trustee, the
Investment Committee and the Plan Administrator and their
successors and on all persons entitled to benefits under any Plan
and their respective heirs and legal representatives.
VI-9 Successor Employer. If a successor to any Employer or a
purchaser of all or substantially all of any Employer's assets
elects, with the consent of the Company, to continue any Plan, such
successor or purchaser shall be substituted for that Employer under
this Trust Agreement. If such Employer is also the Company, such
successor or purchaser shall be substituted for the Company
hereunder.
VI-10 Service of Legal Process. If the Trustee receives service
of summons, subpoena or other legal process of any court with
respect to any action relating to any Plan or this Trust Agreement,
it shall promptly inform the Company of such service and, at the
request of the Company, shall provide it with a copy of the
document served.
VI-11 Action by Employers. Any action required or permitted to be
taken by an Employer under the provisions of this Trust Agreement
shall be by resolution of its Board of Directors, or by person or
persons authorized by resolution of its Board of Directors.
Article VII
No Reversion to Employers
No part of the corpus or income of the Trust Fund shall revert to
any Employer or be used for, or diverted to, purposes other than
for the exclusive benefit of participants and other persons
entitled to benefits under the Plan provided, however, that:
(a) The contributions of each Employer under the Plan are
conditioned upon the deductibility thereof under section 404 of the
Code, and, to the extent any such deduction is disallowed, the
Trustee shall, upon written request of that Employer, return the
amount of the contribution (to the extent disallowed), reduced by
the amount of any losses thereon, to that Employer within one year
after the date the deduction is disallowed.
(b) If a contribution or any portion thereof is made by any
Employer by a mistake of fact, the Trustee shall, upon written
request of that Employer, return the amount of the contribution or
such portion, reduced by the amount of any losses thereon, to that
Employer within one year after the date of payment to the Trustee.
ARTICLE VIII
Change of Trustee
VIII-1 Resignation. The Trustee may resign at any time by giving
forty-five days' advance written notice to the Company and the
Employers.
VIII-2 Removal of Trustee. The Company may remove any Trustee by
giving 10 days' advance written notice to the Trustee and the
Employers, subject to providing the removed Trustee with
satisfactory written evidence of the appointment of a successor
Trustee and of the successor Trustee's acceptance of the
trusteeship.
VIII-3 Duties of Resigning or Removed Trustee and of Successor
Trustee. If a Trustee resigns or is removed, it shall promptly
transfer and deliver the assets of the ESOP Trust Fund to the
successor Trustee, after reserving such reasonable amount as it
shall deem necessary to provide for its fees and expenses and any
sums chargeable against the ESOP Trust Fund for which it may be
liable. Within 120 days, the resigned or removed Trustee shall
furnish to the Investment Committee and the successor Trustee an
account of its administration of the Trust from the date of its
last account. Each successor Trustee shall succeed to the title to
the ESOP Trust Fund vested in its predecessor without the signing
or filing of any further instrument, but any resigning or removed
Trustee shall execute all documents and do all acts necessary to
vest such title of record in any successor Trustee. If any assets
in the ESOP Trust Fund have been invested in a collective
investment trust or group trust pursuant to subparagraph II-4(o) of
this Trust Agreement, any resigning or removed Trustee shall, at
the direction of the Investment Committee, cause such investment to
be liquidated at the earliest practical time after notice has been
given or received by the trustee of such resignation or removal.
Each successor shall have all the powers, rights and duties
conferred by this Trust Agreement as if originally named Trustee.
No successor Trustee shall be personally liable for any act or
failure to act of a predecessor Trustee.
ARTICLE IX
Employers
Any "Related Company" (as defined below) which is an Employer under
the Plan shall be a party to this Trust Agreement. The Committee
shall provide written notice to the Trustee of all such Related
Companies which have adopted the Plan and shall provide such
evidence thereof as the Trustee may reasonably require. The term
"Related Company" means any trade or business, whether or not it is
incorporated, during any period that 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
(c) of the Code.
ARTICLE X
Amendment and Termination
X-1 Amendment. Subject to the provisions of Article VII, the
Employers, by action of the Company, reserve the right to amend the
Trust Agreement at any time, except that no amendment shall affect
the rights, or increase the duties or responsibilities of the
Trustee under this Trust Agreement without its consent.
X-2 Termination. If the Plan is terminated, all of the provisions
of the Trust evidenced by this Trust Agreement, as applied to the
Plan, nevertheless shall continue in effect until the portion of
the Trust Fund attributable to the Plan has been distributed by the
Trustee as directed by the Plan Administrator.
IN WITNESS WHEREOF, the Company and the Trustee have caused these
presents to be signed and their seals to be hereunto affixed and
attested by their duly authorized officers, as of the day and year
first above written.
SEARS, ROEBUCK AND CO.
By/s/JAMES M. DENNY
SEAL
ATTEST:
/s/DAVID SHUTE
Its SECRETARY
UNITED STATES TRUST COMPANY OF NEW YORK
By/s/JEFF MAUR
Its PRESIDENT
SEAL
ATTEST:
/s/CHARLES WERT
Its EXECUTIVE VICE PRESIDENT
