**Exhibit 10.21**
Sears Supplemental 401(k) Savings Plan
SECTION 1
General
     1.1   History, Purpose and Effective Date. Sears, Roebuck and Co. (the“Company”) has established the Sears 401(k) Savings Plan (the “401(k) Plan”)formerly known as the Sears 401(k) Profit Sharing Plan, formerly known as theSavings and Profit Sharing Fund of Sears Employees, to encourage eligibleemployees to save a portion of their earnings, to accumulate capital for theirfuture economic security, to share in the profits of the Company, and toacquire a proprietary interest in the Company. The Company established as ofJanuary 1994, the Sears Supplemental 401(k) Savings Plan, formerly known as theSears, Roebuck and Co. Management Supplemental Deferred Profit Sharing Plan(the “Plan”) to enable certain highly-compensated participants in the 401(k)Plan to receive the maximum amount of Company matching contributions they wouldhave been entitled to receive under the 401(k) Plan had the limit oncompensation permitted to be taken into account, with respect to the 401(k)Plan, under section 401(a)(17) of the Internal Revenue Code of 1986, as amended(the “Code”) not been reduced effective January 1, 1994. The Plan is intendedto constitute a plan maintained primarily for the purpose of providing deferredcompensation for a select group of management or highly-compensated employeeswithin the meaning of sections 201(2), 301(a)(3), and 401(a)(1) of the EmployeeRetirement Income Security Act of 1974, as amended (“ERISA”). The
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following provisions constitute an amendment, restatement and continuationof the Plan effective as of January 1, 2001.
     1.2   Administration. (a) The Company is the Plan Administrator of thePlan. The Plan Administrator may delegate all or any part of itsresponsibilities and powers to any person or persons selected by it. Any suchdelegation may be revoked at any time. The Secretary of the Company (or, onbehalf of the Company, an Assistant Secretary) shall certify to any interestedperson the names of the employees of the Company who are, from time to time,authorized to act on behalf of the Plan Administrator and who are responsiblefor the day-to-day operation and administration of the Plan. Anyinterpretation of the Plan or factual finding by the Plan Administrator or itsdelegate and any decision made by the Plan Administrator or its delegate on anyother matter within its discretion is final and binding on all persons.
     (b)  The Plan Administrator hereby delegates to the plan administrator ofthe 401(k) Plan the power and responsibility to take all actions assigned to orpermitted to be taken by the Plan Administrator under Sections 3 and 4 hereofuntil such time the delegation is revoked.
     1.3   Plan Year. The term “Plan Year” means the calendar year.
     1.4   Source of Benefit Payments. Any amount payable to or on account of aParticipant under this Plan shall be paid from the general assets of theCompany or from one or more trusts, the assets of which are subject to theclaims of the Company’s general creditors. The amounts payable hereunder shallbe reflected on the accounting records of the Company but shall not be
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construed to create, or require the creation of, a trust, custodial orescrow account. None of the individuals entitled to benefits under the Planshall have any preferred claim on, or any beneficial ownership interest in, anyassets of the Company or to any investment reserves, accounts, trusts or fundsthat the Company may purchase, establish or accumulate to aid in providing thebenefits under the Plan, and any rights of such individuals under the Planshall constitute only unsecured contractual rights. Nothing contained in thePlan shall constitute a guarantee by the Company that the assets of the Companyshall be sufficient to pay any benefits to any person. The Plan and any actiontaken pursuant to its provisions shall not create a trust or fiduciaryrelationship of any kind between the Company and an employee or any otherperson, or between any person who may perform services on behalf of the Planand any other person.
     1.5   Expenses. The expenses of administering the Plan shall be borne bythe Company.
     1.6   Effect on Other Benefit Plans. Any amounts credited or paid underthis Plan shall not be considered to be compensation for the purposes of anyqualified plan (within the meaning of section 401(a) of the Code) maintained bythe Company or any of its subsidiaries. The treatment of such amounts underother employee benefit plans shall be pursuant to the provisions of such plans.
     1.7   Applicable Laws. The Plan shall be construed and administered inaccordance with the laws of the state of Illinois.
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     1.8   Gender and Number. Where the context admits, words in any gendershall include any other gender, words in the singular shall include the pluraland the plural shall include the singular.
     1.9   Notices. Any notice or document required to be given to or filed withthe Plan Administrator will be properly filed if delivered or mailed byregistered mail, postage prepaid, to the plan administrator of the 401(k) Plan,at the Company’s principal executive offices. The Plan Administrator may, byadvance written notice to affected persons, revise such notice procedure fromtime to time. Any notice required under the Plan may be waived by the personentitled to notice.
     1.10   Evidence. Evidence required of anyone under the Plan may be bycertificate, affidavit, document or other information which the person actingon it considers pertinent and reliable, and signed, made or presented by theproper party or parties.
     1.11   Action by the Company. Any action required or permitted to be takenby the Company shall be by resolution of its Board of Directors or by a dulyauthorized officer of the Company.
SECTION 2
Participation
     2.1   Participants. The key employees of the Company eligible toparticipate in the Plan (the “Participants”) and the conditions for suchparticipation shall be established, from time to time, by the Company;provided,
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however, that Participants shall be limited to a select group ofmanagement or highly-compensated employees within the meaning of sections201(2), 301(a) (3), and 401(a) (1) of ERISA. As of the Effective Date of thePlan, only management employees of all participating employers of the 401(k)Plan are eligible to participate in the Plan. If the Company determines thatparticipation by one or more Participants shall cause the Plan to be subject toPart 2, 3 or 4 of Title I of ERISA, the entire interest of such Participant orParticipants under the Plan shall be immediately paid to such Participant orParticipants or shall otherwise be segregated from the Plan in the discretionof the Company, and such Participant or Participants shall cease to have anyinterest under the Plan.
     2.2   Plan Not Contract of Employment. The Plan does not constitute acontract of employment, and participation in the Plan will not give anyemployee the right to be retained in the employ of the Company nor any right orclaim to any benefit under the Plan, unless such right or claim hasspecifically accrued under the terms of the Plan.
SECTION 3
Matching Credits and Accounts
     3.1   Accounts. The Plan Administrator shall maintain, or cause to bemaintained, bookkeeping entries (“Accounts”) in the names of all Participantswhich shall reflect the amount of Common Share Units credited to eachParticipant in accordance with subsections 3.2 and 3.3.
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     3.2   Matching Credits. Subject to such terms, conditions, and limitationsas the Plan Administrator, from time to time, may establish, for each Plan Yearthe Account of each Eligible Participant shall be credited with a “MatchingCredit” on the same date Company matching contributions are credited to hisaccount under the 401(k) Plan for that Plan Year. An individual who iseligible to participate in the Plan in accordance with subsection 2.1 shall bean “Eligible Participant” for a Plan Year if he is employed by the Company (orone of its subsidiaries) on the first day following the close of the Plan Yearand he has made enough before-tax and/or after-tax contributions to the 401(k)Plan for the Plan Year to be credited with the maximum amount of Companymatching contributions permitted under the 401(k) Plan for such year. AnEligible Participant’s Matching Credit for each Plan Year shall be equal to theexcess of the total amount of Company matching contributions that would havebeen paid under the terms of the 401(k) Plan to the Participant for that PlanYear had the amount of compensation that could have been taken into accountunder the 401(k) Plan been limited to $235,840 rather than $150,000 (or suchother amount as may be prescribed for such Plan Year under section 401(a) (17)of the Code), over the actual amount of Company matching contributions creditedto the account of such Participant under the 401(k) Plan for such Plan Year.For purposes of the preceding sentence, effective as of January 1, 1996, theamount of compensation shall include any amounts deferred under the Sears,Roebuck and Co. Deferred Compensation Plan. Beginning on January 1, 1995, anEligible Participant shall also include those participants who areparticipating in this Plan
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and meet all the requirements of the Plan except that they are notemployed on the first day following the close of the Plan year, and who areeligible for an Employer’s Contribution under Section 5 of the 401(k) Planprovisions. Such Eligible Participant’s Matching Credit for such plan yearshall be prorated and calculated under the same method which the 401(k) Planadministrator uses under Section 5 of the 401(k) Plan provisions.
     3.3   Common Share Units. Matching Credits shall be converted to whole andfractional Common Share Units as of the date such Matching Credits are creditedto Particpants’ Accounts, by dividing the dollar amount of each Participant’sMatching Credits by the “fair market value” of the Company’s common shares(which is, the closing price of the company’s common shares as reported forthat day or the nearest preceding business day). On the dividend record datefor Company common shares Dividend Equivalents shall be credited to theAccounts of Participants who have Common Share Units credited to their Accountsas of the dividend record date, which shall be converted into the number ofCommon Share Units which could be purchased with the amount of DividendEquivalents so credited in the manner set forth in the preceding sentence.“Dividend Equivalents” for this purpose means an amount equal to the cashdividend paid on one of the Company’s common shares on such dividend paymentdate.
     3.4   Adjustment of Accounts. The amounts credited to a Participant’sAccount in accordance with subsection 3.3 shall be adjusted from time to timeto reflect a change in the Company’s outstanding common shares, by reason ofany
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stock split, stock dividend, recapitalization, merger, consolidation,combination, stock exchange or similar corporate change, as determined by thePlan Administrator or its delegate in its sole discretion.
SECTION 4
Payment of Plan Benefits
     4.1   Vesting. A Participant at all times shall have a fully vested andnonforfeitable interest in the amounts credited or required to be credited tohis Account under Section 3.
     4.2   Distribution. The fair market value of a Participant’s Account shallbe determined as of the first day of the month following the date on which theParticipant terminates employment with the company and its subsidiaries, andshall be distributed in a lump sum in cash as soon thereafter as practicable.Subsequent payments of pro-rated Matching Credits for the year in whichemployment is terminated shall be paid at the fair market value of the datesuch Matching Credits are credited to Participant’s Account and shall be paidas soon as practicable, thereafter.
     4.3   Distribution upon Death; Beneficiary Designation. Each Participantfrom time to time, by signing a form furnished by the plan administrator of the401(k) Plan in accordance with the terms of subsection 11.4 of the 401(k) Plan,may designate any legal or natural person or persons who are to be paid if hedies before he receives his benefits under the Plan. A beneficiary designation
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form will be effective only when the signed form is filed with the planadministrator of the 401(k) Plan while the Participant is alive and will cancelall beneficiary designation forms filed earlier. The rules established by theplan administrator of the 401(k) Plan for the beneficiary designation formsshall apply to each Participant under this Plan. If a deceased Participantfailed to designate a beneficiary, in accordance with the above procedure, thenthe Plan Administrator shall pay the Participant’s benefits under the Plan, assoon as practicable after the participant’s death, in a lump sum cash paymentunder the rules of subsection 11.4 of the 401(k) Plan. If the Participant diesbefore he receives his benefit under the Plan the fair market value of hisAccount shall be paid to his designated beneficiary or beneficiaries as soon aspracticable after his death in a lump sum cash payment.
     4.4   Distributions to Persons under Legal Disability. Notwithstanding theprovisions of this Section 4, if, in the Plan Administrator’s opinion, aParticipant or beneficiary is under a legal disability or is in any wayincapacitated so as to be unable to manage his financial affairs, the PlanAdministrator may direct that payment be made to a relative or friend of suchperson for his benefit until claim is made by a conservator or other personlegally charged with the care of his person or his estate, and such paymentshall be in lieu of any such payment to such Participant or beneficiary.Thereafter, any benefits under the Plan to which such Participant orbeneficiary is entitled, shall be paid to such conservator or other personlegally charged with the care of his person or his estate.
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     4.5   Benefits May Not be Assigned. Benefits payable under the Plan areexpressly declared to be unassignable and nontransferable. Neither theParticipant nor any other person shall have any voluntary or involuntary rightto sell, assign, pledge, anticipate, mortgage or otherwise encumber, transfer,hypothecate or convey in advance of actual receipt, any benefits payable underthe Plan. No part of the benefits payable to a Participant shall be subject toseizure or sequestration for payment of any debts, judgments, alimony orseparate maintenance owed by the Participant or any other person, or betransferred by operation of law in the event of the Participant’s or any otherperson’s bankruptcy or insolvency.
     4.6   Withholding for Tax Liability. The Plan Administrator may withhold orcause to be withheld from any payment of benefits or from any wages payable toa Participant made pursuant to the Plan any taxes required to be withheld andsuch sum as the Plan Administrator may reasonably estimate to be necessary tocover any taxes for which the Company may be liable and which may be assessedwith regard to such payment.
SECTION 5
Amendment and Termination
     While it is expected that the Plan will continue, the Company mayterminate the Plan or amend it from time to time, except that no amendment willreduce a Participant’s interest in the Plan to less than an amount equal to the
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amount he would have been entitled to receive if he had resigned from theCompany on the day of the amendment. The Company may terminate the Plan at anytime provided that it has made adequate provisions for any amount payable by itunder the terms of the Plan, as in effect on the date of termination. Upontermination of the Plan, the Company, in its discretion which would be appliedin a uniform manner to all Participants, may cause a lump sum payment of allbenefits for all Participants at substantially the same time.
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