


                                                                EXHIBIT 10.20












                            THE ALLSTATE CORPORATION
                        EMPLOYEES REPLACEMENT STOCK PLAN



                  As Amended and Restated on November 12, 1996

                                                     


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                                TABLE OF CONTENTS
                                -----------------
                                                                           PAGE
                                                                           ----

1.       Purpose............................................................1

2.       Definitions........................................................1

3.       Scope of the Plan..................................................5
         (a)      Number of Shares Available Under Plan.....................5
         (b)      Expired or Terminated Awards not Available................6
         (c)      Treasury Stock............................................6

4.       Administration.....................................................6
         (a)      Committee Administration..................................6
         (b)      Board Reservation and Delegation..........................6
         (c)      Committee Authority.......................................6
         (d)      Committee Determinations Final............................7

5.       Eligibility........................................................7

6.       Awards.............................................................8
         (a)      In General................................................8
         (b)      Options and Reload Options................................8
         (c)      Stock Appreciation Rights.................................10
         (d)      Restricted Stock..........................................10

7.       Non-transferability................................................12

8.       Exercise...........................................................12
         (a)      Exercise of Replacement Options...........................12
         (b)      Exercise of Replacement Stock Appreciation Rights.........13
         (c)      Special Rules for Section 16 Grantees.....................13

9.       Notification under Section 83(b)...................................13

10.      Withholding Taxes..................................................13
         (a)      Mandatory Withholding.....................................13
         (b)      Elective Share Withholding................................14

11.      Termination of Employment..........................................15
         (a)      Restricted Stock..........................................15
         (b)      Other Awards..............................................15

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                                TABLE OF CONTENTS
                                -----------------
                                   (CONTINUED)
                                                                           PAGE
                                                                           ----

12.      Securities Law Matters.............................................15

13.      No Funding Required................................................16

14.      No Employment Rights...............................................16

15.      Rights as a Stockholder............................................16

16.      Nature of Payments.................................................16

17.      Non-Uniform Determinations.........................................16

18.      Adjustments........................................................17

19.      Amendment of the Plan..............................................17

20.      Termination of the Plan............................................17

21.      No Illegal Transactions............................................17

22.      Controlling Law....................................................17

23.      Severability.......................................................18


                                      -ii-


<PAGE>


         The Plan. The Allstate  Corporation  ("Company") hereby establishes The
         --------
Allstate Corporation  Employees  Replacement Stock Plan (as set forth herein and
from time to time  amended,  the "Plan"),  subject to approval by the  Company's
stockholders  at the 1995  Annual  Meeting of  Stockholders  and  subject to the
occurrence of the Distribution,  as defined hereinafter,  to be effective on the
Distribution Date, as defined hereinafter ("Effective Date").

         1.    Purpose.  The purpose of the Plan is to provide  continuation  of
               -------
benefits and opportunities  provided to former  participants in any of the Sears
Plans,  which  benefits  and  opportunities  were lost,  terminated,  forfeited,
cancelled (with or without consent of the grantee) or reduced as a result of the
Distribution, by providing for the grant of substitute Awards hereunder.

         2.    Definitions.
               -----------

         As used in the Plan, terms defined  parenthetically  immediately  after
their use shall have the respective  meanings  provided by such  definitions and
the terms set forth below shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):

         (a) "Allstate  Group Grantee" means any  individual who is employed on
the Distribution Date or who, immediately  prior to his most recent Termination
of Employment  prior  to the  Distribution  Date,  was employed by The  Allstate
Corporation or any Allstate Affiliate,  as defined in the Separation  Agreement,
except The PMI Group, Inc. ("PMI") or any of PMI's subsidiaries.

         (b) "Award"  means  an  option,  share  of  restricted  Stock, or stock
appreciation right granted under the Plan.

         (c) "Award Agreement" means the w ritten agreement by which an Award is
evidenced.

         (d) "Board" means the Board of Directors of the Company.

         (e) "Change of Control"  means any of the following occurring more than
five business days after the Distribution:

              (i)   the  acquisition  by  any  person  or  group  of  beneficial
         ownership of any of the Stock or the Voting Power of the Company, which
         acquisition results in such person or group having beneficial ownership
         of 20% or more of either the then-outstanding  Stock or Voting Power of
         the Company, except that (A) no such person or group shall be deemed to
         own beneficially (1) any securities  acquired directly from the Company
         pursuant to a written  agreement  with the Company,  (2) any securities
         held by the Company or a Subsidiary  or any  employee  benefit plan (or
         any  related  trust)  of  the  Company  or a  Subsidiary,  or  (3)  any
         securities  acquired  directly  from  any  Grantee,  except  securities
         acquired  in  transactions   effected   through  the  facilities  of  a
         registered

<PAGE>

         national  securities  exchange or any automated quotation system of the
         National Association of Securities Dealers,  Inc., and (B) no Change of
         Control shall be deemed to have  occurred  solely by reason of any such
         acquisition  by  a  corporation  with  respect  to  which,  after  such
         acquisition,  more than 60% of both the then-outstanding  common shares
         of such  corporation and the Voting Power of such  corporation are then
         beneficially owned, directly or indirectly, by the persons who were the
         beneficial  owners  of the  Stock  and  Voting  Power  of  the  Company
         immediately   before  such  acquisition  in   substantially   the  same
         proportion as their ownership,  immediately before such acquisition, of
         the  then-outstanding  Stock or the Voting Power of the Company, as the
         case may be;

              (ii)  individuals  who, as of the Effective  Date,  constitute the
         Board (the  "Incumbent  Board")  cease for any reason to  constitute at
         least a majority of the Board; provided that any individual who becomes
         a director after the Effective Date whose  election,  or nomination for
         election by the  Company's  stockholders,  was approved by a vote of at
         least  two-thirds of the directors then  comprising the Incumbent Board
         shall be  considered  as though  such  individual  were a member of the
         Incumbent Board, but excluding,  for this purpose,  any such individual
         whose initial  assumption of office is in connection  with an actual or
         threatened  election  contest relating to the election of the directors
         of the Company  (as such terms are used in Rule  14a-11  under the 1934
         Act); or

              (iii) approval by the stockholders of the Company of (A) a merger,
         reorganization  or consolidation  with respect to which the individuals
         and entities who were the respective beneficial owners of the Stock and
         Voting   Power  of  the  Company   immediately   before  such   merger,
         reorganization   or   consolidation   do  not,   after   such   merger,
         reorganization   or   consolidation,   beneficially  own,  directly  or
         indirectly, more than 60% of, respectively, the then outstanding common
         shares  and the Voting  Power of the  corporation  resulting  from such
         merger,   reorganization  or   consolidation,   (B)  a  liquidation  or
         dissolution of the Company or (C) the sale or other  disposition of all
         or substantially all of the assets of the Company;  provided,  however,
         that for the purposes of this clause (iii), the votes of all Section 16
         Grantees  shall  be  disregarded  in  determining  whether  stockholder
         approval has been obtained.

For purposes of this  definition,  "person"  means such term as used in SEC Rule
13d-5(b)  under the 1934 Act,  "beneficial  owner" means such term as defined in
SEC Rule 13d-3  under the 1934 Act,  and  "group"  means such term as defined in
Section 13(d) of the 1934 Act.

         Notwithstanding the foregoing,  (a) a Change of Control shall be deemed
not to have  occurred  with respect to any Section 16 Grantee if such Section 16
Grantee is, by agreement  (written or otherwise),  a participant on such Section
16 Grantee's own behalf in a  transaction  which causes the Change of Control to
occur; and (b) the Distribution shall not be deemed to be a Change in Control.


                                      -2-


<PAGE>

         (f) "Change of Control  Value"  means the Fair Market Value of a share
of Stock  on the  date  of  receipt of notice  of  exercise  of a  limited stock
appreciation  right issued to replace a limited stock appreciation right granted
under a Sears Plan.

         (g) "Committee" means the committee of the Board appointed pursuant to
Article 4.

         (h) "Company" means The Allstate Corporation, a Delaware corporation.

         (i) "Distribution"  means the distribution by Sears to holders of Sears
common shares of all of the shares of Stock owned by it.

         (j) "Distribution  Date" means the  date to be  determined by the board
of directors of Sears, as of which the Distribution shall be effected.

         (k) "Effective Date" means the date described in the first paragraph of
the Plan.

         (l) "Fair  Market  Value" of any  security of the  Company or any other
issuer  (other than Fair Market Value of Stock as of the  Distribution  Date and
Fair Market Value of a Sears common share as of the Distribution Date) means, as
of any applicable date:

              (i)  if the  security is listed for trading on the New York Stock
         Exchange,  the mean  between the high and low prices of the security as
         reported on the New York Stock Exchange  Composite  Tape, or if no such
         reported sale of the security  shall have occurred on such date, on the
         next preceding date on which there was such a reported sale, or

              (ii) if the  security is not so listed,  but is listed on another
         national  securities  exchange  or  authorized  for  quotation  on  the
         National  Association  of Securities  Dealers  Inc.'s  NASDAQ  National
         Market  ("NASDAQ/NM"),  the closing price, regular way, of the security
         on such  exchange  or  NASDAQ/NM,  as the  case  may be,  or if no such
         reported sale of the security  shall have occurred on such date, on the
         next preceding date on which there was such a reported sale, or

              (iii) if the  security  is not  listed  for  trading on a national
         securities  exchange or  authorized  for  quotation on  NASDAQ/NM,  the
         average of the closing bid and asked prices as reported by the National
         Association of Securities Dealers Automated Quotation System ("NASDAQ")
         or, if no such prices shall have been so reported for such date, on the
         next preceding date for which such prices were so reported, or

              (iv)  if the  security  is not  listed  for  trading on a national
         securities exchange or authorized for quotation on NASDAQ/NM or NASDAQ,
         the fair market  value of the security as  determined  in good faith by
         the Committee.


                                      -3-


<PAGE>

Notwithstanding  paragraphs  (i) through (iv) above,  "Fair  Market  Value" of a
Sears common share as of the  Distribution  Date shall be the sum of the average
of the high and low per share prices,  regular way, of such share as reported on
the New York Stock  Exchange  Composite  Tape on each of the five  business days
beginning on and  including  the tenth  business day  preceding  the record date
associated with the Distribution  ("Record Date"), on which there was a reported
sale of such  stock,  divided by five (or,  if less,  the number of such days on
which there was such a reported  sale);  and "Fair Market  Value" of Stock as of
the  Distribution  Date shall be the sum of the  average of the high and low per
share  prices,  regular  way,  of the Stock as  reported  on the New York  Stock
Exchange  Composite  Tape on each of the five  business  days  beginning  on and
including the tenth business day preceding the Record Date, on which there was a
reported  sale of such stock  divided by five (or,  if less,  the number of such
days on which there was such a reported sale).

         (m)  "Grant  Date"  means, except as provided in Article 6, the date on
which the Committee  grants the Award or such later date as specified in advance
by the Committee.

         (n)  "Grantee" means an individual who has been granted an Award.

         (o)  "Internal  Revenue Code" means the Internal  Revenue Code of 1986,
as amended, and regulations and rulings  thereunder.  References to a particular
section of the  Internal  Revenue  Code shall  include  references  to successor
provisions.

         (p)  "Minimum  Consideration" means the $.01 par value per share of the
Stock or such larger amount determined pursuant to resolution of the Board to be
capital  within the meaning of Section 154 of the Delaware  General  Corporation
Law.

         (q)  "1934 Act" means the Securities Exchange Act of 1934, as amended.

         (r)  "Option Price" means the per share purchase price of Stock subject
to an option.

         (s)  "Plan" has the meaning set forth in the introductory paragraph.

         (t)  "Reload Option" has the meaning set forth in Article 6(b)(ii).

         (u)  "Retirement" means a Termination of Employment  occurring on or 
after an individual attains age 65, or a Termination of Employment after an 
individual attains age 55 approved by Allstate  Insurance  Company as an early
retirement, provided that in the case of a Section 16 Grantee, such early 
retirement must be approved by the Committee.

         (v)  "Sears" means Sears, Roebuck and Co., a New York corporation.

         (w)  "Sears Option" means an option granted under a Sears Plan.


                                      -4-


<PAGE>


         (x)  "Sears Plans" means the following plans of Sears: the 1994 
Employees Stock Plan,  the 1990 Employees  Stock Plan, the 1986 Employees Stock
Plan, the 1982 Employees Stock Plan, the 1978 Employees Stock Plan and the 1979
Incentive Compensation Plan.

         (y)  "Sears Restricted  Stock" means restricted shares granted under a
Sears Plan.

         (z)  "Sears  SAR" means  a  stock  appreciation   right,  limited stock
appreciation right or tax benefit right granted under a Sears Plan.

         (aa) "SEC" means the Securities and Exchange Commission.

         (bb) "Section 16 Grantee" means a person subject to potential liability
with respect to equity securities of the Company under Section 16(b) of the 1934
Act.

         (cc)  "Separation  Agreement"  means the separation  agreement  between
Sears and the Company dated as of January ___, 1995.

         (dd)  "Stock"  means common  stock of the  Company, par value $.01 per 
share.

         (ee)  "Subsidiary"  means a corporation as defined in Section 424(f) of
the  Internal  Revenue  Code,  with the Company  being  treated as the  employer
corporation for purposes of this definition.

         (ff) "10% Owner" means a person who owns stock (including stock treated
as owned under Section 424(d) of the Internal Revenue Code) possessing more than
10% of the total combined voting power of all classes of stock of the Company.

         (gg) "Termination of Employment" occurs as of the first day on which an
individual  is for any reason no longer  employed  by the  Company or any of its
Subsidiaries,  or  with  respect  to  an  individual  who  is an  employee  of a
Subsidiary,  the  first  day  on  which  the  Company  no  longer,  directly  or
indirectly,  owns voting  securities  possessing  at least 50% of the  aggregate
Voting Power of such Subsidiary.

         (hh) "Voting Power" of a corporation or other entity means the combined
voting power of the  then-outstanding  voting  securities of such corporation or
other entity entitled to vote generally in the election of directors.

         3.    Scope of the Plan.
               -----------------

          (a)  Number of Shares  Available  Under Plan.  An aggregate  number of
               ---------------------------------------
shares of Stock is hereby made available and is reserved for delivery on account
of the  exercise of Awards and payment of  benefits  in  connection  with Awards
equal to the number of shares of Stock determined  pursuant to the formulas set 
forth in Article 6 to be required to replace awards


                                      -5-


<PAGE>


under the Sears Plans;  provided that in no event shall the aggregate number of
such shares of Stock exceed 4,500,000 shares of Stock.  Subject to the foregoing
limits,  shares of  uthorized  but  unissued  Stock or shares of  Stock held as 
treasury shares by the Company may be used for or in connection with Awards.

          (b)  Expired or Terminated Awards not Available.  If and to the extent
               ------------------------------------------
an Award shall expire or terminate for any reason  without having been exercised
in full,  or shall be  forfeited,  regardless  of whether,  in either case,  the
Grantee  enjoyed  any of the  benefits of stock  ownership,  the shares of Stock
(including  restricted Stock) and stock appreciation rights associated with such
Award shall not become available for other Awards.

          (c)  Treasury  Stock.  The Committee shall have the authority to cause
               ---------------
the Company to purchase from time to time shares of Stock to be held as treasury
shares and used for or in connection with Awards.

         4.    Administration.
               --------------

          (a)  Committee Administration. Subject to Article 4(b), the Plan shall
               ------------------------
be  administered  by the  Committee,  which shall consist of not less than three
persons who are appointed by the Board, who are directors of the Company and not
employees of the Company or any of its  affiliates.  Membership on the Committee
shall be subject to such limitations (including, if appropriate, a change in the
minimum  number of members of the  Committee) as the Board deems  appropriate to
permit  transactions  pursuant  to the  Plan  to be (1)  exempt  from  potential
liability under Section 16(b) of the 1934 Act, and Rule 16b-3 pursuant  thereto,
as in effect both before and after  September 1, 1995, or such other date as the
SEC shall  determine,  and (2) exempt from  limitations on  deductibility  under
Section 162(m) of the Internal Revenue Code.

          (b)  Board   Reservation  and  Delegation.   The  Board  may,  in  its
               ------------------------------------
discretion,  reserve to itself or delegate to another committee of the Board any
or all of the authority  and  responsibility  of the  Committee  with respect to
Awards  to  Grantees  who are not  Section  16  Grantees  at the  time  any such
delegated  authority or  responsibility  is exercised.  Such other committee may
consist of one or more directors who may, but need not, be officers or employees
of the Company or of any of its  Subsidiaries.  To the extent that the Board has
reserved  to  itself  or  delegated  the  authority  and  responsibility  of the
Committee to such other  committee,  all references to the Committee in the Plan
shall be to the Board or such other committee, as the case may be.

          (c)  Committee Authority.  The  Committee shall  have  full and final 
               -------------------
authority, in its discretion, but subject to the express provisions of the Plan,
as follows:

              (i) to grant Awards on or after the Distribution Date as described
        in Article 6,


                                      -6-


<PAGE>



              (ii) to determine (A) when Awards may be granted, and (B) whether
         or not specific Awards shall be identified with other specific Awards,
         and if so,  whether they shall  be exercisable cumulatively  with,  or
         alternatively to, such other specific Awards,

             (iii) to interpret the Plan and to make all determinations
         necessary or advisable for the administration of the Plan,

              (iv) to prescribe, amend, and rescind rules and regulations 
         relating to the Plan, including, without limitation, rules with respect
         to the exercisability and nonforfeitability of Awards upon the 
         Termination of Employment of a Grantee,

               (v)  to determine the terms and provisions of the Award 
         Agreements, which need not be identical and,  with the consent (to the
         extent required  by the  Plan)  of the  Grantee,  to modify  any  such
         Award Agreement at any time,

              (vi) to accelerate the exercisability of, and to accelerate or 
         waive any or all of the restrictions and conditions applicable to, any
         Award,

             (vii) to make such adjustments or modifications to Awards to 
         Grantees working  outside the United  States as are  necessary  and 
         advisable to fulfill the purposes of the Plan, and

            (viii) to  impose  such  additional  conditions,  restrictions,  and
         limitations  upon the grant,  exercise  or  retention  of Awards as the
         Committee may,  before or  concurrently  with the grant  thereof,  deem
         appropriate,  including,  without  limitation,  requiring  simultaneous
         exercise of related  identified  Awards, and limiting the percentage of
         Awards which may from time to time be exercised by a Grantee.

         The  Committee  shall have full and final  authority to  authorize  any
action or make any  determination  as the  Committee  shall  deem  necessary  or
advisable  for carrying  out the purposes of the Plan,  including to correct any
defect, supply any omission and reconcile any inconsistency between the Plan and
the awards under the Sears Plans the Plan is intended to replace.

         (d)   Committee   Determinations   Final.  The   determination  of  the
               ----------------------------------
Committee on all matters  relating to the Plan or any Award  Agreement  shall be
conclusive and final.  No member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Award.

         5.    Eligibility.  Awards may be granted to any employee or former 
               -----------
employee (or to the estate of a deceased employee) of the Company or any of its
Subsidiaries to replace any awards granted to such employee, former employee or
deceased employee under a Sears Plan


                                      -7-


<PAGE>

which were terminated, forfeited, cancelled or reduced (with or without the 
consent of the Grantee) in connection with the Distribution.

         6.    Awards.
               ------

          (a)  In General.  In  accordance  with its powers under the Plan,  the
               ----------
Committee may grant  replacement  Awards,  including  options  (including Reload
Options),  replacement stock  appreciation  rights (including  replacement stock
appreciation  rights replacing limited stock appreciation rights and tax benefit
rights)  and  replacement  restricted  stock in  accordance  with  Article  6 to
preserve those  opportunities and benefits of Allstate Group Grantees which were
terminated,   forfeited,   cancelled,   or  reduced  in   connection   with  the
Distribution,  provided that no Grantee  shall be granted  Awards under the Plan
with respect to more than 675,000 shares of Stock.

          (b)  Options and Reload Options.
               --------------------------

               (i)  Grant of Replacement  Options.  Subject to Article 3(a), the
                    -----------------------------
         Committee may grant options  ("Replacement  Options") under the Plan to
         each  Allstate  Group  Grantee  who  holds  unexercised  Sears  Options
         (whether or not nonforfeitable) at the Distribution Date; provided that
         such Allstate Group  Grantee's  right to exercise any Sears Options has
         been forfeited or cancelled in connection  with the  Distribution.  The
         Award Agreement with respect to such Replacement  Options shall provide
         that the Grantee may exercise a Replacement  Option at the same time as
         he would  have been able to  exercise  the  Sears  Option it  replaces,
         subject to Article 8(c), if applicable.

                           (A) The Option Price for a  Replacement  Option shall
               be determined by the following formula; provided that in no event
               shall the Option Price be less than the Minimum Consideration:

                           Option Price = A x B
                                          -----
                                            C

         Any fraction of a cent shall be rounded down to the next full cent.

                           (B) The  number  of  shares  of Stock  for  which the
               Replacement   Option  is  exercisable   shall  be  determined  in
               accordance with the following formula:

                           Number of shares = C x D
                                              -----
                                                B

         Any fractional share shall be rounded up to the next full share.

                           (C)  In the foregoing formulas,


                                      -8-


<PAGE>
      
               "A"         is the option exercise price for a Sears Option being
                           replaced,

               "B"         is the Fair Market Value of a share of Stock as of 
                           the Distribution Date,

               "C"         is the Fair Market Value of a Sears common share as
                           of the Distribution Date, and

               "D"         is the number of Sears common shares for which the
                           Sears Option being replaced is exercisable.

                           (D) Each Replacement Option shall have the same terms
               and  conditions  (other  than the Option  Price and the number of
               shares of Stock,  but including any provision for Reload Options)
               as, and not give the Grantee any benefits he did not have,  under
               the corresponding Sears Option.

               (ii)  Grant of Reload  Options.  The  Committee  may,  subject to
                     ------------------------
         Article 3, grant a Reload Option to any Grantee of a Replacement Option
         whose Replaced Sears Option  included a reload option for Sears shares.
         For  purposes of the Plan,  a "Reload  Option"  shall mean an option to
         purchase  a number of shares of Stock  granted in  connection  with the
         exercise of the Grantee's  Replacement Option (the "Exercised Options")
         upon the payment of the Option  Price for such  Exercised  Options with
         shares of Stock which have a Fair  Market  Value equal to not less than
         100% of the Option Price for such Exercised Options.  The Reload Option
         with respect to an Exercised  Option shall be for a number of shares of
         Stock equal to the number of shares of Stock  tendered to exercise  the
         Exercised Options plus, if so provided by the Committee,  the number of
         shares of Stock, if any, retained by the Company in connection with the
         exercise of the  Exercised  Options to satisfy any federal,  state,  or
         local tax withholding requirements.  Reload Options shall be subject to
         the following terms and conditions:

                           (A) the Grant Date for each  Reload  Option  shall be
               the date of exercise of the Exercised Option to which it relates;

                           (B) the Reload  Option may be  exercised  at any time
               during the unexpired term of the  Replacement  Option to which it
               relates  (subject to earlier  termination  thereof as provided in
               the Plan and in the applicable Award Agreement); and

                           (C) the terms of the Reload  Option shall be the same
               as the terms of the Exercised Option to which it relates,  except
               that (1) the Option  Price shall be the Fair Market  Value of the
               Stock on the Grant  Date of the  Reload  Option and (2) no Reload
               Option  may be  exercised  within  one year from the  Grant  Date
               thereof.


                                      -9-


<PAGE>



          (c)  Stock Appreciation Rights.
               -------------------------

               (i)  Grant of  Replacement  SARs.  The  Committee may grant stock
                    ---------------------------
         appreciation  rights  ("Replacement  SARs")  under  the  Plan  to  each
         Allstate Group Grantee who holds unexercised limited stock appreciation
         rights,  and tax benefit rights (whether or not  nonforfeitable)  under
         the Sears Plans;  provided that such Allstate Group  Grantee's right to
         exercise any Sears SARs has been  forfeited or cancelled in  connection
         with the Distribution. Replacement SARs granted in replacement of Sears
         SARs  identified  with Sears  Options  shall be equal in number to, and
         shall be identified with the Replacement Options granted in replacement
         of such  Sears  Options.  The  Award  Agreement  with  respect  to such
         Replacement  SARs  shall  provide  that  the  Grantee  may  exercise  a
         Replacement  SAR at the  same  time  as if the  Grantee  had  held  the
         Replacement  SAR  since the  grant  date of the Sears SAR it  replaces,
         subject to the limitations of Article 8(c), if applicable.

               (ii) Benefit for Replacement  Limited Stock Appreciation  Rights.
                    -----------------------------------------------------------
         The  benefit  for each  Replacement  SAR  granted in  replacement  of a
         limited stock appreciation right ("Replacement LSAR") identified with a
         Sears  Option  shall be equal to the  difference  between the Change of
         Control  Value of a share of  Stock  on the  date of  exercise  of such
         Replacement SAR and the Option Price of the related Replacement Option.

               (iii) Benefit for Replacement Tax  Benefit Rights.  The  benefit
                     -------------------------------------------
         for each  Replacement SAR granted in replacement of a tax benefit right
         ("Replacement Tax Benefit Right")  identified with a Sears Option shall
         be equal to the then applicable  maximum  statutory  federal income tax
         rate for corporations  (subject to any limitations thereon contained in
         the tax benefit  right  being  replaced),  multiplied  by the amount of
         compensation,  if any,  realized by the Grantee for federal  income tax
         purposes upon exercise of the related Replacement Option.

               (iv)  Terms and Conditions of Replacement SARs. Each  Replacement
                     ----------------------------------------
         SAR shall have the same terms and conditions  (except as provided above
         in this Article 6(c)) as, and not give the Grantee greater rights than,
         the corresponding Sears SAR.

          (d)  Restricted Stock.
               ----------------

              (i)   Replacement Restricted Stock. The Committee may grant shares
                    ----------------------------
         of restricted Stock ("Replacement  Restricted Stock") under the Plan to
         each Allstate Group Grantee whose Sears  Restricted  Stock is forfeited
         or cancelled in connection with the  Distribution.  The Award Agreement
         with respect to such  Replacement  Restricted  Stock shall provide that
         such Replacement  Restricted Stock shall become  nonforfeitable  at the
         same time that the Sears Restricted Stock it replaces would have become
         nonforfeitable,   subject  to  the  limitations  of  Article  8(c),  if
         applicable.


                                      -10-


<PAGE>




                           (A) The Grantee's basis in the Replacement Restricted
               Stock (i.e. the amount of  consideration,  if any, that shall be
               deemed  to have  been paid  by the  Grantee for the  Replacement 
               Restricted  Stock) shall be determined by the following formula:

                                            E x B
                                            -----
                                              C

                 The  Grantee   shall  not  be   required  to  pay  additional
               consideration for the grant of  Replacement  Restricted  Stock,
               except  that the  Minimum Consideration  shall be paid for any
               shares of restricted Stock that are not treasury shares.

                           (B) The number of shares of Replacement Restricted 
               Stock to be granted shall be determined by the following formula:

                                            Number of shares = F x C 
                                                               -----
                                                                 B

               Any fractional share shall be rounded up to the next full share.

                           (C) In the foregoing formulas,

                               "B"     is the Fair Market Value of a share of 
                                       Stock as of the Distribution Date,

                               "C"     is the Fair Market Value of a Sears 
                                       common share as of the Distribution Date,

                               "E"     is the Grantee's average per share basis,
                                       if any, in the Sears Restricted Stock 
                                       being replaced, and

                               "F"     is the number of shares of Sears 
                                       Restricted Stock being replaced.

                           (D) Each share of Replacement Restricted Stock shall
               be substantially the same terms and  conditions  other  than the
               number of shares and the amount of the Grantee's  basis therein)
               as, and shall not give the Grantee any benefits which he did not
               have,  under the corresponding   Sears Restricted  Stock,  except
               as otherwise provided by the Committee.




                                      -11-


<PAGE>



              (ii)  Additional Conditions for Restricted Stock.
                    ------------------------------------------

                           (A) The Committee may provide that any share of 
               restricted Stock shall be held (together with a stock power 
               executed in blank by the Grantee) in escrow by the Secretary of
               the Company until such shares  become  nonforfeitable  or are 
               forfeited or may make such other  arrangements for the holding of
               shares of restricted stock as it deems appropriate.

                           (B) If a share of restricted  Stock is forfeited such
               share of  restricted  Stock  shall cease to be  outstanding,  and
               shall no longer  confer on the  Grantee  thereof  any rights as a
               stockholder of the Company.

                           (C) Any  share  of  restricted  Stock  shall  bear an
               appropriate legend specifying that such share is non-transferable
               and  subject to the  restrictions  set forth in the Plan.  If any
               shares of  restricted  Stock become  nonforfeitable,  the Company
               shall cause certificates for such shares to be issued or reissued
               without  such  legend and  delivered  to the  Grantee  or, at the
               request of the Grantee, shall cause such shares to be credited to
               a brokerage account specified by the Grantee.

         7.    Non-transferability.  Each Award  (other than  restricted  Stock)
               -------------------
granted  hereunder  shall by its terms not be assignable or  transferable  other
than by will or the  laws of  descent  and  distribution  and may be  exercised,
during the  Grantee's  lifetime,  only by the Grantee.  Each share of restricted
Stock  shall  be  non-transferable  until  such  share  becomes  nonforfeitable.
Notwithstanding  the foregoing,  the Grantee may, to the extent  provided in the
Plan and in a manner  specified  by the  Committee,  (a)  designate in writing a
beneficiary to exercise his options after the Grantee's  death, and (b) transfer
an option, or stock appreciation  right to a revocable,  inter vivos trust as to
which the Grantee is both the settlor and the trustee.

         8.    Exercise.
               --------

               Exercise of Replacement Options. Subject to Articles 4 and 6, (i)
               -------------------------------
each  Replacement  Option  shall  be  exercisable  in one or  more  installments
commencing not earlier than the first anniversary of the grant date of the Sears
Option it replaces,  (ii) options  shall not be  exercisable  for twelve  months
following a hardship  distribution  that is subject to Treasury  Regulation  ss.
1.401(k)-1(d)(2)(iv)(B)(4),  (iii) each option shall be exercised by delivery to
the Company of written notice of intent to purchase a specific  number of shares
of Stock subject to the option,  (iv) the Option Price of any shares of Stock as
to which an option shall be  exercised  shall be paid in full at the time of the
exercise,  and (v) payment may be made in either one or any  combination  of the
following, as provided in the Award Agreement:



                                      -12-


<PAGE>



                    (I)  cash, or

                   (II) Stock that has been held for at least six months, valued
               at the Fair Market Value on the date of exercise.

         Shares of Stock acquired by a Grantee on exercise of an option shall be
delivered  to the Grantee or, at the request of the  Grantee,  shall be credited
directly to a brokerage account specified by the Grantee.

         (b)   Exercise of Replacement  Stock  Appreciation  Rights.  Subject to
               ----------------------------------------------------
Articles 4(c)(vi) and 6, (i) each stock  appreciation right shall be exercisable
not  earlier  than the first  anniversary  of the grant date of the Sears  stock
appreciation  right it  replaces,  to the  extent  the  option  with which it is
identified,  if any, may be exercised, (ii) replacement LSARs shall become fully
exercisable  upon the occurrence of a Change of Control and shall be exercisable
for a period of sixty days thereafter, (iii) replacement SARs shall be exercised
by delivery  to the  Company of written  notice of intent to exercise a specific
number of Replacement SARs, and (iv) unless otherwise provided in the applicable
Award Agreement,  the exercise of stock appreciation rights which are identified
with shares subject to an option shall result in the  cancellation or forfeiture
of such option to the extent of such exercise.

         (c)   Special  Rules for Section 16 Grantees.  Subject to Article 6, no
               --------------------------------------
stock  appreciation right or option shall be exercisable by a Section 16 Grantee
during  the first six  months  after its Grant  Date,  except as  exempted  from
Section 16(b) of the 1934 Act.

         (d)   Notification under Section 83(b). The Committee may, on the Grant
               --------------------------------
Date or any later date,  prohibit a Grantee from making the  election  described
below.  If the  Committee  has not  prohibited  such  Grantee  from  making such
election, and the Grantee, in connection with the exercise of any option, or the
grant of any share of  restricted  Stock,  makes the  election  permitted  under
Section 83(b) of the Internal  Revenue Code to include in such  Grantee's  gross
income in the year of transfer  the amounts  specified  in Section  83(b) of the
Internal  Revenue  Code,  such Grantee shall notify the Company of such election
within 10 days of filing notice of such election.

         10.   Withholding Taxes.
               -----------------

           (a) Mandatory Withholding.
               ---------------------

             (i) Whenever  under  the  Plan,  cash or  shares of Stock are to be
         delivered  upon  exercise  or  payment  of an  Award or upon a share of
         restricted  Stock  becoming  nonforfeitable,  or any other  event  with
         respect to rights and benefits hereunder, the Company shall be entitled
         to require as a  condition  of delivery  (A) that the Grantee  remit an
         amount sufficient to satisfy all federal,  state, and local withholding
         tax requirements related thereto, (B) the withholding of such sums from
         compensation  



                                      -13-


<PAGE>




         otherwise  due to the  Grantee or  from any shares of  Stock due to the
         Grantee  under  the  Plan  or (C)  any  combination  of the  foregoing.

            (ii) If any election described in Article 9 is made, then the person
         making such election shall remit to the Company an amount sufficient to
         satisfy  all  federal,  state,  and  local  withholding  taxes  thereby
         incurred;  provided  that, in lieu of or in addition to the  foregoing,
         the  Company   shall  have  the  right  to  withhold   such  sums  from
         compensation  otherwise  due to the Grantee or from any shares of Stock
         due to the Grantee under the Plan.

         (b)   Elective Share Withholding.
               --------------------------

             (i)  To the extent  provided under the terms of the Sears Option or
         Sears  Restricted  Stock  Award which it  replaces,  and subject to the
         prior  approval of the  Committee  and to Article  10(b)(ii)  below,  a
         Grantee may elect the withholding ("Share  Withholding") by the Company
         of a portion  of the  shares  of Stock  otherwise  deliverable  to such
         Grantee  upon the  exercise  or  payment of an Award or upon a share of
         restricted  Stock's  becoming  nonforfeitable  (each a "Taxable Event")
         having a Fair Market Value equal to

                  (A)   the  minimum  amount  necessary  to  satisfy  required
               federal, state, or local withholding tax liability attributable
               to the Taxable Event; or

                  (B)   with  the  Committee's  prior  approval,   a  greater
               amount,  not  to  exceed  the  estimated  total  amount  of  such
               Grantee's tax liability with respect to the Taxable Event.

            (ii)  Each Share Withholding  election by a Grantee shall be subject
         to the following restrictions:

                  (A)      any  Grantee's  election  shall  be  subject  to  the
               Committee's  right to revoke its approval of Share Withholding by
               such  Grantee at any time  before the  Grantee's  election if the
               Committee  has  reserved  the  right  to do so at the time of its
               approval;

                  (B)      if  the  Grantee  is  a  Section  16  Grantee,   such
               Grantee's  election  shall be subject to the  disapproval  of the
               Committee at any time,  whether or not the Committee has reserved
               the right to do so; and

                  (C)      the  Grantee's  election must be made before the date
               (the "Tax  Date") on which the  amount of tax to be  withheld  is
               determined.


                                      -14-


<PAGE>




         11.   Termination of Employment.
               -------------------------

          (a)  Restricted Stock.  Except as otherwise  provided by the Committee
               ----------------
on or after the Grant Date,  a  Grantee's  shares of  restricted  Stock that are
forfeitable shall be forfeited upon the Grantee's Termination of Employment.

          (b)  Other Awards.  Unless otherwise  provided in the Award Agreement,
               ------------
any unexercised option or stock appreciation right, to the extent exercisable on
the date of the Grantee's Termination of Employment,  may be exercised, in whole
or in part, at any time within three months after the Grantee's  Termination  of
Employment, except that

              (i)   if the Grantee's  Termination of Employment is caused by the
         death of the  Grantee,  or if the  Grantee's  death  occurs  during the
         period following  Termination of Employment  during which the option or
         stock  appreciation  right  would be  exercisable  under the  preceding
         clause  of  Article  11(b)  or  under  Article   11(b)(ii),   then  any
         unexercised  option  or  stock  appreciation   rights,  to  the  extent
         exercisable on the date of the Grantee's  death,  may be exercised,  in
         whole or in part,  at any time  within  two years  after the  Grantee's
         death by the Grantee's personal representative or by the person to whom
         the option or stock appreciation  rights are transferred by will or the
         applicable laws of descent and distribution; and

              (ii)  if the Grantee's  Termination of Employment is on account of
         Retirement,  then any unexercised option or stock appreciation  rights,
         to  the  extent   exercisable  on  the  date  of  such  Termination  of
         Employment,  may be exercised,  in whole or in part, at any time within
         two years after such Termination of Employment.

         (c)   The foregoing provisions of this Article 11 shall not extend the
unexpired term of any Award.

         12.   Securities Law Matters.
               ----------------------

          (a)  If the Committee  deems  necessary to comply with the  Securities
Act  of  1933,   the   Committee  may  require  a  written   investment   intent
representation  by the  Grantee  and may require  that a  restrictive  legend be
affixed to certificates for shares of Stock.

          (b)  If,  based  upon the  opinion  of counsel  for the  Company,  the
Committee  determines  that the exercise,  nonforfeitability  of, or delivery of
benefits  pursuant to, any Award would violate any  applicable  provision of (i)
federal or state securities law or regulations or (ii) the listing  requirements
of any  national  securities  exchange on which are listed any of the  Company's
equity   securities,   then  the  Committee  may  postpone  any  such  exercise,
nonforfeitability or delivery, as the case may be, but the Company shall use its
best  efforts to cause such  exercise,  nonforfeitability  or delivery to comply
with all such provisions at the earliest practicable date.


                                      -15-


<PAGE>


         13.   No  Funding  Required.  Benefits  payable  under  the Plan to any
               ---------------------
person shall be paid directly by the Company.  The Company shall not be required
to fund or otherwise  segregate  assets to be used for payment of benefits under
the Plan.

         14.   No Employment  Rights.  Neither the establishment of the Plan nor
               ---------------------
the  granting of any Award shall be  construed to (a) give any Grantee the right
to remain employed by the Company or any of its  Subsidiaries or to any benefits
not  specifically  provided  by the Plan or (b) alter in any manner the right of
the Company or any of its Subsidiaries to modify, amend, or terminate any of its
employee benefit plans.

         15.   Rights as a  Stockholder.  A Grantee  shall not, by reason of any
               ------------------------
Award  (other  than  restricted  Stock) have any right as a  stockholder  of the
Company  with  respect  to the  shares of Stock  which may be  deliverable  upon
exercise  or payment of such Award until such Stock has been  delivered  to him.
Shares of restricted  Stock held by a Grantee or held in escrow by the Secretary
of the Company  shall confer on the Grantee all rights of a  stockholder  of the
Company, except as otherwise provided in the Plan or Award Agreement. Subject to
Article  6,  the  Committee  may,  in its  discretion,  at the  time of grant of
restricted Stock,  permit or require the payment of cash dividends thereon to be
reinvested  in  additional  restricted  Stock to the extent shares are available
under Article 3, or otherwise  reinvested in Stock. Stock dividends and deferred
cash  dividends  with respect to  restricted  Stock shall be subject to the same
restrictions  and other terms as apply to the shares with  respect to which such
dividends  are  issued.  Subject  to  Article  6,  the  Committee  may,  in  its
discretion,  provide for  crediting  and  payment of  interest on deferred  cash
dividends.

         16.   Nature of  Payments.  Any and all grants,  payments  of cash,  or
               ------------------- 
deliveries  of shares of Stock  hereunder  shall  constitute  special  incentive
payments  to the Grantee and shall not be taken into  account in  computing  the
amount of salary or  compensation of the Grantee for the purposes of determining
any  pension,  retirement,  death  or  other  benefits  under  (a) any  pension,
retirement, profit-sharing, bonus, life insurance or other employee benefit plan
of the  Company or any of its  Subsidiaries  or (b) any  agreement  between  the
Company or any Subsidiary,  on the one hand, and the Grantee, on the other hand,
except as such plan or agreement shall otherwise expressly provide.

         17.   Non-Uniform Determinations.  The Committee and the Board may make
               --------------------------
nonuniform determinations under the Plan and may make determinations selectively
among persons who receive,  or are eligible to receive,  Awards  (whether or not
such persons are similarly  situated).  Without  limiting the  generality of the
foregoing,  the  Committee  shall  be  entitled,  among  other  things,  to make
non-uniform  and  selective  determinations,   to  enter  into  non-uniform  and
selective Award Agreements as to (a) the identity of the Grantees, (b) the terms
and  provisions  of  Awards,  and  (c)  the  treatment,  under  Article  11,  of
Terminations of Employment.


                                      -16-


<PAGE>



         18.   Adjustments.  Subject to Article 6, the Committee shall make 
               -----------
                             equitable adjustment of

               (a)  the aggregate numbers of shares of Stock available under 
         Articles 3(a) and 3(b),

               (b)  the number of shares of Stock, shares of  restricted  Stock 
         or stock appreciation rights covered by an Award,

               (c)  the Option Price,

               (d) the Fair Market  Value of Stock to be used to  determine  the
         amount of the  benefit  payable  upon  exercise  of stock  appreciation
         rights, and

               (e)  all other appropriate matters,

to  reflect  any  stock  dividend,  stock  split,  reverse  stock  split,  share
combination, recapitalization, merger, consolidation, acquisition of property or
shares, separation, spin-off, reorganization, stock rights offering, liquidation
or similar event of or by the Company.

         19.   Amendment  of the  Plan.  The  Board may from time to time in its
               -----------------------
discretion  amend or modify the Plan without the approval of the stockholders of
the Company,  except as such stockholder  approval may be required (a) to permit
transactions in Stock pursuant to the Plan to be exempt from potential liability
under  Section  16(b) of the 1934 Act,  (b) to permit the Company to deduct,  in
computing  its income tax liability  pursuant to the  provisions of the Internal
Revenue  Code,  compensation  resulting  from  Awards,  or (c) under the listing
requirements of any national  securities exchange on which are listed any of the
Company's equity securities.

         20.   Termination  of the Plan.  The Plan shall  terminate on the tenth
               ------------------------
(10th)  anniversary  of the Effective  Date or at such earlier time as the Board
may determine.  Any  termination,  whether in whole or in part, shall not affect
any Award then outstanding under the Plan.

         21.   No Illegal Transactions. The Plan and all Awards granted pursuant
               -----------------------
to it are  subject to all laws and  regulations  of any  governmental  authority
which may be applicable  thereto;  and notwithstanding any provision of the Plan
or any Award,  Grantees shall not be entitled to exercise  Awards or receive the
benefits  thereof and the Company shall not be obligated to deliver any Stock or
pay any benefits to a Grantee if such exercise,  delivery, receipt or payment of
benefits  would  constitute  a  violation  by the  Grantee or the Company of any
provision of any such law or regulation.

         22.   Controlling Law.  The law of the State of Delaware, except its 
               ---------------
law with respect to choice of law, shall be controlling in all matters relating
to the Plan.


                                      -17-


<PAGE>


         23.   Severability.  If all or any part of the Plan is  declared by any
               ------------ 
court or governmental  authority to be unlawful or invalid, such unlawfulness or
invalidity  shall not  invalidate  any  portion of the Plan not  declared  to be
unlawful  or  invalid.  Any  Article  or part of an Article  so  declared  to be
unlawful or invalid shall, if possible, be construed in a manner which will give
effect to the terms of such Article or part of an Article to the fullest  extent
possible while remaining lawful and valid.






                                      -18-

