EXHIBIT 10.2
EXECUTION COPY
NOVUS CREDIT SERVICES INC. PENSION PLAN
Effective January 1, 1986
Amended and Restated as of April 10, 1996
NOVUS CREDIT SERVICES INC. PENSION PLAN
ARTICLE I
SECTION I-1
Introduction
I-1.1. The Plan. NOVUS Credit Services Inc. Pension Plan (formerly known as
the Sears Consumer Financial Corporation Pension Plan) (the "Plan") is
established by NOVUS Credit Services Inc. (formerly known as Sears Consumer
Financial Corporation) (the "company") to provide retirement and other benefits
for eligible employees. The provisions of Articles I and II of the plan apply to
the employees described in subsection II-I.1 of the plan. The provisions of
Articles I and III of the plan apply to the employees described in subsection
III-1.1 of the plan, and constitute an amendment, restatement and continuation
of the Allstate Retirement Plan (the "Allstate plan") as applied to certain of
such employees. The plan was initially adopted as of January 1, 1986 and amended
on ten occasions thereafter, the most recent such amendment having been adopted
on April 10, 1996. This document fully sets forth the terms and conditions of
the plan as of April 10, 1996.
2
I-1.2. Effective Date, Plan Year. The effective date of the plan is January
1, 1986. A "plan year" is the 12-month period beginning on January 1, and ending
on the next following December 31.
I-1.3. Employers. Any corporation or other entity may adopt the plan with
the company's consent, as described in subsection I-3.1. The company and any
other entity which adopts the plan are referred to below collectively as the
"employers" and sometimes individually as an "employer".
I-1.4. Administration of the Plan. The plan is administered by a plan
committee (the "committee") consisting of three or more persons appointed by the
company, as described in Section 1-2. Any notice or document required to be
given to or filed with the committee will be properly given or filed if
delivered or mailed, by registered mail, postage prepaid, to the committee, in
care of the company, at Riverwoods, Illinois.
I-1.5. Funding of Benefits. Funds contributed under the plan will be held
and invested, until distribution, by a trustee (the "trustee") in accordance
with the terms of a trust agreement between the company and the trustee which
implements and forms a part of the plan. Copies of the plan and trust agreement,
and any amendments thereto, will be on file at the office of the company and of
each other employer which adopts the plan where they may be
3
examined by any participant or other person entitled to benefits under the
plan. The provisions of and benefits under the plan are subject to the terms and
provisions of the trust agreement.
I-1.6. Plan Supplements. The provisions of the plan may be modified by
supplements to the plan. The terms and provisions of each supplement are a part
of the plan and supersede the provisions of the plan to the extent necessary to
eliminate inconsistencies between the plan and the supplement.
4
SECTION I-2
The Committee
I-2.1. Membership. A committee consisting of three or more persons (who may
but need not be employees of the employers) shall be appointed by the company.
The company shall certify to the trustee from time to time the appointment to
(and termination of) office of each member of the committee and the person who
is selected as secretary of the committee.
I-2.2. Committee's General Powers, Rights and Duties. Except as otherwise
specifically provided and in addition to the powers, rights and duties
specifically given to the committee elsewhere in the plan and the trust
agreement, the committee shall have the following powers, rights and duties: (a)
To select a secretary, if it believes it advisable, who may but need not be a
committee member.
(b) To construe and interpret the provisions of the plan and make factual
determinations thereunder, including the discretionary power to
determine the rights or eligibility of employees or participants and
any other persons, and the amounts of their benefits under the plan,
and to remedy ambiguities, inconsistencies or omissions, and such
determinations shall be binding on all parties.
(c) To adopt such rules of procedure and regulations as in its opinion may
be necessary for the proper and efficient administration of the plan
as are consistent with the plan and trust agreement.
(d) To enforce the plan in accordance with the terms of the plan and the
trust agreement and
5
the rules and regulations adopted by the committee as above.
(e) To direct the trustee as respects payments or distributions from the
trust fund in accordance with the provisions of the plan.
(f) To furnish the employers with such information as may be required by
them for tax or other purposes in connection with the plan.
(g) To employ agents, attorneys, accountants, actuaries or other persons
(who also may be employed by the employers) and to allocate or
delegate to them such powers, rights and duties as the committee may
consider necessary or advisable to properly carry out administration
of the plan, provided that such allocation or delegation and the
acceptance thereof by such agents, attorneys, accountants, actuaries
or other persons, shall be in writing.
I-2.3. Manner of Action. During a period in which two or more committee
members are acting, the following provisions apply where the context admits:
(a) A committee member by writing may delegate any or all of his rights,
powers, duties and discretions to any other member, with the consent
of the latter.
(b) The committee members may act by meeting or by writing signed without
meeting, and may sign any document by signing one document or
concurrent documents.
(c) An action or a decision of a majority of the members of the committee
as to a matter shall be as effective as if taken or made by all
members of the committee.
(d) If, because of the number qualified to act, there is an even division
of opinion among the committee members as to a matter, a disinterested
party selected by the committee shall decide the matter and his
decision shall control.
(e) Except as otherwise provided by law, no member of the committee shall
be liable or responsible
6
for an act or omission of the other committee members in which the
former has not concurred.
(f) The certificate of the secretary of the committee or of a majority of
the committee members that the committee has taken or authorized any
action shall be conclusive in favor of any person relying on the
certificate.
I-2.4. Interested Committee Member. If a member of the committee also is a
participant in the plan, he may not decide or determine any matter or question
concerning distributions of any kind to be made to him or the nature or mode of
settlement of his benefits unless such decision or determination could be made
by him under the plan if he were not serving on the committee.
I-2.5. Resignation or Removal of Committee Members. A member of the
committee may be removed by the company at any time by ten days' prior written
notice to him and the other members of the committee. A member of the committee
may resign at any time by giving ten days' prior written notice to the company
and the other members of the committee. The company may fill any vacancy in the
membership of the committee; provided, however, that if a vacancy reduces the
membership of the committee to less than three, such vacancy shall be filled as
soon as practicable. The company shall give prompt written notice thereof to the
other members of the committee. Until any such vacancy is filled, the remaining
members may exercise all of the powers, rights and duties conferred on the
committee.
7
I-2.6. Committee Expenses. All costs, charges and expenses reasonably
incurred by the committee will be paid by the employers in such proportions as
the company may direct. No compensation will be paid to a committee member as
such.
I-2.7. Information Required by Committee. Each person entitled to benefits
under the plan must file with the committee from time to time in writing such
person's post office address and each change of post office address. Any
communication, statement or notice addressed to any person at the last post
office address filed with the committee will be binding upon such person for all
purposes of the plan. Each person entitled to benefits under the plan also shall
furnish the committee with such documents, evidence, data or information as the
committee considers necessary or desirable for the purpose of administering the
plan. The employers shall furnish the committee with such data and information
as the committee may deem necessary or desirable in order to administer the
plan. The records of the employers as to an employee's or participant's period
of employment, hours of service, termination of employment and the reason
therefor, leave of absence, reemployment and earnings will be conclusive on all
persons unless determined to the committee's satisfaction to be incorrect.
I-2.8. Uniform Rules. The committee shall administer the plan on a
reasonable and nondiscriminatory basis and shall apply uniform rules to all
persons similarly situated.
8
I-2.9. Review of Benefit Determinations. The employers will provide notice
in writing to any participant or beneficiary whose claim for benefits under the
plan is denied and the committee shall afford such participant or beneficiary a
full and fair review of its decision if so requested.
I-2.10. Committee's Decision Final. Subject to applicable law, any
interpretation of the provisions of the plan and any decisions on any matter
within the discretion of the committee made by the committee in good faith shall
be binding on all persons. A misstatement or other mistake of fact shall be
corrected when it becomes known and the committee shall make such adjustment on
account thereof as it considers equitable and practicable.
SECTION I-3
General Provisions
I-3.1. Additional Employers. Any corporation or other entity may adopt the
plan and become a party to the trust agreement by:
(a) Filing with the committee a written instrument to that effect; and
(b) Filing with the committee a written instrument executed by the company
consenting to such action.
I-3.2. Action by Employers. Any action required or permitted to be taken by
an employer under the plan shall be by resolution of its Board of Directors, by
resolution of a duly
9
authorized committee of its Board of Directors, or by a person or persons
authorized by resolution of its Board of Directors or such committee.
I-3.3. Waiver of Notice. Any notice required under the plan may be waived
by the person entitled to such notice.
I-3.4. Gender and Number. Where the context admits, words in the masculine
gender shall include the feminine and neuter genders, the singular shall include
the plural, and the plural shall include the singular.
I-3.5. 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.
I-3.6. Employment Rights. The plan does 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 any employer, nor any right or claim to any
benefit under the plan, unless such right or claim has specifically accrued
under the terms of the plan.
I-3.7. Litigation by Participants. If a legal action begun against the
trustee, an employer or the committee or any member thereof by or on behalf of
any person results adversely to that person, or if a legal action arises because
of conflicting claims to a participant's or other person's benefits, the cost to
the trustee, the employers or the committee or any member thereof of defending
the action will be charged to the
10
extent permitted by law to the sums, if any, which were involved in the action
or were payable to the person concerned.
I-3.8. Interests Not Transferable. The interests of persons entitled to
benefits under the plan are not subject to their debts or other obligations and,
except as may be required by the tax withholding provisions of the Internal
Revenue Code or any state's income tax act or pursuant to a qualified domestic
relations order as defined in Section 414(p) of the Internal Revenue Code, may
not be voluntarily or involuntarily sold, transferred, alienated, assigned or
encumbered.
I-3.9. Absence of Guaranty. Neither the committee nor the employers in any
way guarantee the trust fund from loss or depreciation. Except as required by
applicable law, the employers do not guarantee any payment to any person. The
liability of the trustee, the employers or the committee to make any payment
pursuant to the plan is limited to the assets held by the trustee which are
available for that purpose.
I-3.10. Evidence. Evidence required of anyone under the plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
I-3.11. Actuarial Equivalent. Except as otherwise provided by law, a
benefit shall be actuarially equivalent to any other benefit if the actuarial
reserve required to provide the same is equal to the actuarial reserve required
to provide such
11
other benefit, computed on the basis of the actuarial rates, tables and
procedures specified in Supplement A. No adjustment in a determination of an
actuarially equivalent value or amount shall be made if such tables, rates and
procedures are changed subsequent to such determination.
I-3.12. Indemnification. To the extent permitted by law, neither any
present or former 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 good faith in the administration of the plan. Any
employee of an employer to whom the committee 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, members and former members of the committee,
and each of them, shall, to the extent permitted by law, be indemnified and
saved harmless by the employers (to the extent not indemnified or saved harmless
under any liability insurance or other indemnification arrangement with respect
to the plan or this trust) from and against any and all liability or claim of
liability to which they may be subjected by reason of any act done or omitted to
be done in good faith in connection with the administration of the plan,
including all expenses reasonably incurred in their defense if the employers
fail to provide such defense after having been requested to do so in writing.
I-3.13. Successors. The term "employer" as used in the plan includes any
entity that continues the plan in effect;
12
and, if the employer concerned is the company, the term "company" also shall
include such entity.
I-3.14. Severability. If any provision of the plan is held to be illegal or
invalid, such illegality or invalidity shall not affect the remaining provisions
of the plan, and they shall be construed and enforced as if such illegal or
invalid provision had never been inserted therein.
I-3.15. Statutory References. Any references in the plan to a Section of
the Internal Revenue Code of 1954 (the "Code"), the Employee Retirement Income
Security Act of 1974 ("ERISA") or the Tax Equity and Fiscal Responsibility Act
of 1982 ("TEFRA") shall include any comparable section or sections of any future
legislation which amends, supplements or supersedes said Section.
13
SECTION I-4
Contributions
I-4.1. Employer Contributions. Subject to the provisions of Section I-5,
the employers expect and intend to contribute to the plan from time to time such
amounts as shall be required under accepted actuarial principles to maintain the
plan in a sound condition. Notwithstanding the foregoing, each employer's
contribution for a plan year is conditioned on its deductibility under Section
404 of the Internal Revenue Code in that year.
I-4.2. Participant Contributions. No participant will be required or
permitted to make any contributions under the plan.
I-4.3. Minimum Funding Standards. The employers shall maintain a funding
standard account which shall be credited with contributions and gains and
charged with costs and losses for each plan year in accordance with Sections 412
and 413(c)(4) of the Internal Revenue Code of 1986. Employer contributions to
the plan for each plan year shall be made by such times and in such amounts as
are required by said Sections 412 and 413(c)(4).
I-4.4. Application of Forfeitures. Forfeitures arising under the plan for
any reason shall not be used to increase the benefit any person otherwise would
be entitled to receive under the plan at any time prior to termination of the
plan or prior to the complete discontinuance of contributions by
14
his employer. The amounts so forfeited with respect to any employer shall be
used to reduce the employer's contributions under the plan.
I-4.5. No Interest in Employers. The employers shall have no right, title
or interest in the trust fund, nor shall any part of the trust fund revert or be
repaid to an employer, directly or indirectly, unless: (a) the Internal Revenue
Service initially determines that the plan, as applied to such employer, does
not meet the requirements of Section 401(a) of the Internal Revenue Code of
1954, in which event the contributions made to the plan by such employer shall
be returned to it;
(b) all liabilities under the plan shall have been paid or provided for in
full and assets remain in the trust fund that are attributable to
contributions made by an employer because of erroneous actuarial
computations, in which event such remaining assets shall revert and be
repaid to that employer;
(c) a contribution is made by such employer by mistake of fact and such
contribution is returned to the employer within one year after payment
to the trustee; or
(d) a contribution conditioned on the deductibility thereof is disallowed
as an expense for federal income tax purposes and such contribution
(to the extent disallowed) is returned to the employer within one year
after the disallowance of the deduction.
The amount of any contribution that may be returned to an employer pursuant
to subparagraph (c) or (d) above must be reduced by any losses of the trust fund
allocable thereto.
SECTION I-5
Amendment and Termination
15
I-5.1. Amendment. While the employers expect and intend to continue the
plan, the company reserves the right to make, from time to time, any amendment
or amendments to all or any part of the plan, including amendments which are
retroactive in effect. Such amendment or amendments may be effected by action of
the company's Board of Directors (the "Board"). Also, the Board has specifically
authorized the Compensation Committee of the Board to take such actions.
Notwithstanding the foregoing: (a) The duties and liabilities of the committee
cannot be changed substantially without its consent;
(b) No amendment shall reduce the value of a participant's benefits to
less than the amount he would be entitled to receive if he had
resigned from the employ of all of the employers on the day of the
amendment;
(c) Except as provided in subsection I-4.5, under no condition shall an
amendment result in the return or repayment to any employer of any
part of the trust fund or the income from it or result in the
distribution of the trust fund for the benefit of anyone other than
persons entitled to benefits under the plan; and
(d) If an amendment changes the plan's vesting schedule, then each
participant whose nonforfeitable percentage of the participant's
accrued benefit is determined under such schedule and who has
completed at least three years of service, may elect, within 60 days
after the latest of the date the amendment is adopted, the date the
amendment takes effect or the date the participant receives written
notice of the amendment from the company or the plan administrator, to
have the nonforfeitable percentage of the participant's accrued
benefit determined without regard to the amendment, provided however,
that no such election shall be provided for any participant whose
nonforfeitable percentage of the participant's accrued benefit under
the plan as amended, at
16
any time, cannot be less than such percentage determined without
regard to such amendment.
I-5.2. Termination.The plan is intended to be permanent, but the company
reserves the right to terminate the plan, in whole or in part, at any time. Such
termination may be effected by action of the Board. Also the Board has
specifically authorized the Compensation Committee of the Board to take such
action. (a) The date it is terminated by that employer if 30 days' advance
written notice of the termination is given to the committee, the trustee and the
other employers.
(b) The date that employer is judicially declared bankrupt or insolvent.
(c) The date that employer completely discontinues its contributions under
the plan (a mere failure of the employer to make a contribution for
any year shall not be considered as a discontinuance so long as the
plan does not have an accumulated funding deficiency under Section 412
of the Internal Revenue Code as applied to that employer at the end of
such year).
(d) The dissolution, merger, consolidation or reorganization of that
employer, or the sale by that employer of all or substantially all of
its assets, except that:
(i) in any such event arrangements may be made, at the discretion of
the committee, whereby the plan, as applied to the employees of
that employer, may be continued by any successor to that employer
or any purchaser of all or substantially all of its assets, in
the form of a separate plan maintained by such successor or
purchaser; and
(ii) if an employer is merged, dissolved or in any other way
reorganized into, or consolidated with, any other
17
employer, the plan as applied to the former employer will
automatically continue in effect without a termination thereof.
I-5.3. Nonforfeitability on Termination. On termination or partial
termination of the plan, the rights of all affected participants to benefits
accrued to the date of such termination or partial termination shall be
nonforfeitable; but each such participant's recourse toward satisfaction of his
benefits shall be limited, and shall be payable only to the extent his benefits
are funded as of such date or from the Pension Benefit Guaranty Corporation
("PBGC"). The committee, in its discretion, may provide for full vesting in such
other circumstances as it shall deem appropriate.
I-5.4. Notice of Amendment or Termination. Participants will be notified of
an amendment or termination of the plan within a reasonable time. If the plan is
to be terminated by an employer, the committee shall file appropriate notice
with the PBGC.
I-5.5. Plan Merger, Consolidation, etc. In the case of any merger or
consolidation with, or transfer of assets or liabilities to, any other plan,
each participant's benefit if the plan terminated immediately after such merger,
consolidation or transfer shall be equal to or greater than the benefit he would
have been entitled to receive if the plan had terminated immediately before the
merger, consolidation or transfer.
18
I-5.6. Allocation and Distribution of Assets on Termination. On termination
of the plan as respects all employers, the committee will direct the allocation
and distribution of the trust fund. After payment of any expenses of
administration and liquidation, the assets remaining in the trust fund shall be
allocated and distributed to participants; retired or terminated participants,
and other persons entitled to benefits under the plan, to the extent of the
sufficiency of such assets, in accordance with the provisions of Section 4044 of
the Employee Retirement Income Security Act of 1974 ("ERISA"), as it may be
amended from time to time; and any assets remaining after all benefits have been
paid or provided for in full shall revert to the employers. Distribution may be
made in cash or property or partly in each, provided property is distributed at
its fair market value as of the date of distribution as determined by the
trustee. If the committee so determines, and with the consent of the company,
the benefits distributable to any participant under this subsection I-5.6 who is
employed by an employer may be retained in the trust fund until the
participant's employment with the employers is terminated. Distributions made
under this subsection I-5.6 shall be subject to the provisions of subsection
II-5.1, II-5.2, II-5.5, III-5.1, III-5.2 or III-5.5, whichever is applicable.
I-5.7. Application of Certain Plan Provisions. In the event that the plan
is a multiple employer plan within the meaning of Section 413(c) of the Internal
Revenue Code of 1986,
19
the provisions of the plan shall be applied consistently with said Section
413(c) and the regulations thereunder.
SECTION I-6
Restrictions On Benefits Paid To
Highly Compensated Employees
I-6.1. In the event of a plan termination, the benefit of any highly
compensated employee shall be limited to a benefit that is nondiscriminatory
under Code section 401(a)(4).
I-6.2. In any plan year, the payment of benefits to or on behalf of a
highly compensated employee who is one of the 25 highest paid highly compensated
employees shall not exceed an amount equal to the payments that would be made to
or on behalf of such highly compensated employee in that plan year under:
(a) a straight life annuity that is the actuarial equivalent of the
accrued benefit and other benefits, if any, to which such highly
compensated employee is entitled under the plan (other than a social
security supplement); and
(b) the amount of the payments that such highly compensated employee is
entitled to receive under a social security supplement, if any.
I-6.3. The restrictions set forth in Section I-6.2 shall not apply if:
(a) after payment of all benefits payable to or on behalf of a highly
compensated employee described
20
in Section I-6.2, the value of plan assets equals or exceeds 110% of
the value of current liabilities, as defined under Code section
412(l)(7) and determined under any reasonable and consistent method;
or
(b) the value of the benefits payable to or on behalf of such highly
compensated employee is less than 1% of the value of current
liabilities before distribution, as defined under Code section
412(l)(7) and determined under any reasonable and consistent method;
or
(c) the value of the benefits payable to or on behalf of such highly
compensated employee does not exceed $3,500 and has never exceeded
$3,500 at the time of any prior distribution.
I-6.4. For purposes of this Section I-6, the term "benefit" includes any
benefit described in the plan, loans, if any, in excess of the amount set forth
in Code section 72(p)(2)(A), any periodic income, any withdrawal values payable
to a living employee and any death benefits not provided for by insurance on a
participant's life.
I-6.5. A benefit which is otherwise restricted under Section I-6.2 may
nevertheless be distributed in full to an affected highly compensated employee
if, prior to receipt of the restricted amount, the highly compensated employee
enters into a written agreement with the plan administrator, in a form
satisfactory to the plan administrator to secure repayment of the restricted
amount. The restricted amount is the excess of the
21
amounts distributed to the highly compensated employee (accumulated with
reasonable interest) over the amounts that could have been distributed to such
highly compensated employee under the straight life annuity described in
Subsection I-6.2(a) (accumulated with reasonable interest).
I-6.6. The following definitions shall apply to this Section I-6 of the
plan:
"Determination year" means a plan year.
"Family member" means a spouse, lineal ascendent, lineal descendent or
spouse of a lineal ascendent or lineal descendent of a highly compensated
employee.
"Five percent owner" means any person who owns (or is considered as owning
within the meaning of Code sectionE318) more than five percent of the
outstanding stock of a controlled group member or stock possessing more than
five percent of the total combined voting power of all stock of a controlled
group member or, in the case of an unincorporated business, any person who owns
more than five percent of the capital or profits interest in a controlled group
member. In determining percentage of ownership hereunder, controlled group
members that would otherwise be aggregated under Code sections 414(b), (c), (m)
and (o) shall be treated as separate employers.
"Highly compensated active employee" means any individual who is an
employee during the determination year and who, during the look-back year:
22
(1) received earnings in excess of $75,000 (as adjusted pursuant to Code
section 415(d));
(2) received earnings in excess of $50,000 (as adjusted pursuant to Code
section 415(d)) and was a member of the top paid group; or
(3) was an officer of any member of the controlled group and received
earnings greater than 50% of the dollar limitation in effect under Code section
415(b)(l)(A) provided that the number of employees classified as officers
hereunder shall not exceed the lesser of (i) 50 or (ii) the greater of three or
10% of all employees and further provided that if no officer satisfies the
compensation requirement set forth herein during either the look-back year or
the determination year the highest paid officer for such year shall be a highly
compensated active employee.
In determining who is a highly compensated active employee, the company may
elect to substitute $50,000 for $75,000 in (1) above and not apply (2) above
provided that the controlled group maintains significant business activities in
at least two significantly separate geographic areas and meets such other
requirements as the Secretary of the Treasury may prescribe.
The term "highly compensated active employee" shall also include:
(4) An employee who is both (i) described in 1, 2 or 3 above if the term
"determination year" is substituted for
23
the term "look-back year" and (ii) one of the 100 employees who received the
most earnings during the determination year;
(5) An employee who is a five percent owner at any time during the
determination year or the look-back year; or
(6) An employee who during a determination year or a look-back year is a
family member of either (i) a five percent owner who is an active or former
employee or (ii) a highly compensated active employee who is one of the ten
employees who received the most earnings during such year provided, however,
that the family member and the five percent owner or top ten highly compensated
employee shall be treated as a single highly compensated active employee whose
earnings, benefits and contributions is the sum of such compensation, benefits
and contributions of the family member and the five percent owner or top ten
highly compensated employee.
"Highly compensated employee" means a highly compensated active employee or
a highly compensated former employee.
"Highly compensated former employee" means a former employee who terminated
employment prior to the determination year and was a highly compensated active
employee in the year of termination of employment or in any Determination Year
after attaining age 55. Notwithstanding the foregoing, an employee who
terminated employment prior to 1987 will be treated as a highly compensated
former employee only if during the year (or year preceding the termination) or
any year after the employee attains
24
age 55 (or the last year ending before the employee's 55th birthday), the
employee either received earnings in excess of $50,000 (as adjusted pursuant to
Code section 415(d)) or was a five percent owner. Highly compensated former
employees shall be treated as highly compensated employees. The method set forth
in this section for determining who is a highly compensated former employee
shall be applied on a uniform and consistent basis for all purposes for which
the Code section 414(q) definition is applicable.
"Look-back year" means the 12 month period immediately preceding a
determination year.
"Top paid group" means the top 20% percent of employees who performed
services for the controlled group during the applicable year ranked according to
the amount of earnings received from the controlled group during such year. For
purposes of this definition leased employees shall be considered employees
unless such leased employees are covered by a plan described in Code section
414(n)(5) and are not covered in any qualified plan maintained by the controlled
group. Employees who are nonresident aliens and who received no earned income
within the meaning of Code section 911(d)2) from the controlled group
constituting United States source income within the meaning of Code section
861(a)(3) shall not be treated as employees. Additionally, for the purpose of
determining the number of active employees in any year the following additional
employees shall also be excluded; however, such employees shall still be
25
considered for the purpose of identifying the particular employees in the top
paid group:
(1) Employees with less than six months of service;
(2) Employees who normally work less than 17 1/2 hours per week;
(3) Employees who normally work less than six months during a year;
(4) Employees who have not yet attained age 21 years; and
(5) except to the extent provided in regulations, employees who are
included in a unit of employees covered by an agreement which the Secretary of
Labor finds to be a collective bargaining agreement between employee
representatives and any member of the controlled group. Notwithstanding the
foregoing, for purposes of determining whether an individual is a highly
compensated employee or a member of the top paid group, earnings shall be
determined without regard to the limits imposed by Code section 401(a)(17).
SECTION I-7
Leased Employees
A leased employee (as defined below) shall not be eligible to participate
in the plan. A "leased employee" means any person who is not an employee of an
employer but who has provided services to an employer of a type which have
historically (within the business field of the employers) been provided by
employees, on a substantially full time basis for a
26
period of at least one year, pursuant to an agreement between an employer and a
leasing organization. The period during which a leased employee performs
services for an employer shall be taken into account for purposes of
participation and vesting under the plan if such leased employee becomes an
employee of an employer, unless (i)such leased employee is a participant in a
money purchase pension plan maintained by the leasing organization which
provides a non-integrated employer contribution rate of at least 10 percent of
compensation, immediate participation for all employees and full and immediate
vesting, and (ii) leased employees do not constitute more than 20 percent of the
employers' nonhighly compensated work force.
SECTION I-8
Plan Benefits for Participants who
Terminated Employment Prior to
January 1, 1989
The benefits provided under this plan with respect to any participant who
retired or whose employment with the employers otherwise terminated prior to
January 1, 1989 will, except as otherwise specifically provided herein, be
governed in all respects by the terms of the plan as in effect as of the date of
the participant's retirement or other termination of employment.
27
ARTICLE II
SECTION II-1
Participation and Retirement Dates
II-1.1. Employee. For purposes of this Article II, the term "employee"
shall mean an employee of an employer or controlled group member who: (a) is
employed in the United States of America; and (b) was either (i) hired after
January 1, 1985, or (ii) hired on or before that date but not employed by an
employer on January 1, 1986.
II-1.2. Participation. Subject to the conditions and limitations of the
plan, each employee of an employer who is a participant in the plan immediately
preceding January 1, 1988 will continue as a participant on and after that date.
Beginning January 1, 1988 and subject to the provisions of Supplement F, each
other employee of an employer will become a participant in the plan on the first
day of the plan year during which he meets both of the following requirements:
(a) He has attained age 21 years; and
(b) He has completed a year of service (as defined below).
An employee shall be entitled to a "year of service" if he has completed 1,000
hours of service during the 12-month period ending on his employment anniversary
date. An "employment anniversary date" means any anniversary of the employee's
date of hire by an employer or controlled group member.
28
II-1.3. Hour of Service. An "hour of service" means each hour for which an
employee is directly or indirectly paid or entitled to payment by an employer or
controlled group member for the performance of duties and for reasons other than
the performance of duties, including each hour for which back pay, irrespective
of mitigation of damages, has been either awarded or agreed to by an employer or
controlled group member, determined and credited in accordance with Department
of Labor Reg. Sec. 2530.200b-2.
II-1.4. Normal Retirement Date. A participant's "normal retirement date"
will be the first day of the month coincident with or next following the date he
attains age 65 years (his "normal retirement age"). A participant's right to his
normal retirement benefit shall be nonforfeitable on and after his normal
retirement age.
II-1.5. Early Retirement Date. The "early retirement date" of a participant
who was first hired on or before January 1, 1991 will be the first day of the
month coincident with or next following the date of his retirement from the
employ of all of the employers before his normal retirement date but after he
has both attained age 55 years and completed 20 or more years of vesting
service. The "early retirement date" of a participant who was first hired after
January 1, 1991 will be the first day of the month coincident with or next
following the date of his retirement from the employ of all of the employers
29
before his normal retirement date but after he has both attained age 55 years
and completed 10 or more years of vesting service.
II-1.6. Deferred Retirement Date. A participant's "deferred retirement
date" will be the first day of the month coincident with or next following the
date of his retirement from the employ of all of the employers after his normal
retirement date.
II-1.7. Retirement Date. A participant's "retirement date" will be one of
the dates described above as of which his retirement from the employ of the
employers occurs.
II-1.8. Leave of Absence. A "leave of absence" for plan purposes means an
absence from work which is not treated by the employers as a termination of
employment or which is required by law to be treated as a leave of absence.
Leaves of absence will be granted under employer rules applied uniformly to all
employees similarly situated.
II-1.9. Controlled Group Member. A "controlled group member" means:
(a) any corporation which is not an employer but is a member of a
controlled group of corporations (within the meaning of Section
1563(a) of the Internal Revenue Code, determined without regard to
Sections 1563(a)(4) and 1563(e)(3)(C) thereof) which contains an
employer; or
(b) any trade or business (whether or not incorporated) which is under
common control with an employer (within the meaning of Section 414(c)
of the Internal Revenue Code).
30
II-1.10. Employment with Controlled Group Member. If a participant is
transferred from employment with an employer to employment with a controlled
group member then, for the purpose of determining when his retirement date
occurs under this Section II-1 or when his date of termination of employment
with the employers occurs under Section II-4, his employment with such
controlled group member (or any controlled group member to which he is
subsequently transferred) shall be considered as employment with the employers.
SECTION II-2 Bases of Benefits II-2.1. General. Vesting service shall be applied
to determine a participant's eligibility for benefits under the plan, but not
for the purpose of computing the amount of such benefits. Benefit service shall
be applied to compute the amount of a participant's benefits under the plan. A
participant's retirement income or deferred vested benefit will be based on his
benefit service and his final average earnings, both as determined in accordance
with the provisions hereof.
II-2.2. Vesting Service. A participant's "vesting service" means the total
of his years of service computed in accordance with the following rules:
(a) A participant will be entitled to 1/12th of a year of vesting service
for each calendar month (or portion thereof) during which he is
employed by an employer or controlled group member.
31
(b) All periods of employment (whether or not continuous) will be
aggregated in computing a participant's vesting service.
(c) A period of leave of absence will be included in determining a
participant's vesting service.
(d) In no event will a participant be entitled to more than 1/12th of a
year of vesting service for any calendar month.
II-2.3. Benefit Service. A participant's "benefit service" shall be
determined in accordance with the following rules: (a) A participant who was a
participant in the plan on December 31, 1987 will be entitled to a full or
fractional year of benefit service for each full or fractional year of benefit
service to which he was entitled under the plan prior to January 1, 1988, in
accordance with the terms of the plan in effect prior to that date, but
including service after the participant's normal retirement date.
(b) Beginning January 1, 1988, a participant who was first hired on or
before January 1, 1991 shall be entitled to 1/12th of a year of
benefit service for each calendar month (or portion thereof) after
December, 1987 during which he is employed by an employer.
(c) A participant who was first hired after January 1, 1991 shall be
entitled to 1/12th of a year of benefit service for each calendar
month (or portion thereof) after he has completed one year of vesting
service during which he is employed by an employer.
(d) Except as required by law or provided by the committee in a
nondiscriminatory manner, any period of unpaid leave of absence in
excess of twelve months will be disregarded in computing a
participant's benefit service.
II-2.4. Earnings. A participant's "earnings" means the total cash
compensation paid to the participant for services
32
rendered to the employers as an employee, including pre-tax employee deposits
under any qualified profit sharing or stock bonus plan maintained by an
employer, and, beginning January 1, 1995, compensation deferred under the Dean
Witter, Discover & Co. Tax Deferred Equity Participation Plan, the SPS
Transaction Services, Inc. Tax Deferred Equity Participation Plan (the "TDEPPs")
or the Dean Witter, Discover & Co. Capital Accumulation Plan ("CAP") in the year
such deferrals are made, but excluding such items as awards and prizes, lump sum
payments for vacations earned but not taken, supper money, foreign allowances,
service allowances, retainers, special geographic differentials, medical expense
reimbursements, retirement or profit sharing benefits, long-term disability
benefit payments, payments or reimbursements in connection with moving expenses,
awards under any long-term executive compensation plans other than the TDEPPS or
CAP, one-time annual awards for special merit or achievement, performance units
or restricted share awards under any incentive compensation plans, dividends
paid on such restricted shares, the value of stock options or stock appreciation
rights and cash payments received pursuant to stock options, any incremental
increases or earnings under deferred compensation plans including but not
limited to the TDEPPs and CAP, payments or withdrawals from any deferred
compensation plan including but not limited to the TDEPPs and CAP, amounts paid
after death, disability or retirement, employer-paid premiums on any insurance
plan, employer contributions under any profit sharing, profit
33
participation or stock plans, or any other similar types of compensation which
may be specifically excluded by action of the committee.
Effective January 1, 1989, compensation for any year in excess of $200,000
(or such greater amount as may be determined by the Commissioner of Internal
Revenue for that year) shall be disregarded in determining the amount of a
participant's earnings; provided, that the limitations of this sentence shall
not reduce the benefit accrued as of December 31, 1988, determined under the
terms of the plan as then in effect as though the participant had terminated
employment on that date.
In addition to other applicable limitations set forth in the plan and
notwithstanding any other provisions of the plan to the contrary, for plan years
beginning on or after January 1, 1994, the annual earnings of each participant
taken into account under the plan shall not exceed the OBRA `93 annual
compensation limit. The OBRA `93 compensation limit is $150,000, as adjusted by
the Commissioner of Internal Revenue for increases in the cost-of-living in
accordance with section 401(a)(17)(D) of the Code. The cost-of-living adjustment
in effect for a calendar year applies to any period not exceeding 12 months over
which compensation is determined (the determination period) beginning in such
calendar year. If a determination period consists of fewer than 12 months, the
OBRA `93 annual compensation limit will be multiplied by a fraction, the
numerator of which is the number
34
of months in the determination period and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference in this
plan to the limitation under section 401(a)(17) of the Code shall mean the OBRA
`93 annual compensation limit set forth in this provision.
If earnings for any prior determination period are taken into account in
determining a participant's benefits accruing in the current plan year, the
earnings for that prior determination period are subject to the OBRA `93 annual
compensation limit in effect for that prior determination period. For this
purpose, for determination periods beginning before the first day of the first
plan year beginning on or after January 1, 1994, the OBRA `93 annual
compensation limit is $150,000.
Unless otherwise provided under the plan, each section 401(a)(17)
employee's accrued benefit under this plan will be the greater of the accrued
benefit determined for the employee under (a) or (b) below:
(a) the employee's accrued benefit determined with respect to the benefit
formula applicable for the plan year beginning on or after January 1, 1994, as
applied to the employee's total years of service taken into account under the
Plan for the purposes of benefit accruals, or
(b) the sum of:
(i) the employee's accrued benefit as of the last day of the last plan
year beginning before January 1, 1994,
35
frozen in accordance with section 1.401(a)(4)-13 of the regulations and
(ii) the employee's accrued benefit determined under the benefit
formula applicable for the plan year beginning on or after January 1, 1994,
as applied to the employee's years of service credited to the employee for
plan years beginning on or after January 1, 1994, for purposes of benefit
accruals.
A section 401(a)(17) employee means a participant whose current accrued
benefit as of a date on or after the first day of the first plan year beginning
on or after January 1, 1994, is based on earnings for a year beginning prior to
the first day of the first plan year beginning on or after January 1, 1994, that
exceeded $150,000.
II-2.5. Final Average Earnings. The "final average earnings" of a
participant shall be the monthly average of the earnings paid to him during the
5 consecutive calendar years for which his earnings were highest within the last
10 consecutive calendar years immediately preceding his retirement date or
earlier termination of employment (or the monthly average of earnings for the
entire period of his employment if such period is less than 5 calendar years).
Such average shall be computed by dividing the total of the participant's
earnings for such 5 calendar year period (or shorter total period of employment
if applicable) by the number of months within that period for which he had
earnings.
SECTION II-3
36
Amount of Retirement Income
II-3.1. Accrued Benefit. Subject to the provisions of subsection II-3.9 and
Supplement F, a participant's accrued benefit under the plan is a monthly
retirement income, commencing on the participant's normal retirement date and
payable during his lifetime, in an amount equal to the sum of:
(a) a "Base Benefit" equal to 1.10% of the participant's final average
earnings (as defined in subsection II-2.5) multiplied by his number of
years of benefit service; plus
(b) an "Additional Benefit" equal to 0.65% of the participant's excess
earnings (as defined in subsection II-3.6) multiplied by his number of
years of benefit service (not exceeding 35 years).
The amount of monthly retirement income determined under this subsection II-3.1
will be subject to reduction if the participant is to receive a joint and
survivor annuity under subsection II-5.1. In no event shall the amount of a
participant's monthly retirement income be less than his accrued benefit as of
December 31, 1988 (determined under the terms of the plan as then in effect as
though the participant had terminated employment on that date).
II-3.2. Normal Retirement. A participant who retires on his normal
retirement date will be entitled to a monthly retirement income computed in
accordance with subsection II-3.1, commencing on his normal retirement date and
payable in accordance with subsection II-5.1.
37
II-3.3. Deferred Retirement. A participant who retires on a deferred
retirement date will be entitled to a monthly retirement income, commencing on
the earlier of his deferred retirement date or his required commencement date
(as defined in subsection II-5.6), and payable in accordance with subsection
II-5.1. The amount of his monthly retirement income will be computed in
accordance with subsection II-3.1, but shall be actuarially increased to reflect
the aggregate amount of monthly retirement income payments which were not paid
to such participant for those calendar months (if any) beginning on or after his
normal retirement date during which he completed less than 40 hours of service.
If payment of a participant's monthly retirement income begins prior to
retirement on his required commencement date, then: (a) the amount of any
additional retirement income that otherwise would be accrued by the participant
after that date shall be reduced (but not below zero) by the actuarial
equivalent of the retirement income payments made to the participant after that
date; and (b) the amount of retirement income payable to the participant shall
be adjusted, as of each subsequent January 1, to reflect the additional
benefits, if any, accrued by the participant during the immediately preceding
calendar year. In no event shall the amount of monthly retirement income payable
to a participant under this subsection II-3.3 be less than the monthly
retirement income the participant would have received had he retired on his
normal retirement date.
38
II-3.4. Early Retirement - Deferred Payment. A participant who retires on
an early retirement date will be entitled to a monthly retirement income,
commencing on his normal retirement date and payable in accordance with
subsection II-5.1, computed in accordance with subsection II-3.1 (as in effect
as of his early retirement date) and based on his final average earnings at his
early retirement date.
II-3.5. Early Retirement - Immediate Payment. In lieu of receiving the
monthly retirement income otherwise payable under subsection II-3.4 commencing
on his normal retirement date, a participant who retires on an early retirement
date may elect a monthly retirement income commencing on his early retirement
date, or on the first day of any calendar month thereafter before his normal
retirement date. Such monthly retirement income will be computed in accordance
with subsection II-3.4, but shall be reduced as follows: (a) the Base Benefit
shall be reduced: (i) by 0.4% thereof for each month by which commencement
precedes the first day of the month coincident with or next following the date
the participant would have attained age 63 years, if the participant was first
hired on or before January 1, 1991; or (ii) by 5/12ths of 1% thereof for each
month by which commencement precedes the participant's normal retirement date,
if the participant was first hired after January 1, 1991; and (b) the Additional
Benefit shall be reduced by 2/3rds of 1% thereof for each of the first 36 months
and by 1/3rd of 1% thereof for each
39
month in excess of 36 by which commencement precedes the participant's normal
retirement date. Each election under this subsection II-3.5 must be in writing
and filed with the committee at such time prior to the date earlier payment of
the participant's retirement income is to begin as the committee shall
determine. In no event shall the monthly retirement income payable to a
participant who retires on an early retirement date be less than the amount that
would have been payable under the terms of the plan in effect on December 31,
1988 if the participant had retired on that date.
II-3.6. Excess Earnings. A participant's "excess earnings" means the
excess, if any, of his final average earnings over his covered compensation (as
defined below). A participant's "covered compensation" is the monthly average of
the Social Security taxable wage bases in effect for each of the 35 calendar
years ending with the year the participant attains (or would attain) Social
Security retirement age, assuming that the Social Security taxable wage base for
future years is the same as the Social Security taxable wage base in effect for
the current year.
II-3.7. Benefit Limitations, Notwithstanding any other provisions of the
plan, a participant's monthly retirement income or monthly deferred vested
benefit as of the end of any plan year may not exceed an amount which is
equivalent to a retirement income or deferred vested benefit payable for life
only (not taking into account that portion of any joint and
40
survivor annuity which constitutes a qualified joint and survivor annuity under
the Internal Revenue Code), equal to $7,500 per month (or such greater amount as
may be determined by the Commissioner of Internal Revenue for calendar years
ending after December 31, 1987 which begin with or within that plan year). If
payment of a participant's monthly retirement income or deferred vested benefit
begins before he attains the social security retirement age, such limitation
shall be reduced so that it is equivalent to a monthly benefit of $7,500
commencing at the social security retirement age. If payment of a participant's
monthly retirement income begins after he attains the social security retirement
age, such limitation shall be increased so that it is equivalent to a monthly
benefit of $7,500 commencing at the social security retirement age. For purposes
of adjusting amounts under this subsection II-3.7, the interest rate assumption
shall be the greater (or the lesser, in the case of benefits beginning after the
social security retirement age) of 5% or the rate specified in Supplement A for
determining actuarial equivalence. In the case of a participant with less than
10 years of participation in the plan, the foregoing limitation shall be
multiplied by a fraction, the numerator of which shall be the participant's
number of full and fractional years of participation in the plan (but not less
than 1) and the denominator of which shall be 10. The preceding sentence shall
be applied separately with respect to each change in the benefit structure of
the plan. In no event shall a participant's monthly
41
retirement income as of the end of any plan year exceed 100% of his average
compensation for his high three years. A participant's "average compensation for
his high three years" means his average monthly compensation during that period
of three consecutive calendar years of his service with the employers (or during
his actual number of years of service if less than three such years) in which
his aggregate compensation from the employers was the greatest. For purposes of
this subsection II-3.7, a participant's "compensation" means his total cash
compensation for services rendered to the employers as an employee, determined
in accordance with Section 415(c)(3) of the Internal Revenue Code and the
regulations thereunder. The provisions of this subsection II-3.7 shall not
reduce the monthly retirement income or deferred vested benefit of any
participant below such participant's accrued benefit as of December 31, 1986
(determined under the terms of the plan as in effect on May 5, 1986 as though
the participant had terminated employment on December 31, 1986).
II-3.8. Combined Benefit Limitations. If a participant in this plan also is
a participant in a defined contribution plan maintained by an employer, the
aggregate benefits payable to, or on account of, him under both plans will be
determined in a manner consistent with Section 415 of the Internal Revenue Code
and Section 1106 of the Tax Reform Act of 1986. Accordingly, there will be
determined with respect to the participant a defined benefit plan fraction and a
defined
42
contribution plan fraction in accordance with said Sections 415 and 1106. The
benefits provided for the participant under this plan will be adjusted to the
extent necessary so that the sum of such fractions determined with respect to
the participant does not exceed 1.0.
II-3.9. Minimum Benefit for Transferred Participants. In no event shall the
monthly retirement income or deferred vested benefit payable under this Article
II of the plan to (or on account of) a transferred participant (as defined in
subsection II-3.10) be less than the amount determined as follows:
(a) First, the amount of retirement income that would be payable to
(or on account of) such transferred participant under the plan and
each related plan (as defined below) will be calculated using the
transferred participant's period of continuous service with all
employers and controlled group members (disregarding any period his
employer was not an employer or controlled group member), rather than
his benefit service (or such other denominated service which is used
in calculating benefits under any related plan), and using his
compensation from all employers and controlled group members in
determining his final average earnings;
(b) Next, the respective amounts calculated for the plan and each
related plan under subparagraph (a) next above will be multiplied by a
fraction, the numerator of which shall be that portion of the
transferred participant's continuous service which consisted of
employment covered by the plan, or such related plan, as the case may
be, and the denominator of which shall be his total period of
continuous service; and
(c) Finally, the amount of retirement income payable under the plan to (or
on account of) a
43
transferred participant shall not be less than the excess of:
(i) the sum of the amounts calculated under subparagraph (b) next
above; minus
(ii) the sum of the amounts of retirement income that are payable to
(or on account of) such transferred participant under all related
plans.
If a transferred participant dies while employed by an employer, death benefits
will be payable in accordance with the provisions of Section 11-6 of the plan.
The amount of such death benefit will be based upon the amount of retirement
income that would have been payable to the deceased transferred participant in
accordance with the provisions of this subsection II-3.9. A "related plan" means
a defined benefit pension plan maintained by a controlled group member under
which retirement benefits are based upon final average (rather than career
average) earnings. For purposes of this subsection II-3.9, a transferred
participant who, prior to January 1, 1989, participated in the Allstate plan,
shall have the amount of retirement income payable under the Allstate plan
calculated by reducing the base benefit portion of such transferred
participant's post-1988 Allstate plan benefit by 0.4% thereof for each month by
which the commencement of such transferred participant's benefit payments
precedes the first day of the month coincident with or next following the date
such transferred participant would have attained age 60 years. For purposes of
this subsection II-3.9, a transferred participant who, either on October 1, 1995
or, if later, the participant's
44
retirement date, is a highly compensated employee and who participated in the
Sears plan prior to such participant's transfer shall have the amount of
retirement income payable under the Sears plan calculated by reducing the
pre-1978 benefit portion of such transferred participant's Sears plan benefit by
5/12ths of 1% for each month by which the commencement of such transferred
participant's benefit payments precedes the first day of the month coincident
with or next following the date such transferred participant would have attained
age 63 years. For purposes of this subsection II-3.9, the amount of retirement
income payable to a transferred participant under the Allstate or Sears plans
shall be calculated without regard to any exclusion of the portion of a prior
service element based upon earnings in years after 1988, provided, however, that
the amount of such post-1988 earnings taken into account for purposes of this
sentence shall not exceed the OBRA `93 annual compensation limit, as defined in
subsection II-2.4, applied to all years after 1988 with the OBRA `93 annual
compensation limit in effect for 1995 deemed to have been in effect for the
years 1989 through 1993, inclusive.
II-3.10. Transferred Participant. For purposes of this Article II, a
"transferred participant" is a participant: (a) who, after January 1, 1986,
either:
(i) is employed by an employer within twelve months after his
termination of employment with all employers and controlled group
members, or
45
(ii) is transferred directly to employment with an employer, at the
request of a controlled group member or by mutual agreement, and
without any termination of employment with all employers and
controlled group members; and
(b) who, prior to such employment or transfer, was employed by a
controlled group member and, while so employed, was a participant in a
related plan; and
(c) who, with respect to any such employment or transfer occurring after
December 31, 1987, completes at least twelve months of continuous
service with an employer immediately following such employment or
transfer; and
(d) who again terminates employment with all employers and controlled
group members for any reason (including death) and under conditions
entitling him (or his spouse or any other person) to a retirement
income under the plan; and
(e) whose last period of continuous service was with an employer; and
(f) who is not receiving (and has not received) retirement benefits from a
related plan.
II.3.11. Minimum Normal or Deferred Retirement Benefit. In no event shall a
participant's normal or deferred retirement benefit be less than the largest
early retirement benefit the participant could have received under subsection
II-3.5 if he had retired on an early retirement date.
SECTION II-4
Termination of Employment Before Retirement
II-4.1. Monthly Deferred Vested Benefit. A participant whose employment
with all of the employers is terminated for any reason other than his death
before he
46
qualified for retirement on an early retirement date, but after he has completed
five or more years of vesting service, will be entitled to a monthly deferred
vested benefit commencing on his normal retirement date and payable in
accordance with subsection II-5.1. The amount of his monthly deferred vested
benefit will be computed in accordance with subsection II-3.1 (as in effect at
the date that his employment with the employers terminated) and will be based on
the participant's final average earnings at the date his employment with the
employers terminated.
II-4.2. Early Commencement of Benefit. A participant who is entitled to a
monthly deferred vested benefit under subsection II-4.1, who was first hired on
or before January 1, 1991 and who has completed 20 or more years of vesting
service may elect to have such benefit commence as of the first day of any month
after he attains age 55 years but before his normal retirement date. Such
deferred vested benefit shall be computed in accordance with subsection II-4.1,
but shall be reduced as follows: the Base Benefit shall be reduced by 0.4%
thereof for each month by which commencement precedes the participant's normal
retirement date, and the Additional Benefit shall be reduced by 2/3rds of 1%
thereof for each of the first 36 months and by 1/3rd of 1% thereof for each
month in excess of 36 by which commencement precedes the participant's normal
retirement date. A participant who is entitled to a monthly deferred vested
benefit under subsection II-4.1 and who was first hired after January 1, 1991
may elect to have such benefit commence as of the
47
first day of any month after he attains age 55 years but before his normal
retirement date. Such deferred vested benefit shall be computed in accordance
with subsection II-4.1, but shall be reduced to the percentage thereof
determined under the following table:
48
Age at Percentage
Commencement of Benefits
of Benefits Payable
65 100.00%
64 88.83
63 79.11
62 70.62
61 63.19
60 56.67
59 50.92
58 45.84
57 41.34
56 37.34
55 33.78
The foregoing percentages will be adjusted proportionately for fractional parts
of a year. Each election under this subsection II-4.2 must be in writing and
filed with the committee at such time prior to the date earlier payment of the
participant's monthly deferred vested benefit is to begin as the committee shall
determine.
SECTION II-5
Payment of Benefits
49
II-5.1. Form of Payment. Except as otherwise specifically provided, payment
of monthly retirement income and monthly deferred vested benefits shall be made
to a participant as follows:
(a) Life Annuity. A participant who is not legally married on the
date as of which such payments commence, or a participant who
prior to that date elects under subparagraph (c) below not to
receive his monthly retirement income or monthly deferred vested
benefit in the form of a joint and survivor annuity, shall
receive a monthly retirement income or monthly deferred vested
benefit in accordance with the plan payable during his lifetime,
with the last payment to be made for the month in which his death
occurs.
(b) Joint and Survivor Annuity. A participant who is legally married
on the date as of which such payments commence and who had not
made an election in accordance with subparagraph (c) below shall
receive a joint and survivor annuity which is actuarially
equivalent to the amount of monthly retirement income or monthly
deferred vested benefit otherwise payable to him in accordance
with the plan on a life annuity basis. Such joint and survivor
annuity shall consist of a reduced monthly retirement income or
monthly deferred vested benefit continuing during the
participant's lifetime, and if the participant's spouse is living
at the date of the participant's death, payment of one-half of
such reduced monthly retirement income or monthly deferred vested
benefit to such spouse until the spouse's death occurs, with the
last payment to be made for the month of the death of the last to
die of the participant and his spouse.
(c) Election to Waive Joint and Survivor Annuity. A Participant may
make a written election to waive the joint and survivor annuity
at any time during the 90-day period ending on the date payment
of his benefits commences. Such an election will be effective
only if the participant's spouse consents to the election in
writing, and such consent acknowledges the effect of the waiver
and is witnessed by a
50
notary public. Within a reasonable period of time prior to the
date a participant begins to receive benefits under the plan, the
committee shall furnish him with a written explanation of the
terms and conditions of the joint and survivor annuity under
subparagraph (b) above; the participant's right to make, and the
effect of, an election to waive the joint and survivor annuity;
the requirement of spousal consent to such a waiver; and the
participant's right to make, and the effect of, a revocation of
such a waiver. An election under this subparagraph may be revoked
by a participant at any time prior to the date payment of his
benefits commences.
For purposes of this subsection II-5.1, a participant's spouse means the spouse
to whom the participant was married at the date payment of his benefits
commenced. II-5.2. Optional Forms of Payment. In lieu of the form and amount of
retirement income specified in subsection
II-5.1, a participant before his retirement date may elect a retirement
benefit in one of the following forms which is actuarially equivalent to the
form of payment specified in subparagraph II-5.1(a): (a) A retirement benefit
payable for 10 years certain and for the lifetime thereafter of the retired
participant entitled thereto.
(b) In the case of a participant first hired on or before January 1,
1991, a retirement benefit payable during the joint lifetime of
the retired participant and his spouse, with the provision that
upon the death of either the participant or his spouse, payments
equal to 50% of such benefit shall be continued during the
lifetime of the survivor.
(c) A retirement benefit payable during the retired participant's
lifetime, with the provision that after his death, payments equal
to 100% of such benefit shall be continued during the lifetime
51
of the participant's spouse, if such spouse survives him.
(d) In the case of a participant first hired on or before January 1,
1991, a retirement benefit payable during the retired
participant's lifetime; provided that if the participant dies
within 10 years after payments commence, payment of such benefit
will continue to his spouse (or to his beneficiary if his spouse
is not then living) for the balance of such 10-year period; and
provided further that if the participant's spouse is living at
the end of such 10-year period (or the date of the participant's
death, if later), payment of 50% of such benefit will continue to
such spouse until the spouse's death occurs.
(e) In the case of a participant first hired after January l, 1991, a
retirement benefit payable during the retired participant's
lifetime; provided that after his death, payments equal to 100%
of such benefit shall be continued during the lifetime of the
participant's primary beneficiary, if such primary beneficiary
survives him; and provided further that if the participant and
his primary beneficiary both die within 10 years after payments
commence, payment of such benefit will continue to his secondary
beneficiary for the balance of such 10-year period.
(f) In the case of a participant first hired after January 1, 1991, a
retirement benefit payable during the retired participant's
lifetime; provided that: (i) if the participant's beneficiary is
living at the date of the participant's death, payment of 50% or
100% (as the participant has elected) of such benefit will
continue to such beneficiary until the beneficiary's death
occurs; or (ii) if the participant is living at the date of his
beneficiary's death, the participant's benefit will thereafter be
increased to the amount he would have received had his benefits
been payable in the form specified in subparagraph II-5.1(a).
(g) A lump sum payment; provided that the participant met one of the
following requirements at the time of his termination of
employment with the employers:
52
(i) He was first hired on or before January 1, 1991;
(ii) His retirement income payable as a life annuity commencing
at age 65 was less than $150 per month;
(iii) He had both attained age 55 years and completed 20 or more
years of vesting service; or
(iv) He had both attained age 60 years and either (A) completed
10 or more years of vesting service, or (B) was born prior
to January 1, 1930.
(h) A retirement benefit in such other form as shall be established
by the committee which meets the requirements of Section
401(a)(9) of the Internal Revenue Code and is offered to
participants on a nondiscriminatory basis. An election of an
option under this subsection II-5.2 must be in writing, signed by
the participant, and filed with the committee at such time and in
such manner as the committee shall determine; and will be
effective only if the participant's spouse, if any, consents to
an election under subparagraphs (a), (e), (f), (g) or (h) above
in writing, and such consent acknowledges the effect of the
election and is witnessed by a notary public. Payment of an
optional form of retirement income will commence no later than
the date on which the participant's monthly retirement income
would otherwise commence, and shall comply with the requirements
of Section 401(a)(9) of the Internal Revenue Code and the
regulations thereunder.
II-5.3. Facility of Payment. When a person entitled to benefits under the
plan is under legal disability, or, in the committee's opinion, is in any way
incapacitated so as to be unable to manage his financial affairs, the committee
may direct the trustee to pay the benefits to such person's legal
53
representative, or to a relative or friend of such person for such person's
benefit, or the committee may direct the application of such benefits for the
benefit of such person. Any payment made in accordance with the preceding
sentence shall be a full and complete discharge of any liability for such
payment under the plan.
II-5.4. Missing Persons. Neither the committee nor any employer is required
to search for or locate any person entitled to benefits under the plan.
II-5.5. Lump Sum Payment of Accrued Benefits. If the present value of (a) a
participant's entire nonforfeitable accrued benefit under the plan, or (b) the
death benefit payable under subsection II-6.1 or II-6.2 of the plan, does not
exceed $3,500, the trustee shall, in accordance with such rules as the committee
may establish, pay such present value to the participant (or in the event of his
death, to his surviving spouse or beneficiary) in a lump sum upon his
termination of employment. For purposes of this subsection II-5.5, if the
present value of a participant's entire nonforfeitable accrued benefit under the
plan is zero, the participant shall be deemed to have received a distribution of
such nonforfeitable accrued benefit. If the present value of a death benefit
payable under subsection II-6.1 or II-6.2 of the plan exceeds $3,500, the
participant's surviving spouse or beneficiary may elect, in accordance with such
rules as the committee may establish, to have such present value paid in a lump
sum. For purposes of this
54
subsection II-5.5, a present value shall be determined as of the date of
distribution by using the interest rate specified in Supplement A, but not
greater than: (i) the applicable rate (as defined below) if the present value
(using such rate) does not exceed $25,000; or (ii) 120% of the applicable rate
if the present value (using the applicable rate) exceeds $25,000; provided that
a present value determined by using 120% of the applicable rate may never be
less than $25,000. The term "applicable rate" means the interest rate which
would be used (as of the first day of the plan year that contains the date of
distribution) by the Pension Benefit Guaranty Corporation for purposes of
determining the present value of a lump sum distribution on plan termination.
Notwithstanding the provisions of subsection II-7.1, if a participant who
received a lump sum payment under subsection II-5.2 or II-5.5 is subsequently
reemployed by an employer, his years of employment before his termination of
employment shall be disregarded in determining his benefit service under the
plan.
II-5.6. Commencement of Benefits. Payment of a participant's retirement
income must commence by April 1 of the calendar year next following the calendar
year in which the participant attains age 70-1/2 (his "required commencement
date"); provided, however, that the required commencement date of a participant
who is not a five percent owner and who attained age 70-1/2 prior to January 1,
1988 shall be April 1 of the calendar year next following the later of the
calendar year
55
in which he attained age 70-1/2 or the calendar year in which he retires, and
the required commencement date of a participant who attained age 70-1/2 in
calendar year 1988 shall be April 1, 1990.
II-5.7. Optional Direct Rollover of Eligible Rollover Distributions.
(i) This Section II-5.7 applies to distributions made on or after
January 1, 1993. Notwith-standing any provision of the plan to
the contrary that would otherwise limit a distributee's election
under this Section, a distributee may elect, at the time and in
the manner prescribed by the plan administrator, to have any
portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct
rollover.
(ii) For purposes of this Section II-5.7 the following definitions
shall apply:
(A) "Eligible rollover distribution" means any distribution of
all or any portion of the balance to the credit of the
distributee, other than: any distribution that is one of a
series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint
life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten
years or more; any distribution to the extent such
distribution is required under Code section 401(a)(9); and
the portion of any distribution that is not includible in
gross income.
(B) "Eligible retirement plan" means an individual retirement
account described in Code section 408(a), an individual
retirement annuity described in Code section 408(b), an
annuity plan described in Code section 403(a), or a
qualified trust described in Code section 401(a), that
accepts the distributee's eligible rollover distribution.
However, in the
56
case of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(C) "Distributee" means an employee of former employee. In
addition, the employee's or former employee's surviving
spouse and the employee's or former employee's spouse or
former spouse who is the alternate payee under a qualified
domestic relations order, as defined in Code section 414(p),
are distributees with regard to the interest of the spouse
or former spouse.
SECTION II-6
Death Benefits
II-6.1. Spouse's Benefit. A death benefit shall be payable to the spouse of
a participant, subject to and determined in accordance with the following terms
and conditions:
(a) Eligibility. A monthly spouse's benefit shall be payable on
behalf of a participant who, at the date of his death:
(i) was married;
(ii) had either attained age 65 years or was entitled to a
deferred vested benefit under subsection II-4.1; and
(iii) had not begun to receive benefits under the plan.
(b) Amount. The spouse's benefit shall be in an amount
determined as follows:
(i) If, at the date of his death, the participant had
attained age 65 years, the spouse's benefit shall be
equal to the amount of monthly retirement income,
computed pursuant to subsection II-3.2, to which the
participant would have been entitled if the first day
of the month coincident with or next following the date
of his death were his retirement date and his benefits
were payable in the form
57
specified in subparagraph II-5.2(c) of the plan.
(ii) If, at the date of his death, the participant either: (A) was
employed by an employer and had met the early retirement
requirements of subsection II-1.5; or (B) had retired on an early
retirement date after both attaining age 55 years and completing
20 years of vesting service, the spouse's benefit shall be equal
to the amount of monthly retirement income, computed pursuant to
subsection II-3.5, to which the participant would have been
entitled if the first day of the month coincident with or next
following the date of his death were his early retirement date
(or his benefit commencement date in the case of a retired
participant) and his benefits were then payable in the form
specified in subparagraph II-5.2(c) of the plan.
(iii)If, at the date of his death, the participant had not met the
requirements set forth in subparagraphs (b)(i) and (ii) above,
the spouse's benefit shall be equal to 50% of the amount of
monthly retirement income computed pursuant to subsection II-3.5
or monthly deferred vested benefit computed pursuant to
subsection II-4.2, whichever is applicable, to which the
participant would have been entitled if his benefits were payable
in the form specified in subparagraph II-5.1(b) of the plan
commencing on the first day of the month coincident with or next
following his date of death.
(c) Payment. Payment of the spouse's benefit shall commence as of the
first day of the month coincident with or next following the date
of the participant's death or, if the participant's spouse so
elects, the date the participant would have attained age 65
years, and shall end with the month in which the participant's
spouse dies.
58
II-6.2. Death Benefit for Unmarried Participants. A death benefit shall be
payable to the beneficiary of a participant who is not covered by the spouse's
benefit under subsection II-6.1, subject to and determined in accordance with
the following terms and conditions: (a) Eligibility. A monthly death benefit
shall be payable on behalf of a participant who, at the date of his death:
(i) was not married;
(ii) had either attained age 65 years or was entitled to a
deferred vested benefit under subsection II-4.1; and
(iii) had not begun to receive benefits under the plan.
(b) Amount. The death benefit shall be in an amount determined as
follows:
(i) If, at the date of his death, the participant had attained
age 65 years, the death benefit shall be equal to the amount
of monthly retirement income, computed pursuant to
subsection II-3.2, to which the participant would have been
entitled if the first day of the month coincident with or
next following the date of his death were his retirement
date and his benefits were payable in the form specified in
subparagraph II-5.2(a) of the plan.
(ii) If, at the date of his death, the participant either: (A)
was employed by an employer and had met the early retirement
requirements of subsection II-1.5; or (B) had retired on an
early retirement date after both attaining age 55 years and
completing 20 years of vesting service, the death benefit
shall be equal to the amount of monthly retirement income,
computed pursuant to subsection II-3.5, to which the
participant would have been entitled if the first day of the
month coincident
59
with or next following the date of his death were his early
retirement date (or his benefit commencement date in the
case of a retired participant) and his benefits were then
payable in the form specified in subparagraph II-5.2(a) of
the plan.
(iii) If, at the date of his death, the participant had not met
the requirements set forth in subparagraphs (b)(i) and (ii)
above and either: (A) was employed by an employer; or (B)
was first hired on or before January 1, 1991, the death
benefit shall be equal to the amount of monthly retirement
income computed pursuant to subsection II-3.5 or monthly
deferred vested benefit computed pursuant to subsection
II-4.2, whichever is applicable, to which the participant
would have been entitled if his benefits were payable in the
form specified in subparagraph II-5.1(a) of the Plan
commencing on the first day of the month coincident with or
next following his date of death.
(c) Payment. Payment of the death benefit shall commence as of the
first day of the month coincident with or next following the date
of the participant's death or, if the participant's beneficiary
so elects, the date the participant would have attained age 65
years, and shall end: (A) with the 120th monthly payment, in the
case of benefits payable under subparagraphs (b)(i) and (ii)
above; and (B) with the 60th monthly payment, in the case of
benefits payable under subparagraph (b)(iii) above.
II-6.3. Death After Commencement of Benefits. The death benefits, if any,
of a participant who dies after commencement of his benefits under the plan are
those specified under the form in which his benefits were being paid.
60
II-6.4. Designation of Beneficiary. Each participant from time to time, by
signing a form furnished by the committee, may designate any person or persons
(who may be designated concurrently, contingently or successively) to whom any
death benefits payable under subsection II-6.2 are to be distributed. A
beneficiary designation form will be effective only when the form is filed with
the committee while the participant is alive and will cancel all beneficiary
designation forms previously filed with the committee. If a deceased participant
failed to designate a beneficiary as provided above, or if the designated
beneficiary dies before the participant or before complete payment of such death
benefits, the participant's benefits shall be paid as follows:
(a) If the participant was employed by an employer at the date of his
death, to the beneficiary or beneficiaries designated by the
participant under his employer's group term life insurance plan
or, if none, to the beneficiary or beneficiaries designated by
the participant under his employer's tax-qualified defined
contribution plan.
(b) If the participant was not employed by an employer at the date of
his death, or if there are no beneficiaries designated under
subparagraph (a) above, to the legal representative or
representatives of the estate of the participant.
SECTION II-7
Reemployment
II-7.1. Breaks in Employment. If an employee's or participant's employment
with the employers should terminate and such employee or participant is
subsequently reemployed by an
61
employer, then: (a) the vesting service and benefit service to which he was
entitled at the time of termination shall be reinstated; (b) if such
reemployment occurs within twelve months following his termination of
employment, the period between his date of termination and date of reemployment
shall be included in his vesting service and benefit service; and (c) if he had
met the requirements of subsection II-1.2 at his date of termination, he will
become a participant in the plan upon his date of reemployment.
II-7.2. Subsequent Employment. If a former participant who is receiving a
monthly retirement income or monthly deferred vested benefit is reemployed by an
employer on or after his required commencement date, his benefits shall continue
to be paid to him under the plan during his period of reemployment. Except as
provided in the following sentence, if a former participant who is receiving, or
is entitled to receive, a monthly retirement income or monthly deferred vested
benefit is reemployed by an employer prior to his required commencement date, no
benefits shall be payable to him under the plan during his period of
reemployment (except as required by subsection II-5.6), and any benefits payable
under the plan to him thereafter shall be determined in accordance with the plan
as then in effect, shall take into account the benefits to which he was entitled
prior to reemployment, and shall be actuarially adjusted to reflect any benefits
he previously received. If a former participant who is receiving a monthly
retirement income or
62
monthly deferred vested benefit is reemployed by an employer as a part-time
employee, more than 60 days after his earlier termination of employment, and
prior to his required commencement date, his benefits shall continue to be paid
to him under the plan during his period of reemployment; such benefits shall be
recomputed after his period of reemployment ends in accordance with the terms of
the plan as then in effect (taking into account the benefits to which he was
entitled prior to reemployment); and such benefits shall be actuarially adjusted
to reflect the benefits he previously received.
63
ARTICLE III
SECTION III-1
Participation and Retirement Dates
III-1.1. Employee. For purposes of this Article III, the term "employee"
shall mean an employee of an employer or controlled group member who: (a) is
employed in the United States of America; and (b) was both (i) hired on or
before January 1, 1985, and (ii) employed by an employer on January 1, 1986.
III-1.2. Participation. Subject to the conditions and limitations of the
plan, each employee of an employer who is a participant in the plan immediately
preceding January 1, 1988 will continue as a participant on and after that date.
Beginning January 1, 1988, each other employee of an employer will become a
participant in the plan on the first day of the plan year during which he meets
both of the following requirements:
(a) He has attained age 21 years; and
(b) He has completed a year of service (as defined below).
An employee shall be entitled to a "year of service" if he has completed 1,000
hours of service during the 12-month period ending on his employment anniversary
date. An "employment anniversary date" means any anniversary of the employee's
date of hire by an employer or controlled group member.
64
III-1.3. Hour of Service. An "hour of service" means each hour for which an
employee is directly or indirectly paid or entitled to payment by an employer or
controlled group member for the performance of duties and for reasons other than
the performance of duties, including each hour for which back pay, irrespective
of mitigation of damages, has been either awarded or agreed to by an employer or
controlled group member, determined and credited in accordance with Department
of Labor Reg. Sec. 2530.200b-2.
III-1.4. Normal Retirement Date. A participant's "normal retirement date"
will be the first day of the month coincident with or next following the date he
attains age 65 years. A participant's "normal retirement age" is age 60. A
participant's right to his normal retirement benefit shall be nonforfeitable on
and after his normal retirement age.
III-1.5. Early Retirement Date. A participant's "early retirement date"
will be the first day of the month coincident with or next following the date of
his retirement from the employ of all of the employers before his normal
retirement date but after he has either: (a) attained age 60 years; or (b) both
attained age 55 years and completed 20 or more years of vesting service.
III-1.6. Deferred Retirement Date. A participant's "deferred retirement
date" will be the first day of the month coincident with or next following the
date of his retirement
65
from the employ of all of the employers after his normal retirement date.
III-1.7. Retirement Date. A participant's "retirement date" will be one of
the dates described above as of which his retirement from the employ of the
employers occurs.
III-1.8. Leave of Absence. A "leave of absence" for plan purposes means an
absence from work which is not treated by the employers as a termination of
employment or which is required by law to be treated as a leave of absence.
Leaves of absence will be granted under employer rules applied uniformly to all
employees similarly situated.
III-1.9. Controlled Group Member. A "controlled group member" means:
(a) any corporation which is not an employer but is a member of a
controlled group of corporations (within the meaning of Section
1563(a) of the Internal Revenue Code, determined without regard
to Sections 1563(a)(4) and 1563(e)(3)(C) thereof) which contains
an employer; or
(b) any trade or business (whether or not incorporated) which is
under common control with an employer (within the meaning of
Section 414(c) of the Internal Revenue Code).
III-1.10. Employment with Controlled Group Member. If a participant is
transferred from employment with an employer to employment with a controlled
group member then, for the purpose of determining when his retirement date
occurs under this Section III-I or when his date of termination of employment
with the employers occurs under Section III-4, his employment with
66
such controlled group member (or any control led group member to which he is
subsequently transferred) shall be considered as employment with the employers.
SECTION III-2
Bases of Benefits
III-2.1. General. Vesting service shall be applied to determine a
participant's eligibility for benefits under the plan, but not for the purpose
of computing the amount of such benefits. Benefit service shall be applied to
compute the amount of a participant's benefits under the plan. A participant's
retirement income or deferred vested benefit will be based on his benefit
service and his final average earnings, both as determined in accordance with
the provisions hereof.
III-2.2. Vesting Service. A participant's "vesting service" means the total
of his years of service computed in accordance with the following rules: (a) A
participant will be entitled to 1/12th of a year of vesting service for each
calendar month (or portion thereof) during which he is employed by an employer
or controlled group member.
(b) All periods of employment (whether or not continuous) will be
aggregated in computing a participant's vesting service.
(c) A period of leave of absence will be included in determining a
participant's vesting service.
(d) In no event will a participant be entitled to more than 1/12th of
a year of vesting service for any calendar month.
67
III-2.3. Benefit Service. A participant's "benefit service" shall be
determined in accordance with the following rules:
(a) A participant who was a participant in the plan on December 31,
1987 will be entitled to 1/12th of a year of benefit service for
each calendar month (or portion thereof) of benefit service to
which he was entitled under the plan prior to January 1, 1988, in
accordance with the terms of the plan in effect prior to that
date, but including service prior to January 1, 1986 and after
the participant's 65th birthday.
(b) Beginning January 1, 1988, a participant shall be entitled to
1/12th of a year of benefit service for each calendar month (or
portion thereof) after December 31, 1987 during which he is
employed by an employer.
(c) A participant shall not be entitled to more than 28 years of
benefit service. In the case of a participant who has both
accrued a Prior Service Element of his Pre-1978 Benefit and
completed 28 years of benefit service, each additional year of
his benefit service after 1988 shall replace a year of benefit
service for purposes of such Prior Service Element, until such
participant has zero years of benefit service prior to 1978.
(d) Except as required by law or provided by the committee in a
nondiscriminatory manner, any period of unpaid leave of absence
in excess of twelve months will be disregarded in computing a
participant's benefit service.
III-2.4. Earnings. A participant's "earnings" means the total cash
compensation paid to the participant for services rendered to the employers as
an employee, including pre-tax employee deposits under any qualified profit
sharing or stock bonus plan maintained by an employer and, beginning January 1,
1995, compensation deferred under the Dean Witter, Discover & Co.
68
Tax Deferred Equity Participation Plan, the SPS Transaction Services, Inc. Tax
Deferred Equity Participation Plan (the "TDEPPs") or the Dean Witter, Discover &
Co. Capital Accumulation Plan ("CAP") in the year such deferrals are made, but
excluding such items as awards and prizes, lump sum payments for vacations
earned but not taken, supper money, foreign allowances, service allowances,
retainers, special geographic differentials, medical expense reimbursements,
retirement or profit sharing benefits, long-term disability benefit payments,
payments or reimbursements in connection with moving expenses, awards under any
long-term executive compensation plans other than the TDEPPs or CAP, one-time
annual awards for special merit or achievement, performance units or restricted
share awards under any incentive compensation plans, dividends paid on such
restricted shares, the value of stock options or stock appreciation rights and
cash payments received pursuant to stock options, any incremental increases or
earnings under deferred compensation plans including but not limited to the
TDEPPs and CAP, payments or withdrawals from any deferred compensation plan
including but not limited to the TDEPPs and CAP, amounts paid after death,
disability or retirement, employer-paid premiums on any insurance plan, employer
contributions under any profit sharing, profit participation or stock plans, or
any other similar types of compensation which may be specifically excluded by
action of the committee.
69
Effective January 1, 1989, compensation for any year in excess of $200,000
(or such greater amount as may be determined by the Commissioner of Internal
Revenue for that year) shall be disregarded in determining the amount of a
participant's earnings; provided, that the limitations of this sentence shall
not reduce the benefit accrued as of December 31, 1988, determined under the
terms of the plan as then in effect as though the participant had terminated
employment on that date.
In addition to other applicable limitations set forth in the plan, and
notwithstanding any other provision of the plan to the contrary, for plan years
beginning on or after January 1, 1994, the annual earnings of each participant
taken into account under the plan shall not exceed the OBRA `93 annual
compensation limit. The OBRA `93 compensation limit is $150,000, as adjusted by
the Commissioner of Internal Revenue for increases in the cost-of-living in
accordance with section 401(a)(17)(D) of the Code. The cost-of-living adjustment
in effect for a calendar year applies to any period not exceeding 12 months over
which compensation is determined (the determination period) beginning in such
calendar year. If a determination period consists of fewer than 12 months, the
OBRA `93 annual compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination period and the
denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference in this
plan to the limitation under section 401(a)(17)
70
of the Code shall mean the OBRA `93 annual compensation limit set forth in this
provision.
If earnings for any prior determination period are taken into account in
determining a participant's benefits accruing in the current plan year, the
earnings for that prior determination period are subject to the OBRA `93 annual
compensation limit in effect for that prior determination period. For this
purpose, for determination periods beginning before the first day of the first
plan year beginning on or after January 1, 1994, the OBRA `93 annual
compensation limit is $150,000.
Unless otherwise provided under the plan, each section 401(a)(17)
employee's accrued benefit under this plan will be the greater of the accrued
benefit determined for the employee under (a) or (b) below:
(a) the employee's accrued benefit determined with respect to the benefit
formula applicable for the plan year beginning on or after January 1, 1994,
as applied to the employee's total years of service taken into account
under the Plan for the purposes of benefit accruals, or
(b) the sum of:
(i) the employee's accrued benefit as of the last day of the last plan year
beginning before January 1, 1994, frozen in accordance with section
1.401(a)(4)-13 of the regulations, and
71
(ii) the employee's accrued benefit determined under the benefit formula
applicable for the plan year beginning on or after Janaury 1, 1994, as
applied to the employee's years of service credited to the employee for
plan years beginning on or after January 1, 1994, for purposes of benefit
accruals.
A section 401(a)(17) employee means a participant whose current accrued
benefit as of a date on or after the first day of the first plan year beginning
on or after January 1, 1994, is based on earnings for a year beginning prior to
the first day of the first plan year beginning on or after January 1, 1994, that
exceeded $150,000.
III-2.5. Final Average Earnings. The "final average earnings" of a
participant shall be the monthly average of the earnings paid to him during the
5 consecutive calendar years for which his earnings were highest within the last
10 consecutive calendar years immediately preceding his retirement date or
earlier termination of employment (or the monthly average of earnings for the
entire period of his employment if such period is less than 5 calendar years).
Such average shall be computed by dividing the total of the participant's
earnings for such 5 calendar year period (or shorter total period of employment
if applicable) by the number of months within that period for which he had
earnings.
72
SECTION III-3
Amount of Retirement Income
III-3.1. Normal Retirement. Subject to the provisions of subsections
III-3.8 and III-3.9, a participant who retires on a normal retirement date will
be entitled to a monthly retirement income, commencing on the participant's
normal retirement date and payable during his lifetime, in an amount equal to
the sum of:
(a) a Post-1988 Benefit equal to the sum of:
(i) a Base Benefit equal to 1.55% of the participant's final
average earnings (as defined in subsection III-2.5)
multiplied by his number of years of benefit service after
December 31, 1988; and
(ii) an Additional Benefit equal to 0.65% of the participant's
excess earnings (as defined in subsection III-3.5)
multiplied by his number of years of benefit service after
December 31 1988;
(b) a 1978-1988 Benefit equal to the sum of:
(i) the Future Service Element of the participant's monthly
retirement income determined under the terms of the Allstate
Retirement Plan as in effect on December 31, 1988, based on
his final average earnings at that date (calculated as
provided in subsection III-3.3) and his benefit service from
January 1, 1978 through December 31, 1988;
(ii) 18% of the amount determined under subparagraph (b)(i)
above; and
(iii) the product of:
(A) the amount determined under subparagraph (b)(i) above,
multiplied by
73
(B) a fraction, the numerator of which is the excess, if
any, of the participant's final average earnings at his
retirement date over his final average earnings at
December 31, 1988 (calculated as provided in subsection
III-3.3), and the denominator of which is the
participant's final average earnings at December 31,
1988 (calculated as provided in subsection III-3.3);
plus
(c) a Pre-1978 Benefit equal to the sum of:
(i) A Prior Service Element equal to the sum of:
(A) the Prior Service Element of the participant's monthly
retirement income determined under the terms of the
Allstate Retirement Plan as in effect on December 31,
1988, based on his average participating compensation
(as defined in the Allstate Retirement Plan) at that
date (calculated as provided in subsection III-3.3) and
his benefit service prior to January 1, 1978;
(B) 18% of the amount determined under subparagraph
(c)(i)(A) above; and
(C) an amount equal to 2-1/8% of the excess, if any, of the
participant's final average earnings over his final
average earnings at December 31, 1988 (calculated as
provided in subsection III-3.3), multiplied by his
number of full and fractional years of benefit service
prior to January 1, 1978 (up to 20 years); provided,
however, that in no event shall a participant who is a
"highly compensated employee" within the meaning of
Section 414(q) of the
74
Internal Revenue Code be entitled to the portion of the
Prior Service Element calculated under this
subparagraph (c)(1)(C); and
(ii) a Past Service Element equal to 118% of (A) 0.2% for each
full year of benefit service through December 31, 1978 (not
limited to 28 years), times (B) the participant's earnings
in 1978 up to a maximum of $15,000.
The amount of monthly retirement income determined under this subsection
III-3.1 will be subject to reduction if the participant is to receive a
joint and survivor annuity under subsection III-5.1. In no event shall the
amount of a participant's monthly retirement income be less than an amount
equal to 118% of his accrued benefit as of December 31, 1988 (determined
under the terms of the plan as then in effect as though the participant
had terminated employment on that date); and in no event shall a
participant's 1978-1988 Benefit be less than an amount equal to 118% of
the participant's Future Service Element at December 31, 1988 calculated
under the provisions of Section 3.4 of the Allstate Retirement Plan as in
effect on that date.
III-3.2. Deferred Retirement. A participant who retires on a deferred
retirement date will be entitled to a monthly retirement income, commencing on
the earlier of his deferred retirement date or his required commencement date
(as defined in subsection III-5.6), and payable in accordance with
75
subsection III-5.1. The amount of his monthly retirement income will be computed
in accordance with subsection III-3.1, but shall be actuarially increased to
reflect the aggregate amount of monthly retirement income payments which were
not paid to such participant for those calendar months (if any) beginning on or
after his normal retirement date during which he completed less than 40 hours of
service. If payment of a participant's monthly retirement income begins prior to
retirement on his required commencement date, then: (a) the amount of any
additional retirement income that otherwise would be accrued by the participant
after that date shall be reduced (but not below zero) by the actuarial
equivalent of the retirement income payments made to the participant after that
date; and (b) the amount of retirement income payable to the participant shall
be adjusted, as of each subsequent January 1, to reflect the additional
benefits, if any, accrued by the participant during the immediately preceding
calendar year. In no event shall the amount of monthly retirement income payable
to a participant under this subsection III-3.2 be less than the monthly
retirement income the participant would have received had he retired on his
normal retirement date.
III-3.3. Early Retirement - Deferred Payment. A participant who retires on an
early retirement date will be entitled to a monthly retirement income,
commencing on his normal retirement date and payable in accordance with
subsectionEIII-5.1. Such retirement income will be computed in accordance with
76
subsection III-3.1 (as in effect as of the participant's early retirement date),
but based on: (i) his number of years of benefit service at his early retirement
date; and (ii) the final average earnings he would have had at the earlier of:
(A) the last day of the month in which his 60th birthday occurs, or (B) December
31, 1999, if he had continued in the employ of the employers to that date at the
same level of earnings he had in the calendar year preceding his early
retirement date. The projection of final average earnings described in the
preceding sentence shall not serve to increase the participant's number of years
of benefit service; but any years of projection which occur after December 31,
1988 shall be considered as Post-1988 Benefit years for purposes of apportioning
a participant's retirement income among the Post-1988 Benefit, 1978-1988 Benefit
and Pre-1978 Benefit. In no event shall the amount of a participant's monthly
retirement income computed under this subsection III-3.3 be less than an amount
equal to 118% of the participant's early retirement benefit calculated under the
terms of the plan as in effect on December 31, 1988 as though the participant
had retired on that date.
III-3.4. Early Retirement - Immediate Payment. In lieu of receiving the
monthly retirement income otherwise payable under subsection III-3.3 commencing
on his normal retirement date, a participant who retires on an early retirement
date may elect a monthly retirement income commencing on his early retirement
date, or on the first day of any calendar month
77
thereafter before his normal retirement date. Such monthly retirement income
will be computed in accordance with subsection III-3.3, but shall be reduced as
follows: (a) the participant's Pre-1978 Benefit, 1978-1988 Benefit and Base
Benefit shall be reduced by 0.4% thereof for each month by which commencement
precedes the first day of the month coincident with or next following the date
the participant would have attained age 60 years; and, (b) the participant's
Additional Benefit shall be reduced by 2/3rds of 1% thereof for each of the
first 36 months and by 1/3rd of 1% for each month in excess of 36 by which
commencement precedes the participant's normal retirement date. In no event
shall the monthly retirement income payable to a participant who retires on an
early retirement date be less than an amount equal to 118% of the monthly
retirement income that would have been payable under the terms of the plan in
effect on December 31, 1988 if the participant had retired and commenced payment
on that date.
III-3.5. Excess Earnings. A participant's "excess earnings" means the
excess, if any, of his final average earnings over his covered compensation (as
defined below). A participant's "covered compensation" is the monthly average of
the Social Security taxable wage bases in effect for each of the 35 calendar
years ending with the year the participant attains (or would attain) Social
Security retirement age, assuming that the Social Security taxable wage base for
future years is the
78
same as the Social Security taxable wage base in effect for the current year.
III-3.6. Benefit Limitations. Notwithstanding any other provisions of the
plan, a participant's monthly retirement income or monthly deferred vested
benefit as of the end of any plan year may not exceed an amount which is
equivalent to a retirement income or deferred vested benefit payable for life
only (not taking into account that portion of any joint and survivor annuity
which constitutes a qualified joint and survivor annuity under the Internal
Revenue Code), equal to $7,500 per month (or such greater amount as may be
determined by the Commissioner of Internal Revenue for calendar years ending
after December 31, 1987 which begin with or within that plan year). If payment
of a participant's monthly retirement income or deferred vested benefit begins
before he attains the social security retirement age, such limitation shall be
reduced so that it is equivalent to a monthly benefit of $7,500 commencing at
the social security retirement age. If payment of a participant's monthly
retirement income begins after he attains the social security retirement age,
such limitation shall be increased so that it is equivalent to a monthly benefit
of $7,500 commencing at the social security retirement age. For purposes of
adjusting amounts under this subsection III-3.6, the interest rate assumption
shall be the greater (or the lesser, in the case of benefits beginning after the
social security retirement age) of 5% or the rate specified in Supplement A for
determining
79
actuarial equivalence. In the case of a participant with less than 10 years of
participation in the plan, the foregoing limitation shall be multiplied by a
fraction, the numerator of which shall be the participant's number of full and
fractional years of participation in the plan (but not less than 1) and the
denominator of which shall be 10. The preceding sentence shall be applied
separately with respect to each change in the benefit structure of the plan. In
no event shall a participant's monthly retirement income as of the end of any
plan year exceed 100% of his average compensation for his high three years. A
participant's "average compensation for his high three years" means his average
monthly compensation during that period of three consecutive calendar years of
his service with the employers (or during his actual number of years of service
if less than three such years) in which his aggregate compensation from the
employers was the greatest. For purposes of this subsection III-3.6, a
participant's "compensation" means his total cash compensation for services
rendered to the employers as an employee, determined in accordance with Section
415(c)(3) of the Internal Revenue Code and the regulations thereunder. The
provisions of this subsection III-3.6 shall not reduce the monthly retirement
income or deferred vested benefit of any participant below such participant's
accrued benefit as of December 31, 1986 (determined under the terms of the plan
as in effect on May 5, 1986 as though the participant had terminated employment
on December 31, 1986).
80
III-3.7. Combined Benefit Limitations. If a participant in this plan also
is a participant in a defined contribution plan maintained by an employer, the
aggregate benefits payable to, or on account of, him under both plans will be
determined in a manner consistent with Section 415 of the Internal Revenue Code
and Section 1106 of the Tax Reform Act of 1986. Accordingly, there will be
determined with respect to the participant a defined benefit plan fraction and a
defined contribution plan fraction in accordance with said Sections 415 and
1106. The benefits provided for the participant under this plan will be adjusted
to the extent necessary so that the sum of such fractions determined with
respect to the participant does not exceed 1.0.
III-3.8. Special Rule for Participants Who Terminate Employment After
December 31, 1999. Notwithstanding any other provision of the plan, the monthly
retirement income or deferred vested benefit payable under the plan to (or on
account of) a participant in this Article III who retires or otherwise
terminates employment with the employers after December 31, 1999 shall be
determined as follows:
(a) First the amount of retirement income that would be payable to (or on
account of) such participant under Article III of the plan will be
calculated, using all of the participant's earnings and benefit
service.
(b) Next, the amount determined under subparagraphE(a) above will be
multiplied by a fraction, the numerator of which is the portion of the
participant's benefit service which occurred prior to January 1, 2000
(not limited to 28 years) and the denominator of which is
81
the participant's total period of benefit service (not limited to 28
years).
(c) Next, the amount of retirement income that would be payable to (or on
account of) such participant under Article II of the plan will be
calculated, using all of the participant's earnings and benefit
service as determined under Article II.
(d) Next, the amount determined under subparagraph (c) above will be
multiplied by a fraction, the numerator of which is the portion of the
participant's benefit service which occurred after December 31, 1999
(not limited to 28 years) and the denominator of which is the
participant's total period of benefit service (not limited to 28
years).
(e) Finally, the amount of retirement income payable under the plan to (or
on account of) such participant shall be equal to the sum of the
amounts determined under subparagraphsE(b) and (d) above.
III-3.9. Minimum Benefit for Former Sears Participants. In no event shall
the monthly retirement income or deferred vested benefit payable under this
Article III of the plan to (or on account of) a participant who was an active
participant in the Sears plan on December 31, 1985 (a "Sears participant") be
less than the amount determined as follows:
(a) First, the amount of retirement income that would be payable to (or
on account of) such Sears participant under this plan and the Sears Pension
Plan (the "Sears plan") will be calculated using the Sears participant's
period of continuous service with all employers and controlled group
members (disregarding any period his employer was not an employer or
controlled group member), rather than his benefit service (or such other
denominated service which is used in calculating benefits under the Sears
plan), and using his compensation from all employers and controlled
82
group members in determining his final average earnings;
(b) Next, the respective amounts calculated for this plan ---- and the
Sears plan under subparagraph (a) next above will be multiplied by a
fraction, the numerator of which shall be that portion of the Sears
participant's continuous service which consisted of employment covered
by this plan, or the Sears plan, as the case may be, and the
denominator of which shall be his total period of continuous service;
and
(c) Finally, the amount of retirement income payable under this plan to
(or on account of) a Sears participant shall not be less than the
excess of:
(i) the sum of the amounts calculated under subparagraph (b) next
above; minus
(ii) the amount of retirement income that is payable to (or on account
of) such Sears participant under the Sears plan.
If a Sears participant dies while employed by an employer, death benefits will
be payable in accordance with the provisions of Section III-6 of the plan. The
amount of such death benefit will be based upon the amount of retirement income
that would have been payable to the deceased Sears participant in accordance
with the provisions of this subsection III-3.9. For purposes of this subsection
III-3.9, the amount of retirement income payable to a Sears participant under
the Sears plan shall be calculated without regard to any exclusion of the
portion of a prior service element based upon earnings in years after 1988,
provided, however, that the amount of such post-1988 earnings taken into account
for purposes of this sentence shall not exceed the OBRA
83
`93 annual compensation limit, as defined in subsection III-2.4, applied to all
years after 1988 with the OBRA `93 annual compensation limit in effect for 1995
deemed to have been in effect for the years 1989 through 1993, inclusive.
III-3.10. Minimum Normal or Deferred Retirement Benefit. In no event shall
a participant's normal or deferred retirement benefit be less than the largest
early retirement benefit the participant could have received under subsection
III-3.4 if he had retired on an early retirement date.
84
SECTION III-4
Termination of Employment Before Retirement
III-4.1. Monthly Deferred Vested Benefit. A participant whose employment
with all of the employers is terminated for any reason other than his death
before he qualified for retirement on an early retirement date, but after he has
completed five or more years of vesting service, will be entitled to a monthly
deferred vested benefit commencing on his normal retirement date and payable in
accordance with subsectionEIII-5.1.
III-4.2. Amount of Deferred Vested Benefit. A participant's deferred vested
benefit will be an amount computed in accordance with subsection III-3.1 (as in
effect as of the date the participant's employment with the employers
terminated), and will be based on the participant's final average earnings at
the date the participant's employment with the employers terminated.
III-4.3. Early Commencement of Benefit. A participant entitled to a monthly
deferred vested benefit under subparagraph III-4.1 who has completed 20 or more
years of vesting service may elect to have such benefit commence as of the first
day of any month after he attains age 55 years but before his normal retirement
date. A participant entitled to a monthly deferred vested benefit under
subsection III-4.1 who is or becomes disabled after he has attained age 50 years
may elect to
85
have such benefit commence as of the first day of any month before his normal
retirement date. Any other participant entitled to a monthly deferred vested
benefit under subsection III-4.1 may elect to have such benefit commence as of
the first day of any month after he attains age 60 years but before his normal
retirement date. Such deferred vested benefit shall be computed in accordance
with subsection III-4.2, but reduced by the applicable percentages set forth in
subsection III-3.4 as though it were payment of early retirement income. Each
election under this subsection III-4.3 must be in writing, must be filed with
the committee at such time prior to the date earlier payment of the
participant's monthly deferred vested benefit is to begin as the committee shall
determine and, in the case of a participant described in the second sentence of
this subsection, must be approved by the committee.
86
SECTION III-5
Payment of Benefits
III-5.1. Form of Payment. Except as otherwise specifically provided,
payment of monthly retirement income and monthly deferred vested benefits shall
be made to a participant as follows:
(a) Life Annuity. A participant who is not legally married on the
date as of which such payments commence, or a participant who
prior to that date elects under subparagraph (c) below not to
receive his monthly retirement income or monthly deferred vested
benefit in the form of a joint and survivor annuity, shall
receive a monthly retirement income or monthly deferred vested
benefit in accordance with the plan payable during his lifetime,
with the last payment to be made for the month in which his death
occurs.
(b) Joint and Survivor Annuity. A participant who is legally married
on the date as of which such payments commence and who had not
made an election in accordance with subparagraphE(c) below shall
receive a joint and survivor annuity which is actuarially
equivalent to the amount of monthly retirement income or monthly
deferred vested benefit otherwise payable to him in accordance
with the plan on a life annuity basis. Such joint and survivor
annuity shall consist of a reduced monthly retirement income or
monthly deferred vested benefit continuing during the
participant's lifetime, and if the participant's spouse is living
at the date of the participant's death, payment of one-half of
such reduced monthly retirement income or monthly deferred vested
benefit to such spouse until the spouse's death occurs, with the
last payment to be made for the month of the death of the last to
die of the participant and his spouse.
(c) Election to Waive Joint and Survivor Annuity. A participant may
make a written election to waive the joint and survivor annuity
at any time during the 90-day period ending on the date payment
of his benefits commences. Such
87
an election will be effective only if the participant's spouse
consents to the election in writing, and such consent
acknowledges the effect of the waiver and is witnessed by a
notary public. Within a reasonable period of time prior to the
date a participant begins to receive benefits under the plan, the
committee shall furnish him with a written explanation of the
terms and conditions of the joint and survivor annuity under
subparagraph (b) above; the participant's right to make, and the
effect of, an election to waive the joint and survivor annuity;
the requirement of spousal consent to such a waiver; and the
participant's right to make, and the effect of, a revocation of
such a waiver. An election under this subparagraph may be revoked
by a participant at any time prior to the date payment of his
benefits commences.
For purposes of this subsection III-5.1, a participant's spouse means
the spouse to whom the participant was married at the date payment of his
benefits commenced.
III-5.2. Optional Forms of Payment. In lieu of the form and amount of
retirement income specified in subsection III-5.1, a participant before his
retirement date may elect a retirement benefit in one of the following forms
which is actuarially equivalent to the form of payment specified in subparagraph
111-5.1(b):
(a) A retirement benefit payable for 10 years certain and for the
lifetime thereafter of the retired participant entitled thereto.
(b) A retirement benefit payable during the joint lifetime of the
retired participant and his spouse, with the provision that upon
the death of either the participant or his spouse, payments equal
to 50% of such benefit shall be continued during the lifetime of
the survivor.
(c) A retirement benefit payable during the retired participant's
lifetime, with the provision that after his death, payments equal
to 100% of such
88
benefit shall be continued during the lifetime of the
participant's spouse, if such spouse survives him.
(d) A retirement benefit payable during the retired participant's
lifetime; provided that if the participant dies within 10 years
after payments commence, payment of such benefit will continue to
his spouse (or to his beneficiary if his spouse is not then
living) for the balance of such 10-year period; and provided
further that if the participant's spouse is living at the end of
such 10-year period (or the date of the participant's death, if
later), payment of 50% of such benefit will continue to such
spouse until the spouse's death occurs.
(e) A lump sum payment.
(f) A retirement benefit in such other form as shall be established
by the committee which meets the requirements of Section
401(a)(9) of the Internal Revenue Code and is offered to
participants on a non-discriminatory basis.
An election of an option under this subsection III-5.2 must be in writing,
signed by the participant, and filed with the committee at such time and in
such manner as the committee shall determine; and will be effective only if
the participant's spouse, if any, consents to an election under
subparagraphs (a), (e) or (f) above in writing, and such consent
acknowledges the effect of the election and is witnessed by a notary
public. Payment of an optional form of retirement income will commence no
later than the date on which the participant's monthly retirement income
would otherwise commence, and shall comply with the requirements of Section
401(a)(9) of the Internal Revenue Code and the regulations thereunder.
89
III-5.3. Facility of Payment. When a person entitled to benefits under the
plan is under legal disability, or, in the committee's opinion, is in any way
incapacitated so as to be unable to manage his financial affairs, the committee
may direct the trustee to pay the benefits to such person's legal
representative, or to a relative or friend of such person for such person's
benefit, or the committee may direct the application of such benefits for the
benefit of such person. Any payment made in accordance with the preceding
sentence shall be a full and complete discharge of any liability for such
payment under the plan.
III-5.4. Missing Persons. Neither the committee nor any employer is
required to search for or locate any person entitled to benefits under the plan.
III-5.5. Lump Sum Payment of Accrued Benefits. If the present value of a
participant's entire nonforfeitable accrued benefit under the plan does not
exceed $3,500, the trustee shall, in accordance with such rules as the committee
may establish, pay such present value to the participant in a lump sum upon his
termination of employment. For purposes of this subsection III-5.5, if the
present value of a participant's entire nonforfeitable accrued benefit under the
plan is zero, the participant shall be deemed to have received a distribution of
such nonforfeitable accrued benefit. A present value shall be determined as of
the date of distribution by using the interest rate specified in Supplement A,
but not greater than the interest
90
rate which would be used (as of the first day of the plan year that contains the
date of distribution) by the Pension Benefit Guaranty Corporation for purposes
of determining the present value of a lump sum distribution on plan termination.
Notwithstanding the provisions of subsection III-7.1, if a participant who
received a lump sum payment under subsection III-5.2 or III-5.5 is subsequently
reemployed by an employer, his years of employment before his termination of
employment shall be disregarded in determining his benefit service under the
plan.
III-5.6. Commencement of Benefits. Payment of a participant's retirement
income must commence by April 1 of the calendar year next following the calendar
year in which the participant attains age 70-1/2 (his "required commencement
date"); provided, however, that the required commencement date of a participant
who is not a five percent owner and who attained age 70-1/2 prior to January 1,
1988 shall be April 1 of the calendar year next following the later of the
calendar year in which he attained age 70-1/2 or the calendar year in which he
retires, and the required commencement date of a participant who attained age
70-1/2 in calendar year 1988 shall be April 1, 1990.
III-5.7. Optional Direct Rollover of Eligible Rollover Distributions.
(i) This Section III-5.7 applies to distributions made on or after January
1, 1993. Notwith-standing any provision of the plan to the contrary that would
otherwise limit a distributee's election under this Section, a distributee may
elect, at the time and in the manner prescribed by the plan administrator, to
have any portion of an eligible rollover
91
distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
(ii) For purposes of this Section III-5.7 the following
definitions shall apply:
(A) "Eligible rollover distribution" means any distribution
of all or any portion of the balance to the credit of
the distributee, other than: any distribution that is
one of a series of substantially equal periodic
payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or the
joint lives (or joint life expectancies) of the
distributee and the distributee's designated
beneficiary, or for a specified period of ten years or
more; any distribution to the extent such distribution
is required under Code section 401(a)(9); and the
portion of any distribution that is not includible in
gross income.
(B) "Eligible retirement plan" means an individual
retirement account described in Code section 408(a), an
individual retirement annuity described in Code section
408(b), an annuity plan described in Code section
403(a), or a qualified trust described in Code section
401(a), that accepts the distributee's eligible
rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse,
an eligible retirement plan is an individual retirement
account or individual retirement annuity.
(C) "Distributee" means an employee of former employee. In
addition, the employee's or former employee's surviving
spouse and the employee's or former employee's spouse
or former spouse who is the alternate payee under a
qualified domestic relations order, as defined in Code
section 414(p), are distributees with regard to the
92
interest of the spouse or former spouse.
SECTION III-6
Death Benefits
III-6.1. Death Before Commencement of Benefits. A death benefit shall be
payable, as provided below, on behalf of a participant who dies:
(a) while employed by an employer and after his normal retirement date;
(b) while employed by an employer and before his normal retirement date;
(c) after retirement on a retirement date but before commencement of his
benefits under the plan; or
(d) in the case of a terminated participant entitled to receive a monthly
deferred vested benefit under subsection III-4.1, after termination of
employment but before commencement of his benefits under the plan.
The amount of death benefit payable under subparagraph (a) above shall be
the present value of the monthly retirement income, computed pursuant to
subsection III-3.2, accrued for the participant under the plan at the date of
his death. The amount of death benefit under subparagraphs (b) and (d)Eabove
shall be the present value of the monthly deferred vested benefit, computed
pursuant to subsection III-4.2, accrued for the participant under the plan at
the date of his death. The death benefit under subparagraph (c) above shall be
the amount of monthly retirement income payable to the participant's spouse
under subparagraph 111-5.1(b) had the participant's retirement
93
income commenced at the date of his death. Subject to the following
provisions of this subsection III-6.1, the death benefits under subparagraphs
(a), (b) and (d) above shall be paid to the participant's beneficiary in a lump
sum as soon as practicable after the date of the participant's death. The death
benefit under subparagraph (c) above shall be paid to the participant's
surviving spouse during her lifetime. If the amount of the death benefit under
subparagraph (a), (b) or (d) above exceeds $3,500 and payment is being made to
the participant's spouse, such death benefit shall be paid in an actuarially
equivalent monthly amount during the spouse's lifetime, unless such spouse
consents in writing to a lump sum payment.
III-6.2. Death After Commencement of Benefits. The death benefits, if any,
of a participant who dies after commencement of his benefits under the plan are
those specified under the form in which his benefits were being paid.
III-6.3. Designation of Beneficiary. Each participant from time to time, by
signing a form furnished by the committee, may designate any person or persons
(who may be designated concurrently, contingently or successively) to whom any
death benefits payable under subsectionEIII-6.1 are to be distributed. A
beneficiary designation form will be effective only when the form is filed with
the committee while the participant is alive and will cancel all beneficiary
designation forms previously filed with the committee. If a participant
94
designates someone other than (or in addition to) his spouse as his primary
beneficiary, his spouse must consent in writing to the designation. Such a
consent will be effective only if it acknowledges the effect of the beneficiary
designation, is witnessed by a notary public, and is made on or after the first
day of the plan year in which the participant attains age 35 years (or the date
of his termination of employment, if earlier). If a participant designates
someone other than (or in addition to) his spouse as primary beneficiary, and
his spouse does not (or cannot) consent and is living at his death, the
participant's beneficiary designation shall be ineffective, and his death
benefit shall be distributed to his spouse. Each participant shall be provided
with a written explanation of the foregoing provisions of this subsection
III-6.3 within the three years prior to the plan year he attains age 35 years.
If a deceased participant failed to designate a beneficiary as provided above,
or if the designated beneficiary dies before the participant, the participant's
benefits shall be paid to the participant's spouse or, if none, as follows:
(a) If the participant was employed by an employer at the date of his
death, to the beneficiary or beneficiaries designated by the
participant under his employer's group term life insurance plan or, if
none, to the beneficiary or beneficiaries designated by the
participant under his employer's tax-qualified defined contribution
plan.
(b) If the participant was not employed by an employer at the date of his
death, or if there are no beneficiaries designated under subparagraph
(a) above, to the legal representative or representatives of the
estate of the participant.
95
SECTION III-7
Reemployment
III-7.1. Breaks in Employment. If an employee's or participant's employment
with the employers should terminate and such employee or participant is
subsequently reemployed by an employer, then: (a) the vesting service and
benefit service to which he was entitled at the time of termination shall be
reinstated; (b) if such reemployment occurs within twelve months following his
termination of employment, the period between his date of termination and date
of reemployment shall be included in his vesting service and benefit service;
and (c) if he had met the requirements of subsection III-1.2 at his date of
termination, he will become a participant in the plan upon his date of
reemployment.
III-7.2. Subsequent Employment. If a former participant who is receiving a
monthly retirement income or monthly deferred vested benefit is reemployed by an
employer on or after his required commencement date, his benefits shall continue
to be paid to him under the plan during his period of reemployment. Except as
provided in the following sentence, if a former participant who is receiving, or
is entitled to receive, a monthly retirement income or monthly deferred vested
benefit is reemployed by an employer prior to his required commencement date, no
benefits shall be payable to him under the plan during his period of
reemployment (except as required by subsection III-
96
5.6), and any benefits payable under the plan to him thereafter shall be
determined in accordance with the plan as then in effect, shall take into
account the benefits to which he was entitled prior to reemployment, and shall
be actuarially adjusted to reflect any benefits he previously received. If a
former participant who is receiving a monthly retirement income or monthly
deferred vested benefit is reemployed by an employer as a part-time employee,
more than 60 days after his earlier termination of employment, and prior to his
required commencement date; his benefits shall continue to be paid to him under
the plan during his period of reemployment; such benefits shall be recomputed
after his period of reemployment ends in accordance with the terms of the plan
as then in effect (taking into account the benefits to which he was entitled
prior to reemployment); and such benefits shall be actuarially adjusted to
reflect the benefits he previously received.
97
ARTICLE IV
Execution of Plan
To record the amendment and restatement of the plan to read as set forth
herein, the company has caused its authorized officer to affix the corporate
name and seal hereto, effective as of April 10, 1996.
NOVUS CREDIT SERVICES INC.
By: ____________________________
98
SUPPLEMENT A
Actuarial Assumptions
Article II
Percentage to be applied to amounts initially calculated under subsection II-3.1
of the plan for the purpose of determining the amount of the forms of payment
under subsections II-5.1, II-5.2 and II-5.5 for a participant first hired on or
before January 1, 1991:
Plan Percentage of Monthly
Form of Payment Section Retirement Income
Joint and Survivor II-5.1(b) 95%
Life and 10-Year Certain II-5.2(a) 95%
Joint and 50% Survivor 11-5.2(b) 100%
100% Joint and Survivor 11-5.2(c) 85%
Ten Year Certain and
Joint and Contingent 11-5.2(d) 93%
Lump Sum II-5.2(g) With respect to the portion of the
II-5.5 benefit payable under Article II
accrued prior to January 1, 1991,
the percentage determined in
accordance with the UP-1984
Mortality Table set back one year
and the PBGC immediate annuity rate
in effect on the January 1
preceding the date of distribution.
With respect to the portion of the
benefit payable under Article II
accrued after December 31, 1990,
the percentage determined in
accordance with the UP-1984
Mortality Table set back one year
and 110% of the PBGC immediate
annuity rate in effect on the
January 1 preceding the date of
distribution.
Actuarial factors to be applied to amounts initially calculated under subsection
II-3.1 of the plan for the purpose of determining the amount of the forms of
payment under subsections II-5.1, II-5.2 and II-5.5 for a participant first
hired after January 1, 1991:
Forms of payment under subsections II-5.1 and II-5.2 (other than lump sum):
A-1
1. Rate of interest: 8%
2. Mortality: UP-1984 Mortality Table
Lump sum payments under subsections II-5.2(g) and II-5.5:
1. Rate of interest: 110% of PBGC immediate annuity rate in effect on the
January 1 preceding the date of distribution.
2. Mortality: UP-1984 Mortality Table set back one year.
The amount of any other optional form that may be authorized by the committee
under subsection II-5.2(h) shall be computed using the UP-1984 Mortality Table
at 8% Interest.
Article III
Percentage to be applied to amounts initially calculated under the plan for the
purpose of determining the amount of the forms of payment under subsections
III-5.1, III-5.2, III-5.5 and III-6.1:
Plan Percentage of Monthly
Form of Payment Section Retirement Income
Joint and Survivor III-5.1(b) 87.5%
Life and 10-Year Certain III-5.2(a) 93.0%
Joint and 50% Survivor III-5.2(b) 92.5%
100% Joint and Survivor III-5.2(c) In accordance with TableE1
attached
Ten Year Certain and III-5.2(d) In accordance with TableE2
Joint and Contingent attached
Lump Sum III-5.2(e) With respect to the portion of the
III-5.5 benefit payable under Article III
III-6.1 accrued prior to January 1, 1991, the
percentage determined in
accordance with the terms of the
plan as in effect on December 31,
1990. With respect to the portion
of the benefit payable under
Article III accrued after December
31, 1990, the percentage
determined in accordance with the
UP-1984 Mortality Table set back
one year and 110% of the PBGC
immediate annuity rate in effect
on the January 1
A-2
preceding the
date of distribution.
The amount of any other optional form that may be authorized by the committee
under subsection III-5.2(f) shall be computed using the 1971 Group Annuity Table
at 6% Interest.
In no event shall the amount of any lump sum calculated under this Supplement A
be less than the amount determined by using an interest rate equal to: (i)Ethe
applicable rate (as defined below) if the lump sum amount (using such rate) does
not exceed $25,000; or (ii) 120% of the applicable rate if the lump sum amount
(using the applicable rate) exceeds $25,000; provided that a lump sum amount
determined by using 120% of the applicable rate may never be less than $25,000.
The term "applicable rate" means the interest rate which would be used (as of
the first day of the plan year that contains the date of distribution) by the
Pension Benefit Guaranty Corporation for purposes of determining the present
value of a lump sum distribution on plan termination.
If the actuarial assumptions in this Supplement A are amended, the actuarial
equivalent of a participant's accrued benefit shall be determined in accordance
with the actuarial assumptions as amended; provided, however, the actuarial
equivalent of a participant's accrued benefit on and after the date of such
amendment shall not be less than the actuarial equivalent of his accrued benefit
determined as of the date immediately before such amendment in accordance with
the actuarial assumptions then in use.
A-3
SUPPLEMENT B
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 1954. 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
plan year if, as of the last day of the preceding plan year (the "determination
date"), the present value of the cumulative accrued benefits of participants who
are key employees (as defined in Section 416(i)(1) of the Internal Revenue Code)
exceeds 60 percent of the present value of the cumulative accrued benefits of
all participants. In making the foregoing determination, the following special
rules shall apply:
(a) The present value of a participant's accrued benefit 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 accrued benefit of a participant who was previously a key
employee, but who is no longer a key employee, shall be
disregarded.
(c) The accrued benefit of a beneficiary of a participant shall be
considered an accrued benefit of the participant.
(d) The accrued benefit of a participant who did not perform any
services for an employer during the 5-year period ending on the
determination date shall be disregarded.
(e) The accrued benefit of a participant who is not a key employee
shall be determined under the method used for all plans of the
employers or, if there is no such method, as if such benefit
accrued no faster than the slowest accrual rate permitted under
Section 411(b)(1)(C) of the Internal Revenue Code.
B-1
B-3. Key Employee. In general, a "key employee" is an employee who, at any
time during the 5-year period ending on the determination date, is:
(a) an officer of an employer receiving annual compensation greater
than 50% of the limitation in effect under Section 415(b)(1)(A) of the
Internal Revenue Code; provided, that for purposes of this
subparagraph (a), no more than 50 employees of the employers (or if
lesser, the greater of 3 employees or 10 percent of the employees)
shall be treated as officers;
(b) one of the ten employees receiving annual compensation -from the
employers of more than the limitation in effect under Section 415(c)
(1) (A) of the Internal Revenue Code and owning both more than a 1/2
percent interest and 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 the employers of more than $150,000.
B-4. Minimum Vesting. For any plan year in which the plan is a top-heavy
plan, a participant's vested percentage in his accrued benefit shall not be less
than the percentage determined under the following table:
Years of Vested
Credited Service Percentage
---------------- ----------
Less than 2 0
2 20
3 40
4 60
5 80
6 or more 100
If the foregoing provisions of this paragraph B-4 become effective, and the plan
subsequently ceases to be a top-heavy plan, each participant who has then
completed three or more years of credited service may elect to continue to have
the vested percentage of his accrued benefit determined under the provisions of
this paragraph B-4.
B-5. Minimum Benefit. A participant's monthly retirement income or deferred
vested benefit, commencing at his normal retirement date and payable as a life
annuity,
B-2
shall not be less than an amount equal to 2 percent of his average compensation
(as defined below), multiplied by the number of years (not to exceed 10) of his
top-heavy service (as defined below). A participant's "average compensation"
means the monthly average of his compensation for the 5 consecutive years for
which his compensation was highest, disregarding any compensation paid after the
last year in which the plan is a top-heavy plan. A Participant shall be entitled
to a year of "top heavy service" for each year of his credited service after
December 31, 1983 during which the plan is a top-heavy plan and he is a
participant thereunder.
B-6. 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 4.1 of the plan.
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 this plan for purposes of determining whether
the plan is a top-heavy plan.
B-8. No Duplication of Benefits. If the employers maintain more than one
plan, the minimum benefit otherwise required under paragraph B-5 above may be
reduced in accordance with regulations of the Secretary of the Treasury to
prevent inappropriate duplication of minimum benefits or contributions.
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 benefit plan
fraction and defined contribution plan fraction under subsections II-3.8 and
III-37 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.
B-3
SUPPLEMENT C
Special Service Rules
C-1. Employees of Greenwood Trust Company. Notwithstanding the provisions
of subparagraph III-2.3(a) of the plan, if an employee of Greenwood Trust
Company is covered under Article III of the plan, his employment after December
31, 1984 and prior to January 1, 1986 shall be included in determining his
benefit service under the plan.
C-2. Employees of Sears Savings Bank. Notwithstanding the provisions of
subparagraph III-2.2(a) of the plan, when a participant has completed 10 or more
years of vesting service, his last continuous period of employment with a
predecessor to Sears Savings Bank shall be included in determining his vesting
service under the plan. For purposes of this paragraph C-2, a "predecessor to
Sears Savings Bank" means a corporation or other entity designated by the
committee, the stock, assets or business of which was acquired by Sears Savings
Bank prior to JanuaryE1, 1986.
C-3. Service with Sears. Solely for purposes of vesting, the Period of
service of any person who was employed by a member of the Sears affiliated group
immediately following the spin-off and who had an accrued benefit under the plan
as of the spin-off shall include, to the extent consistent with the requirements
of the Internal Revenue Code and ERISA, the lesser of: the number of years of
such employee's continuous service with the Sears affiliated group after the
spin-off and the number of years necessary to fully vest such person in an
accrued benefit under the plan. For purposes of the preceding sentence, the term
"Sears affiliated group" shall mean Sears, Roebuck and Co. ("Sears") and any
corporation, trade or business required to be aggregated with Sears under Code
section 414(b), (c), (m) or (o), and the term "spin-off" shall mean the
distribution by Sears of all of the shares of Dean Witter, Discover & Co. owned
by Sears to shareholders of Sears.
C-4. Service with NationsSecurities. If, on or after June 7, 1993, a
participant transfers employment to NationsSecurities, A Dean Witter/NationsBank
Company, a North Carolina partnership ("NationsSecurities"), then for purposes
of Sections II-1.5, II-2.2, III-1.5 and III-2.2 of
C-1
the plan, such transferred participant's period of service shall include his
period of service with NationsSecurities.
C-2
SUPPLEMENT D
Special Rules for Employees of SPS Transaction
Services, Inc. and its Subsidiaries
D-1. Minimum Benefit. Subject to the provisions of Code section 415 (as
herein reflected) and other applicable provisions, the monthly retirement income
or deferred vested benefit otherwise payable under the plan to (or on account
of) an SPS participant (as defined below), commencing at his normal retirement
date and payable during his lifetime or in such other actuarial equivalent form
provided for under the plan, shall not be less than a minimum benefit (the
"minimum benefit") in the amount of $20 multiplied by such SPS participant's
years of benefit service. An "SPS participant" means a participant in the plan
who, at any time on or after February 25, 1992, is an employee of SPS
Transaction Services, Inc. ("SPS") or any employer which is a member of a
controlled group which includes SPS (within the meaning of Section 414(b) or (c)
of the Internal Revenue Code).
D-2. Extension of Benefits, Rights and Features. Effective October 1, 1995,
an SPS participant hired prior to January 1, 1986 who is a non-highly
compensated employee in 1994, 1995 or 1996 and whose retirement benefits are
determined under Article II of the plan (or a beneficiary of such SPS
participant, as applicable), shall have such SPS participant's benefits accrued
up to the earlier of such SPS participant's retirement date or December 31,
1996, calculated as provided in the plan with the following modifications:
(a) such SPS participant's early retirement date under subsection II-1.5,
shall be the first day of the month coincident with or next following the date
of such SPS participant's retirement from the employ of all employers before
such SPS participant's normal retirement date but after such SPS participant has
attained either (i) both age 55 years and completed 20 or more years of vesting
service or (ii) age 60 years (at which time such SPS participant shall be fully
vested).
(b) such SPS participant's Base Benefit calculated under subsection
II-3.5(a)(i) shall be reduced by 0.4% thereof for each month by which
commencement precedes the first day of the month coincident with or next
following the date such SPS participant would have attained age 60 years.
D-1
(c) if such SPS participant is entitled to a monthly deferred vested
benefit under subsection II-4.2, the Base Benefit portion of such SPS
participant's retirement benefit shall be reduced by 0.4% thereof for each month
by which commencement precedes the first day of the month coincident with or
next following the date of such SPS participant's attaining age 60 years.
(d) if such SPS participant is entitled to a monthly deferred vested
benefit under subsection II-4.1, and such SPS participant is or becomes disabled
after attaining age 50 years, such SPS participant may elect the early
commencement of such monthly deferred vested benefit calculated under Subsection
II-4.2, as modified by subparagraph D-2(c) above.
(e) a death benefit shall be payable as provided below on behalf of such
SPS participant who dies:
(1) while employed by an employer and after such SPS participant's normal
retirement date;
(2) while employed by an employer and before such SPS participant's normal
retirement date;
(3) after retirement on a retirement date but before commencement of such
SPS participant's benefits under the plan; or,
(4) after such SPS participant has terminated employment and is entitled to
receive a monthly deferred vested benefit under subsection II-4.1, but before
commencement of such benefits under the plan.
The amount of death benefit payable under subparagraph (1) above shall be
the present value of the monthly retirement income computed pursuant to
subsection II-3.2, accrued for such SPS participant under the plan at the date
of such SPS participant's death. The amount of death benefit under subparagraphs
(2) and (4) above shall be the present value of the monthly deferred vested
benefit, computed pursuant to subsection II-4.2, accrued for such SPS
participant under the plan at the date of such SPS participant's death. The
death benefit under subparagraph (3) above shall be the amount of monthly
retirement income payable to such SPS participant's spouse under subparagraph
II-5.1(b) had such SPS participant's retirement income commenced at the date of
such SPS participant's death. Subject to the following provisions of this
paragraph D-2(e), the death benefits under subparagraphs (1), (2) and (4) above,
shall be paid to such SPS participant's beneficiary in a lump sum as soon as
practicable after the
D-2
date of such SPS participant's death. The death benefit under subparagraph (3)
above shall be paid to such SPS participant's surviving spouse during such
spouse's lifetime. If the amount of the death benefit under subparagraphs (1),
(2) or (4) above exceeds $3,500 and payment is being made to such SPS
participant's spouse, such death benefit shall be paid in an actuarially
equivalent monthly amount during such spouse's lifetime, unless such spouse
consents in writing to a lump sum payment.
D-3. Frozen Benefits, Rights and Features. An SPS participant whose
benefits are determined under Article III of the plan and who, either on October
1, 1995 or, if later, on such SPS participant's retirement date, is a highly
compensated employee, shall have the right to receive payments under the plan at
a time, in an amount or in the form determined under one or more of the
benefits, rights or features described in this paragraph D-3 only with respect
to benefits accrued by such SPS participant up to and including the earlier of
such SPS participant's retirement date or September 30, 1995:
(a) early retirement benefits payable at an early retirement date
determined under subparagraph III-1.5(a);
(b) such SPS participant's early retirement benefit determined under
subsection III-3.4, shall be calculated by reducing the Base Benefit from age
60, provided however, that with respect to benefits accrued after September 30,
1995, such SPS participants early retirement benefit shall be determined under
subsection III-3.4, by reducing the Base Benefit from age 63.
(c) if such SPS participant is eligible for a monthly deferred vested
benefit under subsection III-4.1, the early commencement of such benefit under
subsection III-4.3 shall be paid in an amount calculated by reducing the Base
Benefit from age 60, provided, however, that with respect to benefits accrued
after September 30, 1995, such SPS participant's monthly deferred vested benefit
commenced under subsection III-4.3 shall be in an amount calculated by reducing
the Base Benefit from such Participant's normal retirement date.
(d) if such SPS participant is eligible for a monthly deferred vested
benefit under subection III-4.1, the early commencement of such benefit in the
event such SPS participant is or becomes disabled after attaining age 50 years.
(e) death benefits payable under subsection III-6.1 in the form of a
lump sum upon the death of such SPS
D-3
participant, provided, however, that with respect to benefits accrued after
September 30, 1995, death benefits payable with respect to such SPS participant
under subsection III-6.1, shall be paid to a spouse in a form provided under
subsection II-6.1, or to a nonspouse beneficiary in a form provided under
subsection II-6.2.
D-4
SUPPLEMENT E
Special Rules for Former Sears Savings Bank Employees
E-1. Sale to American Savings. Each participant who was employed at one of
the sixteen branches of Sears Savings Bank sold to American Savings on August
15, 1986 shall be granted an additional five years of vesting service under the
plan.
E-2. Sale to Citicorp Savings. Each participant whose employment was
terminated solely as a result of the sale of fifty branches of Sears Savings
Bank to Citicorp Savings on June 26, 1987 shall be fully vested under the plan,
and shall be eligible for early retirement if he has both attained age 50Eyears
and completed 10Eyears of vesting service.
E-3. Closure of Sears Financial Centers. Each participant whose employment
was terminated solely as a result of the closure of all Sears Financial Centers
by December 31, 1987 shall be vested under the plan after the completion of five
years of vesting service, and shall be eligible for early retirement if he has
both attained age 50 years and completed 10 years of vesting service.
E-4. Downsizing of Sears Savings Bank. Each participant whose employment
was terminated solely as a result of the reorganization of Sears Savings Bank
announced on September 1, 1988 shall be vested under the plan after the
completion of five years of vesting service, and shall be eligible for early
retirement if he has both attained age 50 years and completed 10 years of
vesting service."
E-1
SUPPLEMENT F
Special Rules for Sears Mortgage Corporation and Sears Savings Bank
Employees
F-1. Purpose. The purpose of this Supplement F is to set forth special
rules relating to employees of Sears Mortgage Corporation ("SMC") and Sears
Savings Bank ("SSB").
F-2. Participation. Subject to the conditions and limitations of the plan,
each employee of SMC and SSB who is a participant in the plan on January 1, 1991
will continue as a participant on and after that date. Employees of SMC and SSB
who were first hired by an employer on or before January 1, 1991, or who
directly transferred to SMC or SSB on or before January 1, 1991, are eligible to
participate in the plan. Employees who previously participated in a defined
benefit pension plan maintained by a controlled group member or a member of the
Sears affiliated group, as defined on Supplement C, and who are hired by SMC or
SSB after January 1, 1991 but before January 2, 1993, or who directly
transferred to SMC or SSB after January 1, 1991, also are eligible to
participate in the plan. No other employee of SMC or SSB may become a plan
participant. Each employee of SMC or SSB who is a participant in the plan (other
than those who are participants in Article III thereof) is referred to below as
a "Supplement F Participant."
F-3. Benefits. The Base Benefit of a SupplementEF Participant who became a
plan participant after December 31, 1988 shall be equal to 0.85% of his final
average earnings multiplied by his number of years of benefit service. The Base
Benefit of a Supplement F Participant who became a plan participant before
January 1, 1989 shall be equal to the sum of:
(a) 1.0% of his final average earnings multiplied by his number of years of
benefit service before January 1, 1989; plus
(b) the sum of:
(i) 1.0% of his final average earnings multiplied by his number of years of
benefit service after December 31, 1988 (not to exceed the lesser of eleven
years or his number of years of benefit service before January 1, 1989); plus
(ii) 0.85% of his final average earnings multiplied by the excess, if any,
of his number of years of benefit service after December 31, 1988 over the
number of years of
F-1
benefit service taken into account under subparagraph (i) next above.
F-4. Use of Terms. All terms and provisions of the plan shall apply to this
Supplement F, except that where the terms and provisions of the plan and this
Supplement F conflict, the terms and provisions of this Supplement F shall
govern.
F-5. Cessation of Participation. No additional accruals under the plan will
occur on behalf of SMC and SSB employees and former employers, and no new
participants who are SMC or SSB employees will be admitted to the plan, after
the earlier to occur of the spinoff (as defined in Supplement C), the sale by
any member of the Sears affiliated group (as defined in Supplement C) of SMC or
SSB, as the case may be, or December 31, 1994.
F-2