SUPPLEMENTAL RETIREMENT PROGRAM FOR MANAGEMENT PROFIT-SHARING ASSOCIATES OF J. C. PENNEY CORPORATION, INC.

Exhibit 10(ii)(ai)

 

SUPPLEMENTAL RETIREMENT PROGRAM FOR

 

MANAGEMENT PROFIT-SHARING ASSOCIATES OF

 

J. C. PENNEY CORPORATION, INC.

 

ADOPTED EFFECTIVE JANUARY 1, 1978

 

AMENDED AND RESTATED EFFECTIVE AUGUST 1, 1995

 

AS AMENDED THROUGH FEBRUARY 16, 2004

 

This document is the amended and restated Plan adopted by the Benefit Plans Review Committee (BPRC) on July 11, 1995 with an effective date of August 1, 1995, as amended on the following dates:

 

April 1, 1996 by Director of Personnel;

April 10, 1996 by Board of Directors;

April 10, 1996 by Benefit Plans Review Committee;

June 28, 1996 by Personnel Committee;

 

July 9, 1997 by Benefit Plans Review Committee;

December 30, 1997 by Director of Personnel;

 

March 18, 1998 by Director of Personnel;

 

January 13, 1999 by Board of Directors;

July 14, 1999 by Board of Directors;

 

March 7, 2000 by Benefit Plans Review Committee;

 

February 6, 2001 by Human Resources Committee;

March 22, 2001 by Human Resources and Compensation Committee;

June 18, 2001 by Director of Business Planning and Support;

 

January 27, 2002 by Chief Human Resources and Administrative Officer; and

June 1, 2002 by Director of Human Resources.

 

December 10, 2003 by Board of Directors

 

February 16, 2004 by Human Resources Committee

 

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SUPPLEMENTAL RETIREMENT PROGRAM FOR

MANAGEMENT PROFIT-SHARING ASSOCIATES OF

J. C. PENNEY CORPORATION, INC.

 

Adopted Effective January 1, 1978

 

Amended and Restated Effective August 1, 1995

 

As Amended Through December 10, 2003

 

TABLE OF CONTENTS

 

 

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EXHIBIT 10(ii)(ai)

 

SUPPLEMENTAL RETIREMENT PROGRAM FOR

MANAGEMENT PROFIT-SHARING ASSOCIATES OF

J. C. PENNEY CORPORATION, INC.

 

Adopted Effective January 1, 1978

 

Amended and Restated Effective August 1, 1995

 

As Amended Through December 10, 2003

 

ARTICLE I. INTRODUCTION

 

The Supplemental Retirement Program for Management Profit-Sharing Associates of J. C. Penney Corporation, Inc. is a plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated associates. This document amends and restates the Plan, originally adopted effective January 1, 1978, effective August 1, 1995.

 

With respect to any Eligible Management Associate who terminated employment prior to August 1, 1995, benefits payable to such Eligible Management Associates are determined pursuant to the terms and conditions of the Supplemental Retirement Program for Management Profit-Sharing Associates of J. C. Penney Company, Inc. in effect as of July 31, 1995.

 

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ARTICLE II. DEFINITIONS

 

For the purpose of this Plan the following terms shall have the following meanings:

 

Associate : Any person who is employed by a Controlled Group Member if the relationship between a Controlled Group Member and such person would constitute the legal relationship of employer and employee, including an officer who may or may not be a director, but excluding a director serving only in that capacity, and excluding any employee of a Controlled Group Member substantially all the operations of which are outside the United States unless United States Social Security contributions are made on behalf of such employee.

 

Average Final Compensation : The average annual Compensation of an Eligible Management Associate in respect of the three calendar years of his highest Compensation determined by taking into account (a) the Compensation attributable to the Eligible Management Associate’s Credited Service in the calendar year in which occurs such Early Retirement Date, Traditional Retirement Date, or Delayed Retirement Date, as the case may be, and (b) the Compensation during either of the following, whichever is appropriate:

 

(i)	the 9 full calendar years of Final Service immediately preceding the calendar year in which occurs the Eligible Management Associate’s Early Retirement Date, Traditional Retirement Date, or Delayed Retirement Date, as the case may be; or

 

(ii)

if such Eligible Management Associate has less than 9 full calendar years of Final Service, the entire number of full calendar years of such Final Service immediately preceding the calendar year in which occurs the Eligible Management Associate’s Early Retirement Date, Traditional Retirement Date, or Delayed Retirement Date, as the case may be.

 

If such Eligible Management Associate has less than three full calendar years of Final Service prior to the calendar year in which occurs his Early Retirement Date, Traditional Retirement Date, or Delayed Retirement Date, Average Final Compensation shall mean the aggregate Compensation earned with respect to the Eligible Management Associate’s Final Service immediately preceding the calendar year in which occurs his Early Retirement Date, Traditional Retirement Date or Delayed Retirement Date, divided by the total number of full months of such Final Service, multiplied by 12.

 

Benefit Commencement Date : The date upon which payment of a Pension Plan Participant’s retirement benefit is scheduled to begin pursuant to the terms of the Pension Plan.

 

Benefit Restoration Plan : Prior to January 27, 2002, the J. C. Penney Company, Inc. Benefit Restoration Plan, as amended from time to time, and on and

 

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after January 27, 2002, The J. C. Penney Corporation, Inc. Benefit Restoration Plan, as amended from time to time.

 

Benefits Administration Committee : The committee appointed by the Human Resources Committee and authorized by Article VI to administer the Plan.

 

Board of Directors : Board of Directors of the Parent Company.

 

Code : The Internal Revenue Code of 1986, as amended from time to time. References to “regulations” are to regulations published by the Secretary of the Treasury under applicable provisions of the Code, unless otherwise expressly indicated.

 

Company : Prior to January 27, 2002, J. C. Penney Company, Inc., a Delaware corporation, and on and after January 27, 2002, J. C. Penney Corporation, Inc., a Delaware corporation. The term “Company” will also include any successor employer, if the successor employer expressly agrees in writing as of the effective date of succession to continue the Plan.

 

Company Account(s) : The account(s) of that name and any successor account(s) and/or fund(s) established and maintained pursuant to the Savings and Profit-Sharing Retirement Plan prior to January 1, 1999, the Savings, Profit-Sharing and Stock Ownership Plan, and the Mirror Savings Plans in which are reflected all Company contributions allocated to an Eligible Management Associate together with all assets attributable thereto.

 

Compensation : The total cash remuneration (including Profit Incentive Compensation, and whether received or deferred (i) Performance Unit Plan payments and (ii) EVA Performance Plan payments) paid to an Associate by the Company or a Participating Employer, or, for the purpose of determining Average Final Compensation only, by a Controlled Group Member, that qualifies as wages as defined in Code Section 3401(a), determined without regard to any reduction for workers’ compensation and state disability insurance reimbursements, and all other compensation payments for which the Company or a Participating Employer or other Controlled Group Member is required to furnish the Associate a written statement under Code Sections 6041(d), 6051(a)(3) and 6052, reduced by the following items:

 

(a) all expatriate and foreign service allowances, including without limitation cost-of-living adjustments;

 

(b) tax gross-up payments;

 

(c) noncash prizes;

 

(d) income attributable to employer-provided group term life insurance;

 

(e) income recognized with respect to stock options and stock awards;

 

(f) tax equalizations payments;

 

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(g) taxable and nontaxable relocation payments;

 

(h) payments of deferred amounts under the EVA Performance Plan or any other nonqualified plan of deferred compensation;

 

(i) special payments made to an Associate under the Performance Unit Plan or the EVA Performance Plan in the year of retirement or disability;

 

(j) severance pay, outplacement pay, and/or critical pay;

 

(k) third-party disability payments (State of New York);

 

(l) home sale bonus payments;

 

(m) mortgage interest assistance payments;

 

(n) senior management perquisites, tax preparation fees, and allowances for travel from Alaska and Hawaii;

 

(o) legal settlements constituting back pay or other wage payments;

 

(p) non-associate travel reimbursements;

 

(q) clothing allowance payments; and

 

(r) payments made pursuant to a non-compete agreement.

 

In addition, Compensation includes any contributions made by a Participating Employer or other Controlled Group Member on behalf of an Associate pursuant to a deferral election under any employee benefit plan containing a cash or deferred arrangement under Code Section 401(k), and any amounts that would have been received as cash but for an election to receive benefits under a cafeteria plan meeting the requirements of Code Section 125, and amounts deferred by an Associate under the Deferred Compensation Plan and the Mirror Savings Plans.

 

Each annual payment to an Associate (i) from the Performance Unit Plan, (ii) from the EVA Performance Plan, and (iii) of Profit Incentive Compensation shall be deemed to have been made in the calendar year immediately preceding the year in which payment was actually made.

 

For all purposes under the Plan, the Benefits Administration Committee, in its discretion, may exclude additional items from “Compensation” under the Plan.

 

An Associate who is in the service of the Armed Forces of the United States during any period in which his reemployment rights are guaranteed by law will be considered to have received the same rate of Compensation during his absence he was receiving immediately prior to his absence, provided he returns to employment with a Controlled Group Member within the time such rights are guaranteed.

 

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Controlled Group : The Company and all other corporations, trades and businesses, the employees of which, together with employees of the Company, are required by the first sentence of subsection (b)    , by subsection (c)    , by subsection (m)    , or by subsection (o) of Code section 414 to be treated as if they were employed by a single employer.

 

Controlled Group Member : Each corporation or unincorporated trade or business that is or was a member of a Controlled Group, but only during such period as it is or was such a member.

 

Credited Service : The years of credited service, up to a total maximum of 40 years, credited to an Eligible Management Associate (a) under the terms of the Pension Plan, determined without regard to any yearly limitation imposed by the terms of the Pension Plan (excluding any periods of Disability Service), and (b) under Paragraph (1) of Article VIII.

 

Deferred Compensation Plan : J. C. Penney Company, Inc. 1995 Deferred Compensation Plan, as amended from time to time, as in existence prior to January 1, 1999 before being merged into the J. C. Penney Company, Inc. Mirror Savings Plan II effective January 1, 1999.

 

Deferred Performance Unit Plan : J. C. Penney Company, Inc. Deferred Compensation Plan originally effective February 1, 1985 and amended to prohibit further deferrals effective January 26, 1991.

 

Delayed Retirement Date : The first day of the month immediately following the date on which an Eligible Management Associate Separates from Service after having attained Traditional Retirement Age.

 

Disability Service : The years of disability service credited to an Eligible Management Associate under the terms of the Pension Plan.

 

Early Retirement Age : The first date on which an Eligible Management Associate has attained age 55 and has completed at least 15 years of Service.

 

Early Retirement Date : The first day of the month immediately following the date on which an Eligible Management Associate Separates from Service after having attained Early Retirement Age but before attainment of such Eligible Management Associate’s Traditional Retirement Age.

 

Eligible Management Associate : An Associate (excluding an Associate who retired from (i) a Participating Employer before January 1, 1978, (ii) J. C. Penney Life Insurance Company or J. C. Penney Casualty Insurance Company on or after January 1, 1990, or (iii) Thrift Drug, Inc. on or after April 1, 1991) classified under the Company’s personnel policy as a management associate and who is participating in a Profit Incentive Compensation program or other profit sharing compensation program (other than the Savings and Profit-Sharing Retirement Plan or the Savings, Profit-Sharing and Stock Ownership Plan) of a Participating Employer on his Traditional Retirement Date or Early Retirement Date. Notwithstanding the preceding sentence, the Benefits

 

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Administration Committee reserves the right to waive, in its discretion, one or more of the requirements of this paragraph on a case by case basis for any Associate age 55 who was participating in a Profit Incentive Compensation program on December 31, 1995.

 

ERISA : Employee Retirement Income Security Act of 1974, as amended from time to time.

 

Estimated Social Security Benefit : (1) For purposes of the benefit provided in Paragraph (3) of Article IV the monthly benefit the Eligible Management Associate would receive under the Social Security Act at age 62 based on the following assumptions:

 

(i)

All compensation earned (a) prior to the later of 1951 or the year the Eligible Management Associate attains age 22 or (b) in the year in which the Eligible Management Associate Separates from Service if such separation occurs prior to the last day of the calendar year will be disregarded;

 

(ii)

Earnings for the years prior to the Eligible Management Associate’s employment with the Participating Employer are in the same proportion to the Taxable Wage Base in effect for the prior years as that which the first full year of earnings bore to the Taxable Wage Base in existence at that time;

 

(iii)

Earnings are averaged over a number of full calendar years as determined by the following:

 

 

If the Eligible Management Associate’s total calendar years of earnings determined under clauses (i) and (ii) above exceed the number of full years of earnings that are to be averaged based on the year of such Eligible Management Associate’s birth, one or more of the Eligible Management Associate’s lowest years of earnings will be disregarded until his total years of earnings equals the number of full years of earnings that are to be averaged based on the year of such Eligible Management Associate’s birth.

 

(iv)

Social Security indexing factors used are those actually used by the Social Security Administration in determining the Eligible Management Associate’s Social Security benefit, and if those factors are not available, the latest published factors will be used.

 

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(2)	For Eligible Management Associates who reach Traditional Retirement Age on or prior to August 1, 2000, for purposes of clause (iii) of Subparagraph (b) of Paragraph (1) of Article IV the lesser of the benefit determined under (A) or (B) below:

 

(A) The product of (a) multiplied by (b) with (a) being the monthly benefit the Eligible Management Associate would receive under the Social Security Act at age 62, or if retirement is later than age 62, the benefit payable at actual retirement, based on the following assumptions:

 

(i)

The benefit is based solely on the compensation earned during the Eligible Management Associate’s calendar years of service and disregarding the Eligible Management Associate’s last calendar year of service if less than a full year and disregarding completely all other years;

 

(ii)

Earnings are averaged over the number of years of actual credited service, as defined in the Pension Plan;

 

(iii)

Social Security indexing factors used are those actually used by the Social Security Administration in determining the Eligible Management Associate’s social security benefit, and if those factors are not available, the latest published factors will be used;

 

and

(b) being a fraction, not exceeding one, the numerator of which is the Eligible Management Associate’s years of credited service, as defined by the Pension Plan and the denominator of which is 30.

 

(B) The monthly benefit the Eligible Management Associate would receive under the Social Security Act at age 62, or if retirement is later than age 62, the benefit payable at actual retirement, based on the following assumptions:

 

(i)

All compensation earned (a) prior to the later of 1951 or the year the Eligible Management Associate attains age 22 or (b) in the year in which the Eligible Management Associate Separates from Service if such separation occurs prior to the last day of the calendar year will be disregarded;

 

(ii)

The Eligible Management Associate earned no compensation for calendar years before the Eligible Management Associate was employed by the Participating Employer, which years will be included in the calculation as years of zero earnings;

 

(iii)

Earnings are averaged over a number of full calendar years as determined by the following:

 

 

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If the Eligible Management Associate’s total calendar years of earnings determined under clauses (i) and (ii) above exceed the number of full years of earnings that are to be averaged based on year of such Eligible Management Associate’s birth, one or more of the Eligible Management Associate’s lowest years of earnings will be disregarded until his total years of earnings equals the number of full years of earnings that are to be averaged based on the year of such Eligible Management Associate’s birth.

 

(iv)

Social Security indexing factors used are those actually used by the Social Security Administration in determining the Eligible Management Associate’s Social Security benefit, and, if those factors are not available, the latest published factors will be used.

 

For Eligible Management Associates who reach Traditional Retirement Age after August 1, 2000, for purposes of clause (iii) of Subparagraph (b) of Paragraph (1) of Article IV, Estimated Social Security Benefit shall be determined under (B) above.

 

EVA Performance Plan : The J. C. Penney Company, Inc. 1998 EVA Performance Plan, as amended from time to time.

 

Final Service : An Eligible Management Associate’s years of Credited Service plus, if he becomes an Associate of a Controlled Group member that is not a Participating Employer, the years of Service with such Controlled Group Member that are credited to the Associate after he ceases earning Credited Service. Calendar years that include a period of Disability Service will not be included in the determination of Final Service. Calendar years of Service or of Credited Service that are interrupted by a Separation from Service or by one or more years in which the Eligible Management Associate did not receive Compensation for the entire year will be considered to be consecutive for purposes of determining consecutive years of Final Service.

 

Human Resources and Compensation Committee : The Human Resources and Compensation Committee of the Board of Directors of the Parent Company.

 

Human Resources Committee : The Human Resources Committee of the Management Committee of the Company.

 

Interest Income Account(s) : The account(s) of that name and any successor account(s) and/or fund(s) established and maintained pursuant to the Savings and Profit-Sharing Retirement Plan and/or the Savings, Profit-Sharing and Stock Ownership Plan.

 

Matched Deposits : An Eligible Management Associate’s deposits, not in excess of 6% of his compensation (as defined in the Savings and Profit-Sharing Retirement Plan, the Savings, Profit-Sharing and Stock Ownership Plan and the Mirror

 

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Savings Plans), made pursuant to the Savings and Profit-Sharing Retirement Plan, the Savings, Profit-Sharing and Stock Ownership Plan, and the Mirror Savings Plans.

 

Mirror Savings Plans : Prior to January 27, 2002, the J. C. Penney Company, Inc. Mirror Savings Plan I, the J. C. Penney Company, Inc. Mirror Savings Plan II, and the J. C. Penney Company, Inc. Mirror Savings Plan III, all as amended from time to time, and on and after January 27, 2002, the J. C. Penney Corporation, Inc. Mirror Savings Plan I, the J. C. Penney Corporation, Inc. Mirror Savings Plan II, and the J. C. Penney Corporation, Inc. Mirror Savings Plan III, all as amended from time to time.

 

Parent Company: J. C. Penney Company, Inc., a Delaware corporation, and any successor corporation.

 

Participating Employer : The Company and any other Controlled Group Member or organizational unit of the Company or of a Controlled Group Member which is designated as a Participating Employer under the Plan by the Human Resources Committee; provided, however, that if such designation would substantially increase the cost of the Plan to the Company, such designation shall be subject to the sole discretion of the Board of Directors.

 

Penney Stock (Company) Account : The account(s) of that name and any successor account(s) and/or fund(s) established and maintained pursuant to the Savings and Profit-Sharing Retirement Plan and/or the Savings, Profit-Sharing and Stock Ownership Plan.

 

Pension Plan : Prior to January 27, 2002, the J. C. Penney Company, Inc. Pension Plan, as amended from time to time, and on and after January 27, 2002, the J. C. Penney Corporation, Inc. Pension Plan, as amended from time to time.

 

Pension Plan Participant : An Associate or former Associate who is treated as a participant under the Pension Plan.

 

Performance Unit Plan : J. C. Penney Company, Inc. 1984 Performance Unit Plan, as amended from time to time, as in existence prior to February 1, 1998 when terminated effective January 31, 1998.

 

Plan : Prior to January 27, 2002, the Supplemental Retirement Program for Management Profit-Sharing Associates of J. C. Penney Company, Inc., as amended from time to time, and on and after January 27, 2002, the Supplemental Retirement Program for Management Profit-Sharing Associates of J. C. Penney Corporation, Inc. as amended from time to time.

 

Profit Incentive Compensation : The share of store profits to which an Associate is entitled as a store manager or as a member of a store’s management staff; the management incentive compensation to which a management Associate is entitled; the regional or district incentive compensation to which a regional or district office Associate is entitled; and, if so determined by the Human Resources Committee, any other compensation based on profits (excluding any Company contributions to and benefits under the Savings and Profit-Sharing Retirement Plan and Savings,

 

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Profit—Sharing and Stock Ownership Plan) to which an Associate of a Participating Employer, or, for the purpose of determining Average Final Compensation only, a Controlled Group Member who is not a Participating Employer, is entitled.

 

Savings and Profit-Sharing Retirement Plan : J. C. Penney Company, Inc. Savings and Profit-Sharing Retirement Plan, as amended from time to time, as in existence prior to January 1, 1999 before being merged into the Savings, Profit-Sharing and Stock Ownership Plan effective January 1, 1999.

 

Savings, Profit-Sharing and Stock Ownership Plan : Prior to January 27, 2002, the J. C. Penney Company, Inc. Savings, Profit-Sharing and Stock Ownership Plan, as amended from time to time, and on and after January 27, 2002, the J. C. Penney Corporation, Inc. Savings, Profit-Sharing and Stock Ownership Plan, as amended from time to time.

 

Separation from Service or Separates from Service : Termination of Service after having attained age 55 by reason of disability, discharge, retirement (including resignation), or death. Termination of Service due to a disability is deemed to occur upon the later of termination of the Eligible Management Associate’s sick pay or at the end of any leave of absence granted the Eligible Management Associate.

 

Service : The period of time credited to an Eligible Management Associate as service under the terms of the Pension Plan.

 

Spouse : The individual to whom an Eligible Management Associate is legally married under the laws of the State (within the meaning of section 3(10) of ERISA) in which the Eligible Management Associate is domiciled, or if domiciled outside the United States, under the laws of the State of Texas.

 

Tax Deferred Deposits : Deposits made under the Savings and Profit-Sharing Retirement Plan and/or the Savings, Profit-Sharing and Stock Ownership Plan which were subject to a cash or deferred election under Section 401(k) of the Code and designated as Tax Deferred Deposits pursuant to the terms of the Savings and Profit-Sharing Retirement Plan and/or the Savings, Profit-Sharing and Stock Ownership Plan.

 

Taxed Deposits : An Eligible Management Associate’s after-tax deposits made under the Savings and Profit-Sharing Retirement Plan and/or the Savings, Profit-Sharing and Stock Ownership Plan and designated as Taxed Deposits pursuant to the terms of the Savings and Profit-Sharing Retirement Plan and/or the Savings, Profit-Sharing and Stock Ownership Plan.

 

Traditional Retirement Age : The date on which an Eligible Management Associate attains age 60.

 

Traditional Retirement Date : The first day of the month immediately following the date an Eligible Management Associate attains Traditional Retirement Age if such Eligible Management Associate Separates from Service on such date.

 

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Valuation Date : With respect to the Company Accounts, excluding the Penney Stock (Company) Account, each day of the calendar year. With respect to the Penney Stock (Company) Account(s), each day of a calendar year on which the New York Stock Exchange is open. If the New York Stock Exchange is closed, the Penney Stock (Company) Account(s) will have the same value as of the last immediately preceding day the Exchange was open.

 

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ARTICLE III. PARTICIPATION

 

Each Eligible Management Associate shall participate in the Plan as of such Eligible Management Associate’s Early Retirement Date, Traditional Retirement Date, or Delayed Retirement Date, as the case may be; provided, however, that such Eligible Management Associate who has a Separation from Service in the month of December shall commence participation in the Plan as of the last day of that December. Notwithstanding the preceding sentence, and except as otherwise provided in Paragraph (9) of Article IV, effective on and after January 1, 1996, any Associate who, on December 31, 1995, was not classified as management or who was not in a Profit Incentive Compensation program shall not be considered an Eligible Management Associate and shall not participate in the Plan. In addition, effective as of the Closing (as such term is defined in Paragraph (9) of Article IV), the Eligible Management Associates whose names are set forth on Appendix II to the Plan shall cease to participate in the Plan and shall not be entitled to a benefit under any provision of the Plan. In the event an Eligible Management Associate whose name is set forth on Appendix II is employed after the Closing by the Company or any Controlled Group Member, such person will not thereafter be an Eligible Management Associate and will not participate in the Plan on or after the date of such employment.

 

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ARTICLE IV. BENEFITS

 

(1) At Early, Traditional, or Delayed Retirement Date : The annual amount of benefit payable from the Plan in monthly installments to an Eligible Management Associate commencing on such Eligible Management Associate’s Early Retirement Date, Traditional Retirement Date, or Delayed Retirement Date, as the case may be, and terminating with the installment payable on the first day of the month in which such Eligible Management Associate dies, shall be:

 

(a)

the sum of

 

(i)

3% of the Eligible Management Associate’s Average Final Compensation multiplied by such Eligible Management Associate’s Credited Service not in excess of 10 years;

 

plus

 

(ii)

1% of the Eligible Management Associate’s Average Final Compensation multiplied by such Eligible Management Associate’s Credited Service in excess of 10 years but not in excess of 30 years;

 

plus

 

(iii)

1/2 of 1% of the Eligible Management Associate’s Average Final Compensation multiplied by such Eligible Management Associate’s Credited Service in excess of 30 years but not in excess of 40 years;

 

less

 

(iv)

1/3 of 1% for each month by which the Eligible Management Associate’s Early Retirement Date shall precede such Eligible Management Associate’s Traditional Retirement Date multiplied by the Eligible Management Associate’s Average Final Compensation;

 

less

 

(b)

the sum of

 

(i)

the single-life, no-death-benefit annuity equivalent of (a) the annual amount of pension payable pursuant to the Pension Plan (disregarding Disability Service) assuming that the Eligible Management Associate’s Benefit Commencement Date is the first day of the month immediately following the date of such Eligible Management Associate’s Separation from Service, (b) the annual amount payable pursuant to the terms of a domestic relations order qualified under Code Section 414(p), (A) from the Pension Plan and (B) from benefits accrued pursuant to Paragraph (1) of Article IV of the Benefit Restoration Plan and (c) the accrued benefit payable pursuant to Paragraph (1) of Article IV of the Benefit Restoration Plan;

 

plus

 

(ii)

the single-life, no-death-benefit annuity equivalent, as of the Valuation Date which is the next trading date of the New York Stock Exchange following the Eligible Management Associate’s Separation from Service, of

 

(a)

the value of all assets allocated to the Eligible Management Associate in the Company Account(s) under the Savings, Profit-Sharing and Stock Ownership Plan, including such assets allocated to him under

 

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the Savings and Profit-Sharing Retirement Plan prior to January 1, 1999; and

 

(b)

the value of any additional assets which would have been allocated to the Eligible Management Associate’s Company Account(s) under the Savings and Profit-Sharing Retirement Plan, the Savings, Profit-Sharing and Stock Ownership Plan, and the Mirror Savings Plans, had such Eligible Management Associate made all further permissible Matched Deposits up to 6% of his compensation (as such term is defined in each said plan) under each said plan and had he not made any withdrawals of taxed Matched Deposits from the plans prior to January 1, 1989; and

 

(c)

the value of dividends attributable to units in his Company Account (within the meaning of the Savings, Profit-Sharing and Stock Ownership Plan) and distributed to the Eligible Management Associate pursuant to Section 9.04 of the Savings, Profit-Sharing and Stock Ownership Plan; and

 

(d)

the value of any amounts payable pursuant to the terms of a domestic relations order qualified under Code Section 414(p) out of such Eligible Management Associate’s Company Account(s) from the Savings and Profit-Sharing Retirement Plan and the Savings, Profit-Sharing and Stock Ownership Plan; and

 

(e)

the value of benefits payable to the Eligible Management Associate (or another person on behalf of the Eligible Management Associate from (A) his annual benefit limit make-up account pursuant to paragraph (2) of Article IV of the Benefit Restoration Plan prior to January 1, 1999, and (B) his Company Accounts under the Mirror Savings Plans;

 

plus

 

(iii)

50% (less 1/4 of 1% for each month by which the Eligible Management Associate’s Early Retirement Date shall precede such Eligible Management Associate’s Traditional Retirement Date) of the Eligible Management Associate’s Estimated Social Security Benefit;

 

plus

 

(iv)

in the case of an Eligible Management Associate whose Credited Service is increased pursuant to Paragraph (1) of Article VIII, the amount of annual retirement benefit (or any commutations thereof or substitutions therefor) payable to an Eligible Management Associate from any other employer, but only to the extent determined by the Benefits Administration Committee, expressed in the form of a single-life, no-death-benefit annuity equivalent (as determined by the Benefits Administration Committee), commencing on such Eligible Management Associate’s Separation from Service.

 

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In determining the amount referred to in clause (ii) of subparagraph (b) of this Paragraph (1) of this Article IV, it shall be deemed that:

 

(i)

an Eligible Management Associate who has not, at all times when he was eligible to participate in the Savings and Profit-Sharing Retirement Plan and the Savings, Profit-Sharing and Stock Ownership Plan and the Mirror Savings Plans, contributed an amount sufficient to share, to the maximum extent, in the Company contribution to such Plan or such predecessor plan has so contributed and that an Eligible Management Associate who did not share, to the maximum extent, in Company contributions for which he was eligible under the Savings and Profit-Sharing Retirement Plan due to any withdrawal of taxed Matched Deposits, be deemed not to have any such withdrawal;

 

(ii)

the share of any such Company contribution deemed to have been credited to an Eligible Management Associate pursuant to this Paragraph for plan years ending before January 1, 1989 shall be deemed to have experienced the same rate of dividends, earnings, and change in value as the actual rate of dividends, earnings, and change in value experienced by the Penney Stock (Company) Account under the Savings and Profit-Sharing Retirement Plan from the time such share of a Company contribution is deemed to have been credited for said plan years and that the value of this said amount as of December 31, 1988 under the Savings and Profit-Sharing Retirement Plan, plus the share of any such Company contribution deemed to have been credited to an Eligible Management Associate pursuant to this Paragraph for plan years beginning after December 31, 1988 shall be deemed to have experienced the same rate of earnings and change in value experienced by the Interest Income Account under the Savings, Profit-Sharing and Stock Ownership Plan from the time such share of a Company contribution is deemed to have been credited for said plan years;

 

(iii)

the value of the amount of the Company Account(s) and annual limit make-up account paid out pursuant to a domestic relations order qualified under Section 414(p) of the Code deemed to have been credited to an Eligible Management Associate pursuant to this Paragraph shall be deemed to have experienced the same rate of earnings and change in value experienced by the Interest Income Account under the Savings, Profit-Sharing and Stock Ownership Plan from the time such amount is deemed to have been credited; and

 

(iv)

the rates used to determine the single-life, no-death-benefit annuity equivalent shall be the rates that the Benefits Administration Committee, in its discretion, shall determine.

 

(2) Minimum Benefit : In no event will the amount payable to an Eligible Management Associate under Paragraph (1) of this Article IV at such Eligible Management Associate’s Traditional Retirement Date or Delayed Retirement Date, as the case may be, be less than the difference between:

 

(A)

the amount of pension payable pursuant to the early retirement pension benefit provision of the Pension Plan (determined without regard to any

 

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compensation or benefit limits imposed by the Code) that would be applicable if the Eligible Management Associate elected to receive benefits pursuant to that provision prior to such Eligible Management Associate’s normal retirement date, as defined in the Pension Plan (disregarding Disability Service, if any, and including as Credited Service any increase granted under Article VIII hereof) assuming the Eligible Management Associate’s Benefit Commencement Date is the first day of the month immediately following the day of such Eligible Management Associate’s Separation from Service under this Plan, and

 

(B)

the amount of pension payable pursuant to the early retirement pension benefit provision of the Pension Plan (determined without regard to any compensation or benefit limits imposed by the Code) that would be applicable if the Eligible Management Associate did not elect to receive benefits pursuant to that provision prior to the Eligible Management Associate’s normal retirement date, as defined in the Pension Plan (disregarding Disability Service, if any, and including as Credited Service any increase granted under Article VIII hereof).

 

In no event will the amount payable under Paragraph (1) of this Article IV to an Eligible Management Associate who:

 

(a)

Separates from Service on his Early Retirement Date within one year prior to his Traditional Retirement Date and who is granted additional Credited Service pursuant to Paragraph (1) of Article VIII at his Early Retirement Date, or

 

(b)

Separates from Service because of a reduction in force and is designated as an individual termination by the Director of Personnel in accordance with Paragraph (1) of Article VIII and who is granted deemed additional months of Credited Service thereunder be less than the difference between

 

(A) the amount of pension that would be payable (determined without regard to any compensation or benefit limits imposed by the Code) at such Eligible Management Associate’s normal retirement date, as defined by the Pension Plan (disregarding Disability Service, if any, and including as Credited Service, as defined by the Pension Plan, any increase granted under Article VIII hereof), and

 

(B) the amount of pension payable pursuant to the early retirement pension benefit provision of the Pension Plan (determined without regard to any compensation or benefit limits imposed by the Code) that would be applicable if the Eligible Management Associate elected to receive benefits pursuant to that provision prior to such Eligible Management Associate’s normal retirement date, as defined by the Pension Plan (disregarding Disability Service, if any, and excluding as Credited Servi