Page No.
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ARTICLE I Foreward
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1
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ARTICLE II Definitions and Construction
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3
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2.1 Definitions
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3
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2.2 Construction
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14
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ARTICLE III Participation and Service
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16
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3.1 Participation
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16
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3.2 Service
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16
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3.3 Credited Service
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16
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ARTICLE IV Requirements for Benefits
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17
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4.1 Normal Retirement Pension
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17
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4.2 Early Retirement Pension
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17
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4.3 Vested Pension
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17
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4.4 Late Retirement Pension
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18
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4.5 Disability Pension
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18
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4.6 Pre-Retirement Spouse's Pension
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19
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4.7 Vesting
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20
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4.8 Time of Payment
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20
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4.9 Cashout Distributions
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20
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4.11 Reemployment of Certain Participants
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21
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ARTICLE V Amount of Retirement Pension
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23
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5.1 PEP Pension
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23
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5.2 PEP Guarantee
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25
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5.3 Amount of Pre-Retirement Spouse's Pension
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31
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5.4 Certain Adjustments
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34
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5.5 Excludable Employment
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35
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ARTICLE VI Distribution Options
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37
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6.1 Form and Timing of Distributions On and After January 1, 2009
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37
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6.2 Form and Timing of Distributions Prior to January 1 2009
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39
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6.3 Available Forms of Payment
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42
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6.4 Procedures for Elections
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46
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6.5 Special Rules for Survivor Options
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49
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6.6 Designation of Beneficiary
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51
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6.7 Payment of FICA and Related Income Taxes
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52
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ARTICLE VII Administration
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53
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7.1 Authority to Administer Plan
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53
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7.2 Facility of Payment
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53
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7.3 Claims Procedure
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54
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7.4 Effect of Specific References
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56
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ARTICLE VIII Miscellaneous
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57
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8.1 Nonguarantee of Employment
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57
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8.2 Nonalienation of Benefits
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57
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8.3 Unfunded Plan
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57
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8.4 Action by the Company
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58
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8.5 Indemnification
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58
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ARTICLE IX Amendment and Termination
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59
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ARTICLE IX Amendment and Termination
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59
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9.1 Continuation of the Plan
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59
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9.2 Amendments
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59
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9.3 Termination
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60
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ARTICLE X ERISA Plan Structure
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61
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ARTICLE XI Applicable Law
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63
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ARTICLE XII Signature
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64
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APPENDIX
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65
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ARTICLE A Accruals for 1993 and 1994
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66
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ARTICLE B Transferred and Transition Individuals
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69
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ARTICLE C Plan Provisions Applicable to Pre-2005 Participants
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71
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5.1 PEP Pension
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71
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5.2 PEP Guarantee
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73
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5.3 Amount of Pre-Retirement Spouse's Pension
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79
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Page
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(a)
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Accrued Benefit
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4
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(b)
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Actuarial Equivalent
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4
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(c)
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Advance Election
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5
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(d)
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Annuity
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5
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(e)
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Annuity Starting Date
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5
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(f)
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Authorized Leave of Absence
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6
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(g)
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Code
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6
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(h)
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Company
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6
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(i)
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Covered Compensation
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6
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(j)
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Credited Service
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6
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(k)
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Disability Retirement Pension
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6
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(l)
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Early Retirement Pension
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6
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(m)
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Effective Date
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6
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(n)
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Eligible Spouse
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6
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(o)
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Employee
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7
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(p)
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Employer
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7
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(q)
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ERISA
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7
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(r)
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FICA Amount
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7
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(s)
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409A Program
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7
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(t)
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Highest Average Monthly Earnings
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7
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(u)
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Late Retirement Date
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7
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(v)
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Late Retirement Pension
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7
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(w)
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Normal Retirement Age
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7
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(x)
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Normal Retirement Date
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7
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(y)
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Normal Retirement Pension
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8
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(z)
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Participant
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8
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(aa)
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PBGC
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8
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(bb)
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PBGC Rate
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8
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(cc)
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Pension
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8
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(dd)
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PEP Election
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8
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(ee)
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Plan
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8
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(ff)
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Plan Administrator
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9
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(gg)
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Plan Year
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9
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(hh)
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Post-2004 Participant
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9
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(ii)
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Pre-2005 Participant
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9
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(jj)
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Pre-409A Program
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9
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(kk)
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Pre-Retirement Spouse's Pension
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9
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(ll)
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Pre-2005 Participant
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9
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(mm)
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Primary Social Security Amount
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9
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(nn)
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Prior Plan
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11
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(oo)
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Qualified Joint and Survivor Annuity
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11
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(pp)
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Retirement
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11
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(qq)
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Retirement Date
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11
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(rr)
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Retirement Pension
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11
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(ss)
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Salaried Plan
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12
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(tt)
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Section 409A
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12
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(uu)
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Service
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12
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(vv)
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Severance from Service Date
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12
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(ww)
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Single Life Annuity
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12
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(xx)
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Single Lump Sum
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12
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(yy)
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Social Security Act
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12
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(zz)
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Taxable Wage Base
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13
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(aaa)
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Yum! Brands Organization
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13
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(bbb)
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Vested Pension
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13
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(a) Accrued Benefit: The Pension payable at Normal Retirement Date determined in accordance with Article V, based on the Participant's Highest Average Monthly Earnings and Credited Service at the date of determination.
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(b) Actuarial Equivalent: Except as otherwise specifically set forth in the Plan or any Appendix to the Plan with respect to a specific benefit determination, a benefit of equivalent value computed on the basis of the factors set forth below. The application of the following assumptions to the computation of benefits payable under the Plan shall be done in a uniform and consistent manner. In the event the Plan is amended to provide new rights, features or benefits, the following actuarial factors shall not apply to these new elements unless specifically adopted by the amendment.
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(1) Annuities and Inflation Protection: To determine the amount of a Pension payable in the form of a Qualified Joint and Survivor Annuity or optional form of survivor annuity, or as an annuity with inflation protection, the factors applicable for such purposes under the Salaried Plan shall apply. However, in determining a Pre-409A Pension, no change occurring on or after the Effective Date in the basis for determining the amount of an annuity form of payment from that in effect as of
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(2) Lump Sums: To determine the lump sum value of a Pension, or a Pre-Retirement Spouse's Pension under Section 4.6, the factors applicable for such purposes under the Salaried Plan shall apply, except that when the term "PBGC Rate" is used in the Salaried Plan in this context it shall mean "PBGC Rate" as defined in this Plan. However, in determining a Pre-409A Pension, no change occurring on or after the Effective Date in the basis for determining a lump sum from that in effect as of December 31, 2004, shall be taken into account to the extent that it would result in a larger lump sum (but this last sentence shall not apply for purposes of Section 5.1(b)(3), relating to the “Limit on the Pre-409A Pension Benefit”).
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(3) Other Cases: To determine the adjustment to be made in the Pension payable to or on behalf of a Participant in other cases, the factors are those applicable for such purpose under the Salaried Plan. However, in determining a Pre-409A Pension, no change occurring on or after the Effective Date in such factors from those in effect as of December 31, 2004, shall be taken into account to the extent that it would result in a larger pension (but this last sentence shall not apply for purposes of Section 5.1(b)(3), relating to the “Limit on the Pre-409A Pension Benefit”).
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(c) Advance Election: A Participant's election to receive his Pre-409A Retirement Pension as a Single Lump Sum or an Annuity, made in compliance with the requirements of Section 6.4.
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(d) Annuity: A Pension payable as a series of monthly payments for at least the life of the Participant.
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(e) Annuity Starting Date: The Annuity Starting Date shall be the first day of the first period for which an amount is payable under this Plan as an annuity or in any other form.
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(f) Authorized Leave of Absence: Any absence authorized by an Employer under the Employer's standard personnel practices, whether paid or unpaid.
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(g) Code: The Internal Revenue Code of 1986, as amended from time to time.
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(h) Company: Yum! Brands, Inc. (known as Tricon Global Restaurants, Inc.), a corporation organized and existing under the laws of the State of North Carolina or its successor or successors. For periods before October 7, 1997, the Company under the Prior Plan was PepsiCo, Inc., a North Carolina corporation.
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(i) Covered Compensation: "Covered Compensation" as that term is defined in the Salaried Plan.
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(j) Credited Service: The period of a Participant's employment, calculated in accordance with Section 3.3, which is counted for purposes of determining the amount of benefits payable to, or on behalf of, the Participant.
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(k) Disability Retirement Pension: The Retirement Pension available to a Participant under Section 4.5.
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(l) Early Retirement Pension: The Retirement Pension available to a Participant under Section 4.2.
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(m) Effective Date: The date upon which this document for the Pre-409A Program is generally effective, January 1, 2005. Certain provisions of the Plan may be effective on different dates, as noted herein.
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(n) Eligible Spouse: The spouse of a Participant to whom the Participant is married on the earlier of the Participant's Annuity Starting Date or the date of the Participant's death.
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(o) Employee: An individual who qualifies as an "Employee" as that term is defined in the Salaried Plan.
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(p) Employer: An entity that qualifies as an "Employer" as that term is defined in the Salaried Plan.
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(q) ERISA: Public Law No. 93-406, the Employee Retirement Income Security Act of 1974, as amended from time to time.
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(r) FICA Amount: The Participant’s share of the Federal Insurance Contributions Act (FICA) tax imposed on the Pre-409A Pension and 409A Pension of the Participant under Code Sections 3101, 3121(a) and 3121(v)(2).
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(s) 409A Program: The portion of the Plan that governs deferrals that are subject to Section 409A. The terms of the 409A Program are set forth in a separate document (or separate set of documents).
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(t) Highest Average Monthly Earnings: "Highest Average Monthly Earnings" as that term is defined in the Salaried Plan, but without regard to the limitation imposed by section 401(a)(17) of the Code (as such limitation is interpreted and applied under the Salaried Plan).
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(u) Late Retirement Date: The Late Retirement Date shall be the first day of the month coincident with or immediately following a Participant's actual Retirement Date occurring after his Normal Retirement Age.
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(v) Late Retirement Pension: The Retirement Pension available to a Participant under Section 4.4.
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(w) Normal Retirement Age: The Normal Retirement Age under the Plan is age 65 or, if later, the age at which a Participant first has 5 Years of Service.
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(x) Normal Retirement Date: A Participant's Normal Retirement Date shall be the first day of the month coincident with or immediately following a Participant's Normal Retirement Age.
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(y) Normal Retirement Pension: The Retirement Pension available to a Participant under Section 4.1.
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(z) Participant: An Employee participating in the Plan in accordance with the provisions of Section 3.1.
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(aa) PBGC: The Pension Benefit Guaranty Corporation, a body corporate within the Department of Labor established under the provisions of Title IV of ERISA.
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(bb) PBGC Rate: The PBGC Rate is 120 percent of the interest rate, determined on the Participant's Annuity Starting Date, that would be used by the PBGC for purposes of determining the present value of a lump sum distribution on plan termination.
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(cc) Pension: One or more payments that are payable to a person who is entitled to receive benefits under the Plan. The term “Pre-409A Pension” shall be used to refer to the portion of a Pension that is derived from the Pre-409A Program. The term “409A Pension” shall be used to refer to the portion of a Pension that is derived from the 409A Program. Effective as specified in Article I, the Pre-409A Pension, if any, of a Participant who is not a Continuing Grandfathered Participant shall be paid and administered as though the Participant’s entire Plan benefit were solely subject to the terms of the 409A Program.
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(dd) PEP Election: A Participant's election to receive his Pre-409A Retirement Pension in one of the Annuity forms available under Section 6.2, made in compliance with the requirements of Sections 6.3 and 6.4.
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(ee) Plan: The Yum! Brands Pension Equalization Plan, the Plan set forth herein and in the 409A Program document(s), as the Plan may be amended from time to time (subject to the limitations on amendment that are applicable hereunder and under the 409A Program). Prior to September 1, 2004, the Plan was known as the Tricon Pension Equalization Plan. The Plan is also sometimes referred to as PEP, and it is a successor to the PepsiCo Pension Equalization Plan, which was also known as the PepsiCo Pension Benefit Equalization Plan.
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(ff) Plan Administrator: The Company, which shall have authority to administer the Plan as provided in Article VII.
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(gg) Plan Year: The initial Plan Year, being a short Plan Year, shall begin on the Effective Date and shall end on December 31, 1997. Thereafter, the Plan Year shall be the 12-month period commencing on January 1 and ending on December 31.
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(hh) Post-2004 Participant: Any Participant who is not a Pre-2005 Participant.
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(ii) Pre-2005 Participant: A Participant whose employment with the Yum! Brands Organization terminated on or before December 31, 2004, and whose rights to a Pension are based solely on the legally binding rights (i) that he had on (or before) December 31, 2004, and (ii) that were not materially modified after October 3, 2004.
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(jj) Pre-409A Program: The program described in this document (and as necessary, predecessor documents to this document that are described in the Foreword). The term “Pre-409A Program” is used to identify the portion of the Plan that is not subject to Section 409A.
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(kk) Pre-Retirement Spouse's Pension: The Pension available to an Eligible Spouse under Section 4.6. The term “Pre-Retirement Spouse’s Pre-409A Pension” shall be used to refer to the Pension available to an Eligible Spouse under Section 4.6 of this document.
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(ll) Pre-2005 Participant: A Participant whose employment with the Yum! Brands Organization terminated on or before December 31, 2004, and whose rights to a Pension are based solely on the legally binding rights (i) that he had on (or before) December 31, 2004, and (ii) that were not materially modified after October 3, 2004.
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(mm) Primary Social Security Amount: In determining Pension amounts, Primary Social Security Amount shall mean:
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(1) For purposes of determining the amount of a Retirement, Vested or Pre-Retirement Spouse's Pension, the Primary Social Security Amount shall be the estimated monthly amount that may be payable to a Participant commencing at age 65
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(i) That the Participant's social security wages in any year prior to Retirement or severance are equal to the Taxable Wage Base in such year, and
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(ii) That he will not receive any social security wages after Retirement or severance.
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(2) For purposes of determining the amount of a Disability Pension, the Primary Social Security Amount shall be (except as provided in the next sentence) the initial monthly amount actually received by the disabled Participant as a disability insurance benefit under the provisions of Title II of the Social Security Act, as amended and in effect at the time of the Participant's retirement due to disability. Notwithstanding the preceding sentence, for any period that a Participant receives a Disability Pension before receiving a disability insurance benefit under the provisions of Title II of the Social Security Act, then the Participant's Primary Social Security Amount for such period shall be determined pursuant to paragraph (1) above.
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(3) For purposes of paragraphs (1) and (2), the Primary Social Security Amount shall exclude amounts that may be available because of the spouse or any dependent of the Participant or any amounts payable on account of the Participant's death. Estimates of Primary Social Security Amounts shall be made on the basis of the
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(nn) Prior Plan: The PepsiCo Pension Equalization Plan.
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(oo) Qualified Joint and Survivor Annuity: An Annuity which is payable to the Participant for life with 50 percent of the amount of such Annuity payable after the Participant's death to his surviving Eligible Spouse for life. If the Eligible Spouse predeceases the Participant, no survivor benefit under a Qualified Joint and Survivor Annuity shall be payable to any person. The amount of a Participant's monthly payment under a Qualified Joint and Survivor Annuity shall be reduced to the extent provided in sections 5.1 and 5.2, as applicable.
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(pp) Retirement: Termination of employment for reasons other than death after a Participant has fulfilled the requirements for either a Normal, Early, Late, or Disability Retirement Pension under Article IV.
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(qq) Retirement Date: The date on which a Participant's Retirement is considered to commence. Retirement shall be considered to commence on the day immediately following: (i) a Participant's last day of employment, or (ii) the last day of an Authorized Leave of Absence, if later. Notwithstanding the preceding sentence, in the case of a Disability Pre-409A Retirement Pension, Retirement shall be considered as commencing on the Participant's retirement date applicable for such purpose under the Salaried Plan.
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(rr) Retirement Pension: The Pension payable to a Participant upon Retirement under the Plan. The term “Pre-409A Retirement Pension” shall be used to refer to the portion of a Retirement Pension that is derived from the Pre-409A Program. The term “409A Retirement Pension” shall be used to refer to the portion of a Retirement Pension that is derived from the 409A Program.
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(ss) Salaried Plan: The Yum! Brands Retirement Program for Salaried Employees, the program of retirement benefits set forth in Parts B and D of the Yum! Brands Retirement Plan, as it may be amended from time to time. Any reference herein to the Salaried
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(tt) Section 409A: Section 409A of the Code.
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(uu) Service: The period of a Participant's employment calculated in accordance with Section 3.2 for purposes of determining his entitlement to benefits under the Plan.
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(vv) Severance from Service Date: The date on which an Employee's period of service is deemed to end, determined in accordance with Article III of the Salaried Plan.
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(ww) Single Life Annuity: A level monthly Annuity payable to a Participant for his life only, with no survivor benefits to his Eligible Spouse or any other person.
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(xx) Single Lump Sum: The distribution of a Participant's total Pension in the form of a single payment.
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(yy) Social Security Act: The Social Security Act of the United States, as amended, an enactment providing governmental benefits in connection with events such as old age, death and disability. Any reference herein to the Social Security Act (or any of the benefits provided thereunder) shall be taken as a reference to any comparable governmental program of another country, as determined by the Plan Administrator, but only to the extent the Plan Administrator judges the computation of those benefits to be administratively feasible.
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(zz) Taxable Wage Base: The contribution and benefit base (as determined under section 230 of the Social Security Act) in effect for the Plan Year.
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(aaa) Yum! Brands Organization: The controlled group of organizations of which the Company is a part, as defined by Code section 414 and regulations issued thereunder. An entity shall be considered a member of the Yum! Brands Organization only during the period it is one of the group of organizations described in the preceding sentence.
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(bbb) Vested Pension: The Pension available to a Participant under Section 4.3. The term “Pre-409A Vested Pension” shall be used to refer to the portion of a Vested Pension that is derived from the Pre-409A Program. The term “409A Vested Pension” shall be used to refer to the portion of a Vested Pension that is derived from the 409A Program.
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ARTICLE III
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(a) When he would be currently entitled to receive a Pension under the Plan if his employment terminated at such time, or
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(b) When he would be so entitled but for the vesting requirement of Section 4.7.
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(a) Active, Disabled and Retired Employees: A Pre-Retirement Spouse's Pre-409A Pension shall be payable under this subsection to a Participant's Eligible Spouse (if any) who is entitled under the Salaried Plan to a pre-retirement spouse's pension for survivors of active, disabled and retired employees (but if the Participant dies after December 31, 2004, this subsection shall apply only if the Participant had met the eligibility requirements for a Retirement Pension on December 31, 2004). The amount of such Pension shall be determined in accordance with the provisions of Section 5.3.
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(b) Vested Employees: A Pre-Retirement Spouse's Pre-409A Pension shall be payable under this subsection to a Participant's Eligible Spouse (if any) who is entitled under the Salaried Plan to the pre-retirement spouse's pension for survivors of vested terminated Employees (but if the Participant dies after December 31, 2004, this subsection shall apply only if the Participant had met the requirements for a Vested Pension, but not those for a Retirement Pension, on December 31, 2004). The amount (if any) of such Pension shall be determined in accordance with the provisions of Section 5.3. If pursuant to this Section 4.6(b) a Participant has Pre-Retirement Spouse's coverage in effect for his Eligible Spouse, any Pension calculated for the Participant under Section 5.2(b) shall be reduced for each year such coverage is in effect by the applicable percentage set forth below (based on the Participant's age at the time the coverage is in effect) with a pro rata reduction for any portion of a year. No reduction shall be made for coverage in effect within the 90-day period following a Participant's termination of employment.
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(a) Distribution of Participant's Pension: If on the applicable benefit commencement date the Actuarial Equivalent lump sum value of the Participant's PEP Pension is equal to or less than $15,500 ($10,000 in the case of a Pre-2005 Participant), the Plan Administrator shall distribute to the Participant such lump sum value of the Participant's PEP Pension. The portion of such lump sum that represents the Participant’s Pre-409A Pension shall be paid pursuant to the terms of the Pre-409A Program. The applicable benefit commencement date shall be the commencement date of any 409A Pension to which the Participant is entitled, or in the event the Participant is not entitled to a 409A Pension, the first of the month following the Participant’s termination of employment date (however, if the lump sum value as of that date is too great to make the distribution, but the lump sum value is not too great as of his Annuity Starting Date under the terms of the Pre-409A Program, such Annuity Starting Date shall be the applicable commencement date).
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(b) Distribution of Pre-Retirement Spouse's Pension Benefit: If on the Eligible Spouse’s applicable benefit commencement date the Actuarial Equivalent lump sum value of the PEP Pre-Retirement Spouse's Pension to be paid is equal to or less than $15,500 ($10,000 in the case of a of Pre-2005 Participant), the Plan Administrator shall distribute to the Eligible Spouse such lump sum value of the PEP Pre-Retirement Spouse's Pension. The portion of such lump sum that represents the Eligible Spouse’s Pre-Retirement Spouse’s Pre-409A Pension shall be paid pursuant to the terms of this Pre-409A Program. The applicable benefit commencement date shall be the commencement date of any Pre-Retirement Spouse’s 409A Pension to which the Eligible Spouse is entitled or, in the event the Eligible Spouse is not entitled to a Pre-Retirement Spouse’s 409A Pension, the first of the month following the Participant’s death (however, if the lump sum value as of that date is too great to make the distribution, but the lump sum value is not too great as of the date that would be the Eligible Spouse’s benefit commencement date under the terms of this Pre-409A Program, such benefit commencement date shall be the applicable commencement date).
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(a) Calculating the Pre-409A Pension: In the case of a Post-2004 Participant, such Participant’s Pre-409A Pension shall be calculated as follows (on the basis of specified in subsection (b) below and using the definitions appearing in subsection (c) below):
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(1) His Total Pension, reduced by
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(2) His Salaried Plan Pension.
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(b) Basis for Determining: The Pre-409A Pension Benefit amount in subsection (a) above shall be the amount determined on the basis set forth in paragraph (1) below, subject to the limitation specified in paragraph (3) below:
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(1) The Pre-409A Pension Benefit amount under this paragraph shall be determined initially as a present value of the Participant’s benefit under subsection (a) as of December 31, 2004 (determined as if the Participant voluntarily terminated employment on that date without cause, received a payment on the earliest possible commencement date (“Earliest Date”) thereafter, and such payment was in the form with the maximum value available to the Participant in connection with a termination at such time, using the Actuarial Equivalent lump sum factors in effect on such date (“2004 Lump Sum Factors”) to determine the present value. Such present value amount shall
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(2) Notwithstanding paragraph (1) above, a Participant’s Pre-409A Pension Benefit amount shall never exceed the Participant’s Total Pension reduced by his Salaried Plan Pension, with each calculated as of the actual Annuity Starting Date of the Participant’s Pre-409A Pension. For purposes of this paragraph (2), the provisions of Article IV that freeze the Participant’s status as of December 31, 2004 (or consider only the Participant’s status on such date), and the provisions of this document that bar taking into account Plan changes that are effective after December 31, 2004, shall not be taken into account.
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(c) Definitions: The following definitions apply for purposes of this section.
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(1) A Participant's "Total Pension" means the greater of the following amounts:
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(i) The amount of the Participant's pension determined under the terms of the Salaried Plan, but without regard to: (A) the limitations imposed by sections 401(a)(17) and 415 of the Code (as such limitations are interpreted and applied under the Salaried Plan), and (B) the actuarial adjustment under Section 5.5(d) of the Salaried Plan (relating to benefits that are deferred beyond the Participant’s Normal Retirement Date); or
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(ii) The amount (if any) of the Participant's PEP Guarantee determined under Section 5.2.
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For purposes of subsection (b)(1), the determination in clause (i) and (ii) above shall be made as of December 31, 2004, and (except to the extent the provisions of the Plan specifically authorize taking into account subsequent changes) shall be made on the basis
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(2) A Participant's "Salaried Plan Pension" means the amount of the Participant's pension determined under the terms of the Salaried Plan. For purposes of subsection (b)(1), the determination in clause (i) and (ii) above shall be made as of December 31, 2004, and (except to the extent the provisions of the Plan specifically authorize taking into account subsequent changes) shall be made on the basis of the terms of the Salaried Plan without taking into account changes as of December 31, 2004.
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(a) Eligibility: A Participant shall be covered by this section if the Participant has 1988 pensionable earnings from an Employer of at least $75,000. For purposes of this section, "1988 pensionable earnings" means the Participant's remuneration for the 1988 calendar year, which was recognized for benefit received under the Salaried Plan as in effect in 1988. "1988 pensionable earnings" does not include remuneration from an entity attributable to any period when that entity was not an Employer.
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(b) PEP Guarantee Formula: The amount of a Participant's PEP Guarantee shall be determined under the applicable formula in paragraph (1), subject to the special rules in paragraph (2).
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(1) Formulas: The amount of a Participant's Pension under this paragraph shall be determined in accordance with subparagraph (i) below. However, if the Participant was actively employed by the Yum! Brands Organization in a classification eligible for the Salaried Plan prior to July 1, 1975, the amount of his Pension under this paragraph shall be the greater of the amounts determined under
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(i) Formula A: The Pension amount under this subparagraph shall be:
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(A) 3 percent of the Participant's Highest Average Monthly Earnings for the first 10 years of Credited Service, plus
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(B) 1 percent of the Participant's Highest Average Monthly Earnings for each year of Credited Service in excess of 10 years, less
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(C) 1-2/3 percent of the Participant's Primary Social Security Amount multiplied by years of Credited Service not in excess of 30 years.
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In determining the amount of a Vested Pension under this Formula A, the Pension shall first be calculated on the basis of (I) the Credited Service the Participant would have earned had he remained in the employ of the Employer until his Normal Retirement Age, and (II) his Highest Average Monthly Earnings and Primary Social Security Amount at his Severance from Service Date, and then shall be reduced by multiplying the resulting amount by a fraction, the numerator of which is the Participant's actual years of Credited Service on his Severance from Service Date (or December 31, 2004, if earlier) and the denominator of which is the years of Credited Service he would have earned had he remained in the employ of an Employer until his Normal Retirement Age.
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(ii) Formula B: The Pension amount under this subparagraph shall be the greater of (A) or (B) below:
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(A) 1-1/2 percent of Highest Average Monthly Earnings times the number of years of Credited Service, less 50 percent of the Participant's Primary Social Security Amount, or
(B) 3 percent of Highest Average Monthly Earnings times the number of years of Credited Service up to 15 years, less 50 percent of the Participant's Primary Social Security Amount.
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In determining the amount of a Disability Pension under Formula A or B above, the Pension shall be calculated on the basis of the Participant's Credited Service (determined in accordance with Section 3.3(d)(3) of the Salaried Plan, as in effect on December 31, 2004), and his Highest Average Monthly Earnings and Primary Social Security Amount at the date of disability (or as of such earlier date as may apply under Section 5.1(b)).
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(2) Calculation: The amount of the PEP Guarantee shall be determined pursuant to paragraph (1) above, subject to the following special rules:
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(i) Surviving Eligible Spouse's Annuity: Subject to subparagraph (iii) below and the last sentence of this subparagraph, if the Participant has an Eligible Spouse and has commenced receipt of an Annuity under this section, the Participant's Eligible Spouse shall be entitled to receive a survivor annuity equal to 50 percent of the Participant's Annuity under this section, with no corresponding reduction in such Annuity for the Participant. Annuity payments to a surviving Eligible Spouse shall begin on the first day of the month coincident with or following the Participant's death and shall end
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(A) For each full year more than 10 but less than 21 that the surviving Eligible Spouse is younger than the Participant, the survivor benefit payable to such spouse shall be reduced by 0.8 percent.
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(B) For each full year more than 20 that the surviving Eligible Spouse is younger than the Participant, the survivor benefit payable to such spouse shall be reduced by an additional 0.4 percent.
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(ii) Reductions: The following reductions shall apply in determining a Participant's PEP Guarantee.
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(A) If the Participant will receive an Early Retirement Pension, the payment amount shall be reduced by 3/12ths of 1 percent for each month by which the benefit commencement date precedes the date the Participant would attain his Normal Retirement Date.
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(B) If the Participant is entitled to a Vested Pension, the payment amount shall be reduced to the Actuarial Equivalent of the amount payable at his Normal Retirement Date (if payment commences before such date), and the Section 4.6(b) reductions for any Pre-Retirement Spouse's coverage shall apply.
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(C) This clause applies if the Participant will receive his Pension in a form that provides an Eligible Spouse benefit, continuing for the life of the surviving spouse, that is greater than that provided under subparagraph (i). In this instance, the Participant's Pension under this section shall be reduced so that the total value of the benefit payable
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(D) This clause applies if the Participant will receive his Pension in a form that provides a survivor annuity for a beneficiary who is not his Eligible Spouse. In this instance, the Participant's Pension under this section shall be reduced so that the total value of the benefit payable on the Participant's behalf is the Actuarial Equivalent of a Single Life Annuity for the Participant's life.
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(E) This clause applies if the Participant will receive his Pension in a Annuity form that includes inflation protection described in Section 6.2(b). In this instance, the Participant's Pension under this section shall be reduced so that the total value of the benefit payable on the Participant's behalf is the Actuarial Equivalent of the elected Annuity without such protection.
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(iii) Lump Sum Conversion: The amount of the Retirement Pension determined under this section for a Participant whose Retirement Pension will be distributed in the form of a lump sum shall be the Actuarial Equivalent of the Participant's PEP Guarantee determined under this section, taking into account the value of any survivor benefit under subparagraph (i) above and any early retirement reductions under subparagraph (ii)(A) above.
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(a) Calculation: An Eligible Spouse's Pre-Retirement Spouse's Pre-409A Pension shall equal:
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(1) The Eligible Spouse's Total Pre-Retirement Spouse's Pension, minus
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(2) The Eligible Spouse's Salaried Plan Pre-Retirement Spouse's Pension.
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(b) Definitions: The following definitions apply for purposes of this section.
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(1) An Eligible Spouse's "Total Pre-Retirement Spouse's Pension" means the greater of:
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(i) The amount of the Eligible Spouse's pre-retirement spouse's pension determined under the principles and limitation of Section 5.1(b) and under the terms of the Salaried Plan as in effect on December 31, 2004, but without regard to: (A) the limitations imposed by sections 401(a)(17) and 415 of the Code (as such limitations are interpreted and applied under the Salaried Plan), and (B) the actuarial adjustment under Section 5.5(d) of the Salaried Plan (relating to benefits that are deferred beyond the Participant’s Normal Retirement Date); or
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(ii) The amount (if any) of the Eligible Spouse's PEP Guarantee Pre-Retirement Spouse's Pension determined under the principles and limitations of Section 5.1(b) and under subsection (c).
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In making this comparison, the benefits in subparagraphs (i) and (ii) above shall be calculated with reference to the specific time of payment applicable to the Eligible Spouse.
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(2) An “Eligible Spouse’s Salaried Plan Pre-Retirement Spouse’s Pension” means the Pre-Retirement Spouse’s Pension that would be payable to the Eligible Spouse under the principles and limitations of Section 5.1(b) under the terms of the Salaried Plan as in effect on December 31, 2004 (except as otherwise applicable under Section 5.1(b)).
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(c) PEP Guarantee Pre-Retirement Spouse's Pension: An Eligible Spouse's PEP Guarantee Pre-Retirement Spouse's Pension shall be determined in accordance with paragraph (1) or (2) below, whichever is applicable, with reference to the PEP Guarantee (if any) that would have been available to the Participant under Section 5.2.
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(1) Normal Rule: The Pre-Retirement Spouse's Pension payable under this paragraph shall be equal to the amount that would be payable as a survivor annuity, under a Qualified Joint and Survivor Annuity, if the Participant had:
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(i) Separated from service on the earliest of the date of death or his actual Severance from Service Date);
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(ii) Commenced a Qualified Joint and Survivor Annuity on the same date payments of the Qualified Pre-Retirement Spouse's Pension are to commence; and
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(iii) Died on the day immediately following such commencement.
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If payment of a Pre-Retirement Spouse's Pension under this paragraph commences or is deemed to commence prior to the date which would have been the Participant's Normal Retirement Date, appropriate reductions for early commencement shall be applied to the Qualified Joint and Survivor Annuity upon which the Pre-Retirement Spouse's Pension is based.
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(2) Special Rule for Active and Disabled Employees: Notwithstanding paragraph (1) above, the Pre-Retirement Spouse's Pension paid on behalf of a Participant described in Section 4.6(a) shall not be less than an amount equal to 25 percent of such Participant's PEP Guarantee (if any) determined under Section 5.2 in accordance with the principles and limitations of Section 5.1(b). For this purpose, Credited Service shall be determined as provided in Section 3.3(d)(2) of the Salaried Plan, and the deceased
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(a) Adjustments for Rehired Participants: This subsection shall apply to a current or former Participant who is reemployed after his Annuity Starting Date and whose benefit under the Salaried Plan is recalculated based on an additional period of Credited Service. In the event of any such recalculation, the Participant's PEP Pension shall also be recalculated hereunder. For this purpose, the PEP Guarantee under Section 5.2 is adjusted for in-service distributions and prior distributions in the same manner as benefits are adjusted under the Salaried Plan, but by taking into account benefits under this Plan and any specified plans.
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(a) No Advance Election: This subsection shall apply to a Participant: (i) who does not have an Advance Election in effect as of the close of business on the day before his Retirement Date, or (ii) who terminates employment prior to Retirement. Subject to the next sentence, a Participant described in this subsection shall be paid his Pre-409A Pension in the same form and at the same time as he is paid his Pension under the Salaried Plan. If a Participant's Salaried Plan Annuity Starting Date occurs while he is still an employee of the Yum! Brands Organization (because of the time of payment provisions in Code section 401(a)(9)), payment under the Plan shall not begin until the first of the month next following the Participant's Severance from Service Date. In this instance, the form of payment under Pre-409A Program shall remain that which is applicable under the Salaried Plan.
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(b) Advance Election in Effect: This subsection shall apply to a Participant: (i) who has an Advance Election in effect as of the close of business on the day before his Retirement Date, and (ii) whose Retirement Date is after 1993 and before 2009. To be in effect, an Advance Election must meet the advance receipt and other requirements of Section 6.4(b).
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(1) Lump Sum Election: If a Participant covered by this subsection has an Advance Election to receive a Single Lump Sum in effect as of the close of business on the day before his Retirement Date, the Participant's Pre-409A Retirement Pension under the Plan shall be paid as a Single Lump Sum as of the first of the month coincident with or next following his Retirement Date.
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(2) Annuity Election: If a Participant covered by this subsection has an Advance Election to receive an Annuity in effect as of the close of business on the day before his Retirement Date, the Participant's Pre-409A Retirement Pension under the Plan shall be paid in an Annuity beginning on the first of the month coincident with or next
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(i) Salaried Plan Election: A Participant who has a qualifying Salaried Plan election shall receive his distribution in the same form of Annuity the Participant selected in such qualifying Salaried Plan election. For this purpose, a "qualifying Salaried Plan election" is a written election of a form of payment by the Participant that: (A) is currently in effect under the Salaried Plan as of the close of business on the day before the Participant's Retirement Date, and (B) specifies an Annuity as the form of payment for all or part of the Participant's Retirement Pension under the Salaried Plan. For purposes of the preceding sentence, a Participant who elects a combination lump sum and Annuity under the Salaried Plan is considered to have specified an Annuity for part of his Salaried Plan Pension.
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(ii) PEP Election: A Participant who is not covered by subparagraph (i) and who has a PEP Election in effect as of the close of business on the day before his Retirement Date shall receive his distribution in the form of Annuity the Participant selects in such PEP Election.
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(iii) No PEP Election: A Participant who is not covered by subparagraph (i) or (ii) above shall receive his distribution in the form of a Qualified Joint and Survivor Annuity if he is married, or in the form of a Single Life Annuity if he is not married. For purposes of this subparagraph (iii), a Participant shall be considered married if he is married on the day before his Retirement Date.
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(a) Basic Forms of Payment: A Participant's Pre-409A Retirement Pension shall be distributed in one of the forms of payment listed in this subsection. The particular form of payment applicable to a Participant shall be determined in accordance with Section 6.1 or 6.2, as applicable. Payments shall commence on the date specified in Section 6.1 or 6.2 and shall end on the date specified in this subsection.
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(1) Single Life Annuity Option: A Participant may receive his Pre-409A Pension in the form of a Single Life Annuity, which provides monthly payments ending with the last payment due prior to his death.
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(2) Survivor Options: A Participant may receive his Pre-409A Pension in accordance with one of the following survivor options:
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(i) 100 Percent Survivor Option: The Participant shall receive a reduced Pre-409A Pension payable for life, ending with the last monthly payment due prior to his death. Payments in the same reduced amount shall continue after the Participant's death to his beneficiary for life, beginning on the first day of the month coincident with or following the Participant's death and ending with the last monthly payment due prior to the beneficiary's death.
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(ii) 75 Percent Survivor Option: The Participant shall receive a reduced Pre-409A Pension payable for life, ending with the last monthly
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(iii) 50 Percent Survivor Option: The Participant shall receive a reduced Pre-409A Pension payable for life, ending with the last monthly payment due prior to his death. Payments in the amount of 50 percent of such reduced Pre-409A Pension shall be continued after the Participant's death to his beneficiary for life, beginning on the first day of the month coincident with or following the Participant's death and ending with the last monthly payment due prior to the beneficiary's death. A 50 percent survivor option under this paragraph shall be a Qualified Joint and Survivor Annuity if the Participant's beneficiary is his Eligible Spouse.
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(iv) Ten Years Certain and Life Option: The Participant shall receive a reduced Pre-409A Pension which shall be payable monthly for his lifetime but for not less than 120 months. If the retired Participant dies before 120 payments have been made, the monthly Pension amount shall be paid for the remainder of the 120 month period to the Participant's primary beneficiary (or if the primary beneficiary has predeceased the Participant, the Participant's contingent beneficiary).
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(3) Single Lump Sum Payment Option: A Participant may receive payment of his Pre-409A Pension in the form of a Single Lump Sum payment.
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(4) Combination Lump Sum/Monthly Benefit Option: A Participant who does not have an Advance Election in effect may receive a portion of his Pre-409A
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(i) The amount of the Pre-409A Pension paid in the form of a lump sum is determined by multiplying: (A) the amount that would be payable to the Participant as a Single Lump Sum payment if the Participant's entire benefit were payable in that form, by (B) the percentage that the Participant has designated for receipt in the form of a lump sum.
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(ii) The amount of the Pre-409A Pension paid in the form of a monthly benefit is determined by multiplying: (A) the amount of the monthly benefit elected by the Participant, determined in accordance with paragraph (1) or (2) above (whichever applies), by (B) the percentage that the Participant has designated for receipt in the form of a monthly benefit.
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(b) Inflation Protection: The following levels of inflation protection may be provided to any Participant who is entitled to a Pre-409A Retirement Pension (except to the extent such Pre-409A Pension is paid as a lump sum).
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(1) 5 Percent Inflation Protection: A Participant's monthly benefit shall be initially reduced, but thereafter shall be increased if inflation in the prior year exceeds 5 percent. The amount of the increase shall be the difference between inflation in the prior year and 5 percent.
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(2) 7 Percent Inflation Protection: A Participant's monthly benefit shall be initially reduced, but thereafter shall be increased if inflation in the prior year exceeds 7 percent. The amount of the increase shall be the difference between inflation in the prior year and 7 percent.
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Benefits shall be subject to increase in accordance with this subsection each January 1, beginning with the second January 1 following the Participant's Annuity Starting Date. The amount of inflation in the prior year shall be determined based on inflation in the 12-month period ending on September 30 of such year, with inflation measured in the same manner as applies on the Effective Date for adjusting Social Security benefits for changes in the cost of living. Inflation protection that is in effect shall carry over to any survivor benefit payable on behalf of a Participant, and shall increase the otherwise applicable survivor benefit as provided above. Any election by a Participant to receive inflation protection shall be irrevocable by such Participant or his surviving beneficiary.
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(c) Available Options for Vested Benefits Prior to January 1, 2009: For periods prior to January 1, 2009, the forms of payment available for a Participant with a Pre-409A Vested Pension were are a Qualified Joint and Survivor Annuity for married Participants and a Single Life Annuity for both married and unmarried Participants, determined in accordance with Section 6.2(a). For periods after December 31, 2008, the applicable form of payment for Participants entitled to a Pre-409A Vested Pension shall be determined in accordance with Section 6.1(b).
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(a) In General: To qualify as an Advance Election or PEP Election for purposes of Section 6.2, an election must be made in writing, on the form designated by the Plan
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(b) Advance Election: To qualify as an Advance Election, an election must be made under this Plan on or after the Effective Date (or must have been made under the Prior Plan on or after July 15, 1993) and prior to January 1, 2009, and it must meet the following requirements.
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(1) Election: The Participant shall designate on the Advance Election form whether the Participant elects to take his Pre-409A Pension in the form of an Annuity or a Single Lump Sum.
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(2) Receipt by Plan Administrator: The Advance Election must be received by the Plan Administrator before the earlier of (i) January 1, 2009, and (ii) the start of the calendar year containing the Participant's Retirement Date, and such election must be received by the Plan Administrator at least 6 months before the Participant’s Retirement Date. An election that meets the foregoing requirements shall remain effective until it is changed or revoked as provided in paragraph (3).
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(3) Change or Revocation of Election: A Participant shall not be permitted to change or revoke an Advance Election after December 31, 2008. Prior to this date, a Plan Participant may change an Advance Election by filing a new Election that meets the foregoing requirements of this subsection (b). A Participant may revoke an Advance Election only by filing a revocation that is received by the Plan Administrator before the earlier of (i) January 1, 2009, and (ii) the start of the calendar year containing the Plan Participant's Retirement Date, and such revocation must be received by the Plan Administrator at least 6 months before the Participant’s Retirement Date.
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Any Advance Election by a Participant shall be void if the Participant is not entitled to a Pre-409A Retirement Pension.
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(c) PEP Election: A PEP Election may only be made by a Participant who has an Advance Election to receive an Annuity in effect at the time his PEP Election is received by the Plan Administrator. In determining whether an Advance Election is in effect for this purpose, the advance receipt requirement of subsection (b)(2) shall be considered met if it will be met by the Participant's proposed Retirement Date.
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(1) Election: The Participant shall designate on the PEP Election form the Annuity form of benefit the Participant selects from those described in Section 6.3, including the Participant's choice of inflation protection, subject to the provisions of this Article VI. The forms of payment described in Section 6.3(a)(3) and (4) are not available pursuant to a PEP Election.
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(2) Receipt by the Plan Administrator: The PEP Election must be received by the Plan Administrator no earlier than 180 days (90 days prior to January 1, 2007) before the Participant's Retirement Date, and no later than the close of business on the day before the Participant's Retirement Date. The Participant shall furnish proof of the age of his beneficiary (including his Eligible Spouse if applicable), to the Plan Administrator by the day before the Participant's Retirement Date, for any form of payment which is subject to reduction in accordance with subsection 6.3(c) above.
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A Participant may change his PEP Election by filing a new Election with the Plan Administrator that meets the foregoing requirements. The Participant's PEP Election shall become effective at the close of business on the day before the Participant's Retirement Date. Any PEP Election by a Participant shall be void if the Participant does not have an Advance Election in effect at such time.
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(d) Elections Rules for Annuity Starting Dates: When amounts become payable to a Participant in accordance with Article IV, they shall be payable as of the Participant's Annuity Starting Date and the election procedures (in this section and Sections 6.1, 6.2 and 6.5) shall apply to all of the Participant's unpaid accruals under this Pre-409A Program as of such Annuity Starting Date, with the following exception. In the case of a Participant who is rehired after his initial Annuity Starting Date and who (i) is currently receiving an Annuity that remained in pay status upon rehire, or (ii) was previously paid a lump sum distribution (other than a cashout distribution described in Section 4.9(a)), the Participant's subsequent Annuity Starting Date (as a result of his termination of reemployment), and the election procedures at such subsequent Annuity Starting Date, shall apply only to the portion of his benefit that accrues after his rehire. Any prior accruals that remain to be paid as of the Participant's subsequent Annuity Starting Date shall continue to be payable in accordance with the elections made at his initial Annuity Starting Date under this Pre-409A Program.
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(a) Effect of Certain Deaths: If a Participant makes a PEP Election for a form of payment described in Section 6.3(a)(2) and the Participant or his beneficiary (beneficiaries in the case of Section 6.3(a)(2)(iv)) dies before the PEP Election becomes effective, the election shall be disregarded. If the Participant dies after such PEP Election becomes effective but before his Pre-409A Retirement Pension actually commences, the election shall be given effect and the amount payable to his surviving Eligible Spouse or other beneficiary shall commence on the first
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(b) Nonspouse Beneficiaries: If a Participant's beneficiary is not his Eligible Spouse, he may not elect:
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(1) The 100 percent survivor option described in Section 6.3(a)(2)(i) if his nonspouse beneficiary is more than 10 years younger than he is, or
(2) The 75 percent survivor option described in Section 6.3(a)(2)(ii) if his nonspouse beneficiary is more than 19 years younger than he is.
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(a) The specific reason or reasons for such denial;
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(b) Specific reference to pertinent Plan provisions on which the denial is based;
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(c) A description of any additional material or information necessary for the claimant to submit to perfect the claim and an explanation of why such material or information is necessary; and
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(d) A description of the Plan's claim review procedure (including the time limits applicable to such process and a statement of the claimant’s right to bring a civil action following a further denial on review).
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(a) Excess Benefit Plan: An excess benefit plan within the meaning of section 3(36) of ERISA, maintained solely for the purpose of providing benefits for Salaried Plan participants in excess of the limitations on benefits imposed by section 415 of the Code.
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(b) Excess Compensation High Hat Plan: A plan maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees within the meaning of sections 201(2) and 401(a)(1) of ERISA. This plan provides benefits for Salaried Plan participants in excess of the limitations imposed by section 401(a)(17) of the Code on benefits under the Salaried Plan (after taking into account any benefits under the excess benefit plan). For ERISA reporting purposes, this portion of PEP may be referred to as the Tricon Pension Equalization Plan I.
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(c) Preservation Top Hat Plan: A plan maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees within the meaning of sections 201(2) and 401(a)(1) of ERISA. This plan provides grandfather benefits to those Salaried Plan participants described in section 5.2(a) hereof, by preserving for them the pre-1989 level of benefit accrual that was in effect before January 1, 1989 (after taking into account any benefits under the Excess Benefit Plan and Excess Compensation Top Hat Plan). For ERISA reporting purposes, this portion of PEP shall be referred to as the Tricon Pension Equalization Plan II.
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YUM! BRANDS, INC.
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By: | /s/ Anne Byerlein | ||||||
Chief People Officer |
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(a) Minimum 1993 Pension: Any individual who is covered by this section shall accrue a minimum 1993 Pension as of December 31, 1993. In determining the amount of such individual's minimum 1993 Pension, the following shall apply.
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(1) An individual's Service and Credited Service as of the end of 1993 shall be assumed to equal the respective Service and Credited Service he would have if his Service continued through December 31, 1994. Notwithstanding the preceding sentence, the assumed period of continued Service shall be less to the extent PepsiCo, Inc.’s human resource records on December 31, 1993 reflected a scheduled termination date in 1994 for such individual. In this case, the individual's assumed period of continued service shall be the portion of 1994 that ends with such scheduled termination date.
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(2) An individual's Highest Average Monthly Earnings as of the end of 1993 shall be adjusted by the actuary's salary scale assumption which is used under the
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(i) A higher salary scale assumption shall be used for anyone whose projected 1994 earnings as reflected on the "Special PEP Salary Scale" of the PepsiCo Benefits Department on December 31, 1993 were higher than would be assumed under the first sentence of this paragraph. In this case, the individual's 1993 earnings shall be adjusted using such higher salary scale.
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(ii) In the case of an individual whose assumed period of service under paragraph (1) above is less than all of 1994, the salary adjustment under the preceding provisions of this paragraph shall be reduced to the amount that would apply if the individual had no earnings after his scheduled termination date.
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(3) An individual's attained age as of the end of 1993 shall be assumed to be the age he would have at the end of the assumed period of continued service applicable under paragraph (1) above.
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Any individual who is covered by this section, and who is not otherwise vested as of December 31, 1993, shall be vested as of such date in both his Pension (determined without regard to this subsection) and his minimum 1993 Pension. For purposes of this subsection, Code section 401(a)(17) shall be applied in 1993 by giving effect to the amendments to such Code section made by the Omnibus Budget Reconciliation Amendments of 1993.
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(b) Determination of 1994 Accrual: If a participant in the Salaried Plan accrues a minimum 1993 Pension under subsection (a) above, the amount of any PEP Pension that accrues thereafter (under the Prior Plan or this Plan) shall be only the amount by which the PEP Pension that would otherwise accrue for years after 1993 exceeds his minimum 1993 Pension under subsection (a).
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(c) PepsiCo Organization: As of the time in question, the controlled group of organizations of which PepsiCo, Inc. was a part, as defined by Code section 414 and regulations issued thereunder.
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