Exhibit 10.39


 


SECOND AMENDMENT

OF ESI 401(k) PLAN


 


This Second
Amendment of ESI 401(k) Plan is adopted by ITT Educational Services, Inc.


 


Background


 


A.            Effective May 16, 1998, ITT
Educational Services, Inc. (“Employer”) amended and completely restated the ESI
401(k) Plan (“Plan”).


 


B.            The Plan has been amended by a First
Amendment.


 


C.            The Employer wishes to amend the
Plan further.


 


Amendment


 


Effective January
1, 2003, the Plan is amended to add a new Article Nineteen to read as follows:


 


ARTICLE NINETEEN

MINIMUM DISTRIBUTION REQUIREMENTS


 


19.1        General Rules.


 


(a)           Effective
Date.  The provisions of this Article
will apply for purposes of determining required minimum distributions for
calendar years beginning with the 2003 calendar year.


 


(b)           Precedence.  The requirements of this Article will take
precedence over any inconsistent provision of the Plan.  For required minimum distributions made for
calendars years beginning with the 2003 calendar year, the requirements of this
Article will replace the rules described in Section 11.1(f).


 


(c)           Requirements
of Treasury Regulations Incorporated. 
All distributions required under this Article will be determined and
made in accordance with the Treasury Regulations under Code Section 401(a)(9).


 


19.2        Time and Manner of Distribution.


 


(a)           Required
Beginning Date.  The Member’s entire
interest will be distributed, or begin to be distributed, to the Member no
later than the Member’s required beginning date.


 


(b)           Death
of Member Before Distributions Begin. 
Unless the Member or Beneficiary elects to apply the Five-Year Rule as
provided in Section 19.5, if the Member dies before


 

















 


distributions
begin, the Member’s entire interest will be distributed, or begin to be
distributed, no later than as follows:


 


(i)            If
the Member’s surviving spouse is the Member’s sole designated Beneficiary, then
distributions to the surviving spouse will begin by December 31 of the
calendar year immediately following the calendar year in which the Member died,
or by December 31 of the calendar year in which the Member would have
attained age 701⁄2, if later.


 


(ii)           If
the Member’s surviving spouse is not the Member’s sole designated Beneficiary,
then distributions to the Beneficiary will begin by December 31 of the calendar
year immediately following the calendar year in which the Member died.


 


(iii)          If
there is no designated Beneficiary as of September 30 of the year following the
year of the Member’s death, the Member’s entire interest will be distributed by
December 31 of the calendar year containing the fifth anniversary of the
Member’s death.


 


(iv)          If
the Member’s surviving spouse is the Member’s sole designated Beneficiary and
the surviving spouse dies after the Member but before distributions to the
surviving spouse begin, this paragraph (b), other than paragraph (b)(i), will
apply as if the surviving spouse were the Member.


 


For purposes of this Section 19.2(b) and Section 19.4,
unless Section  19.2(b)(iv) applies, distributions are considered to begin
on the Member’s required beginning date.  If Section 19.2(b)(iv) applies, distributions are considered to
begin on the date distributions are required to begin to the surviving spouse
under Section 19.2(b)(i).  If distributions
under an annuity purchased from an insurance company irrevocably commence to
the Member before the Member’s required beginning date (or to the Member’s
surviving spouse before the date distributions are required to begin to the
surviving spouse under Section 19.2(b)(i)), the date distributions are
considered to begin is the date distributions actually commence.


 


(c)           Forms
of Distribution.  Unless the Member’s
interest is distributed in the form of an annuity purchased from an insurance
company or in a single sum on or before the required beginning date, as of the
first distribution calendar year, distributions will be made in accordance with
Sections 19.3 and 19.4.  If the Member’s
interest is distributed in the form of an annuity purchased from an insurance
company, distributions thereunder will be made in accordance with the
requirements of Code Section 401(a)(9) and the Treasury Regulations.


 


19.3        Required Minimum Distributions During
Member’s Lifetime.


 


(a)           Amount
of Required Minimum Distribution For Each Distribution Calendar Year.  During the Member’s lifetime, the minimum
amount that will be distributed for each distribution calendar year is the
lesser of:


 


(i)            The
quotient obtained by dividing the Member’s Account balance by the distribution
period in the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury
Regulations, using the Member’s age as of the Member’s birthday in the
distribution calendar year; or


 


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(ii)           If
the Member’s sole designated Beneficiary for the distribution calendar year is
the Member’s spouse, the quotient obtained by dividing the Member’s Account
balance by the number in the Joint and Last Survivor Table set forth in Section
1.401(a)(9)-9 of the Treasury Regulations, using the Member’s and spouse’s
attained ages as of the Member’s and spouse’s birthdays in the distribution
calendar year.


 


(b)           Lifetime
Required Minimum Distributions Continue Through Year of Member’s Death.  Required minimum distributions will be
determined under this Section 19.3 beginning with the first distribution
calendar year and up to and including the distribution calendar year that
includes the Member’s date of death.


 


19.4        Required Minimum Distributions After
Member’s Death.


 


(a)           Death
On or After Date Distributions Begin.


 


(i)            Member
Survived by Designated Beneficiary.  If
the Member dies on or after the date distributions begin and there is a
designated Beneficiary, the minimum amount that will be distributed for each
distribution calendar year after the year of the Member’s death is the quotient
obtained by dividing the Member’s Account balance by the longer of the
remaining life expectancy of the Member or the remaining life expectancy of the
Member’s designated Beneficiary, determined as follows:


 


(1)                                  The Member’s remaining life expectancy is calculated using the age of the
Member in the year of death, reduced by one for each subsequent year.


 


(2)                                  If the Member’s surviving spouse is the Member’s sole designated
Beneficiary, the remaining life expectancy of the surviving spouse is
calculated for each distribution calendar year after the year of the Member’s
death using the surviving spouse’s age as of the spouse’s birthday in that
year.  For distribution calendar years
after the year of the surviving spouse’s death, the remaining life expectancy
of the surviving spouse is calculated using the age of the surviving spouse as
of the spouse’s birthday in the calendar year of the spouse’s death, reduced by
one for each subsequent calendar year.


 


(3)                                  If the Member’s surviving spouse is not the Member’s sole designated
Beneficiary, the Beneficiary’s remaining life expectancy is calculated using
the age of the Beneficiary in the year following the year of the Member’s
death, reduced by one for each subsequent year.


 


(ii)           No
Designated Beneficiary.  If the Member dies
on or after the date distributions begin and there is no designated Beneficiary
as of September 30 of the year after the year of the Member’s death, the
minimum amount that will be distributed for each distribution calendar year
after the year of the Member’s death is the quotient obtained by dividing the
Member’s Account balance by the Member’s remaining life expectancy calculated
using the age of the Member in the year of death, reduced by one for each
subsequent year.


 


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(b)           Death
Before Date Distributions Begin.  Unless
the Member or Beneficiary elects to apply the Five-Year Rule as provided in
Section 19.5, if the Member dies before distributions begin, the Member’s
entire interest will be distributed, or begin to be distributed, no later than
as follows:


 


(i)            Member
Survived by Designated Beneficiary.  If
the Member dies before the date distributions begin and there is a designated
Beneficiary, the minimum amount that will be distributed for each distribution
calendar year after the year of the Member’s death is the quotient obtained by
dividing the Member’s Account balance by the remaining life expectancy of the
Member’s designated Beneficiary, determined as provided in paragraph (a).


 


(ii)           No
Designated Beneficiary.  If the Member
dies before the date distributions begin and there is no designated Beneficiary
as of September 30 of the year following the year of the Member’s death,
distribution of the Member’s entire interest will be completed by December 31
of the calendar year containing the fifth anniversary of the Member’s death.


 


(iii)          Death
of Surviving Spouse Before Distributions to Surviving Spouse Are Required to
Begin.  If the Member dies before the
date distributions begin, the Member’s surviving spouse is the Member’s sole
designated Beneficiary, and the surviving spouse dies before distributions are
required to begin to the surviving spouse under Section 19.2(b)(i), this
paragraph (b) will apply as if the surviving spouse were the Member.


 


19.5        Election to Use Five-Year Rule.


 


A Member or Beneficiary may elect to apply the
Five-Year Rule or the life expectancy rule of Sections 19.2(b) or 19.4(b).  The Member’s or Beneficiary’s election must
be made no later than the earlier of September 30 of the calendar year in which
distribution would be required to begin under Section 19.2(b), or by September
30 of the calendar year which contains the fifth anniversary of the Member’s
(or, if applicable, surviving spouse’s) death.


 


19.6        Definitions.


 


(a)           Designated
Beneficiary.  A “designated Beneficiary”
is an individual who is designated as the Beneficiary under Section 2.9 of the
Plan and is the designated Beneficiary under Code Section 401(a)(9) and
Treasury Regulation 1.401(a)(9)-1, Q&A-4.


(b)           Distribution
Calendar Year.  A “distribution calendar
year” is the calendar year for which a minimum distribution is required.  For distributions beginning before the
Member’s death, the first distribution calendar year is the calendar year
immediately preceding the calendar year which contains the Member’s required
beginning date.  For distributions
beginning after the Member’s death, the first distribution calendar year is the
calendar year in which distributions are required to begin under Section
19.2(b).  The required minimum
distribution for the Member’s first distribution calendar year will be made on
or before the Member’s required beginning date.  The required minimum distribution for other distribution calendar
years, including the required minimum distribution for the distribution
calendar year in which the Member’s required beginning date occurs, will be
made on or before December 31 of that distribution calendar year.


 


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(c)           Five-Year
Rule.  The “Five-Year Rule” requires
that a Member’s entire interest be distributed by December 31 of the calendar
year containing the fifth anniversary of the Member’s death.


 


(d)           Life
Expectancy.  “Life expectancy” is the
life expectancy computed by use of the Single Life Table in Treasury Regulation
1.401(a)(9)-9.


 


(e)           Member.  For purposes of Article 19 of the Plan, the
term “Member” includes any Member and, where applicable, any Deferred Member.


 


(f)            Member’s
Account Balance.  A Member’s “Account
balance” is the Account balance as of the last Valuation Date in the calendar
year immediately preceding the distribution calendar year (valuation calendar
year) increased by the amount of any contributions made and allocated or
forfeitures allocated to the Account balance as of dates in the valuation
calendar year after the Valuation Date and decreased by distributions made in
the valuation calendar year after the Valuation Date.  The Account balance for the valuation calendar year includes any
amounts rolled over or transferred to the Plan either in the valuation calendar
year or in the distribution calendar year if distributed or transferred in the
valuation calendar year.


 


(g)           Required
Beginning Date.  “Required beginning
date” is the first day of April following the calendar year in which occurs the
later of (i) the date the Member attains age 701⁄2, or (ii) the date the Member
terminates employment.


 


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This Second
Amendment of ESI 401(k) Plan is executed on behalf of ITT Educational Services,
Inc. by its duly authorized officer this 15 day of December, 2003.


 


 


	
   

  	
  ITT EDUCATIONAL SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/   Nina F. Esbin

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
  Nina Esbin

  	
   

  
	
   

  	
  (Printed)

  
	
   

  	
  VP, Human Resources

  	
   

  
	
   

  	
  (Title)

  
	
   

  	
   

  
	
  ATTEST:

  	
   

  
	
   

  	
   

  
	
  /s/ Jenny Yonce

  	
   

  	
   

  
	
  (Signature)

  	
   

  
	
  Jenny Yonce

  	
   

  	
   

  
	
  (Printed)

  	
   

  
	
  Mgr, Benefits & HRIS

  	
   

  	
   

  
	
  (Title)

  	
   

  
					



 


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