<PAGE>
As filed with the Securities and Exchange Commission on March 6, 1998
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
THE PMI GROUP, INC.
(Exact name of issuer as specified in its charter)
Delaware 94-3199675
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
601 Montgomery Street, San Francisco, CA 94111
(Address of Principal Executive Offices)
THE PMI GROUP, INC. SAVINGS AND PROFIT-SHARING PLAN
(Full Title of the Plan)
Victor J. Bacigalupi
The PMI Group, Inc.
601 Montgomery Street
San Francisco, CA 94111
(Name and address of agent for service)
Telephone number, including area code, of agent for service:
(415) 788-7878
Copies to:
John E. Aguirre
Orrick, Herrington & Sutcliffe LLP
400 Sansome Street
San Francisco, CA 94111
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C> <C> <C> <C>
Title of Amount to Proposed maximum Proposed maximum Amount of fee
securities to be registered offering price aggregate offering
registered per share* price*
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock 50,000 shares $30.625 $1,531.25 $452.00
====================================================================================================================================
</TABLE>
* Estimated solely for the purpose of calculating the registration fee pursuant
to Rule 457(c), on the basis of $30.625, the average of the high and low prices
of shares on the New York Stock Exchange on March 4, 1998.
** In addition, pursuant to Rule 416(c) under the Securities Act of 1933, this
registration statement also covers an indeterminate amount of interests to be
offered or sold pursuant to the employee benefit plan described herein.
<PAGE>
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated by reference in this registration
statement: (i) The PMI Group, Inc.'s (the "Company") Annual Report on Form 10-K
for the year ended December 31, 1996 and The PMI Group, Inc. Savings and Profit-
Sharing Plan's (the "Plan") Annual Report on Form 11-K for the year ended
December 31, 1996, filed pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); (ii) all other reports
filed by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act
since the end of the fiscal year covered by the Annual Reports referred to in
clause (i) above; and (iii) the description of the Company's Common Stock filed
pursuant to the Exchange Act, including any amendment or report filed for the
purpose of updating such description. All documents filed by the Company or the
Plan after the date of this registration statement pursuant to Sections 13(a),
13(c), 14, and 15(d) of the Exchange Act, prior to the filing of a post-
effective amendment (that indicates all securities offered have been sold or
deregisters all securities then remaining unsold), shall be deemed to be
incorporated by reference in this registration statement and to be a part hereof
from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES
Inapplicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Inapplicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, inter alia, empowers
a Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Similar indemnity is authorized for such person against expenses (including
attorneys' fees) actually and
1
<PAGE>
reasonably incurred in connection with the defense or settlement of any such
threatened, pending or completed action or suit if such person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation, and provided further that (unless a court
of competent jurisdiction otherwise provides) such person shall not have been
adjudged liable to the corporation. Any such indemnification may be made only as
authorized in each specific case upon a determination by the stockholders or
disinterested directors or, if there are no disinterested directors, or if such
disinterested directors so direct, by independent legal counsel in a written
opinion that indemnification is proper because the indemnitee has met the
applicable standard of conduct.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145. The Company
maintains policies insuring its and its subsidiaries' officers and directors
against certain liabilities for actions taken in such capacities, including
liabilities under the Securities Act of 1933.
Article V of the By-laws of the Company provides for indemnification of
the directors and officers of the Company to the fullest extent permitted by
law, as now in effect or later amended. In addition, the By-laws provide for
indemnification against expenses incurred by a director or officer to be paid by
the Company in advance of the final disposition of such action, suit or
proceeding; provided, however, that if required by the Delaware General
Corporation Law, an advancement of expenses will be made only upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall be ultimately determined that he is not entitled to be indemnified by
the Company. The By-laws further provide for a contractual cause of action on
the part of directors and officers of the Company with respect to
indemnification claims which have not been paid by the Company.
The Company also has provided liability insurance for each director and
officer for certain losses arising from claims or charges made against them
while acting in their capacities as directors or officers of the Company.
The Company has entered into indemnification agreements with its directors
and executive officers that require the Company to indemnify such persons
against all expenses (including attorneys' fees and amounts paid in settlement),
judgments, fines and penalties which are actually incurred in connection with
any threatened, pending or completed action, suit or other proceeding
2
<PAGE>
(including an action by or in the right of the Company) to which such person is,
was or is threatened to be made a party, by reason of the fact that such person
is or was a director or officer of the Company, or is or was serving at the
request of the Company as a director, officer, employee or other agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, to the fullest extent permitted by applicable law and the
Company's Restated Certificate of Incorporation and By-laws. The indemnification
agreements also set forth certain procedures that will apply in the event of a
claim for indemnification thereunder.
Article Nine of the Company's Restated Certificate of Incorporation limits
to the fullest extent permitted by the Delaware General Corporation Law, as the
same exists or may have been amended, the personal liability of the Company's
directors to the Company or its stockholders for monetary damages for a breach
of their fiduciary duty as directors. Section 102(b)(7) of the Delaware General
Corporation Law currently provides that such provisions do not eliminate or
limit the liability of a director (i) for a breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law (relating
to the declaration of dividends and purchase or redemption of shares in
violation of the Delaware General Corporation Law), or (iv) for any transaction
from which the director derived an improper personal benefit.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Inapplicable.
ITEM 8. EXHIBITS
4.1 The PMI Group, Inc. Savings and Profit-Sharing Plan, as amended through
January 1, 1998.
4.2 Restated Certificate of Incorporation of The PMI Group, Inc. (incorporated
by reference to Exhibit 3.1 to the registrant's Registration Statement on
Form S-1, Commission File No. 33-88542).
4.3 By-Laws of The PMI Group, Inc. (incorporated by reference to Exhibit 3.2
to the registrant's Registration Statement on Form S-1, Commission File
No. 33-88542).
5.1 Undertaking re Status of Favorable Determination Letter Covering the Plan.
The PMI Group, Inc. (the "Company") has received a favorable determination
letter from the Internal Revenue Service (the "IRS") concerning The PMI
Group, Inc. Savings and Profit-Sharing Plan's (the "Plan") qualification
under
3
<PAGE>
Section 401(a) and related provisions of the Internal Revenue Code of
1986, as amended. In addition, the Company will submit any future
material amendments to the Plan to the IRS for a favorable determination
that the Plan, as amended, continues to so qualify.
5.2 Opinion of Orrick, Herrington & Sutcliffe LLP.
23.1 Consent of Deloitte & Touche LLP, Independent Auditors.
23.2 Consent of Orrick, Herrington & Sutcliffe LLP is included in Exhibit 5.2
to this Registration Statement.
24.1 Power of Attorney of Directors.
24.2 Power of Attorney of the Plan Committee for The PMI Group, Inc. Savings
and Profit-Sharing Plan.
ITEM 9. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
4
<PAGE>
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of the
Plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
5
<PAGE>
Signatures
THE REGISTRANT
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, State of California on the 4th day of
March, 1998.
THE PMI GROUP, INC.
(Registrant)
/s/ W. Roger Haughton
- ---------------------------------------
W. Roger Haughton
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dated indicated.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dated indicated.
Signature Title Date
Principal Executive Officer:
/s/ W. Roger Haughton
- ---------------------------- March 4, 1998
W. Roger Haughton President
and Chief
Executive Officer
Principal Financial
Officer:
/s/ John M. Lorenzen, Jr.
- ---------------------------- March 4, 1998
John M. Lorenzen, Jr. Executive Vice
President and Chief
Financial Officer
Principal Accounting
Officer:
/s/ William A. Seymore
____________________________ March 4, 1998
William A. Seymore Vice President
and Controller
6
<PAGE>
Directors:
*
____________________________ March 4, 1998
W. Roger Haughton Director
*
____________________________ March 4, 1998
Wayne E. Hedien Director
*
____________________________ March 4, 1998
Edward M. Liddy Director
*
____________________________ March 4, 1998
Donald C. Clark Director
*
____________________________ March 4, 1998
Kenneth T. Rosen Director
*
____________________________ March 4, 1998
Mary Lee Widener Director
*
____________________________ March 4, 1998
Richard L. Thomas Director
*
____________________________ March 4, 1998
James C. Castle Director
*
____________________________ March 4, 1998
John D. Roach Director
/s/ Victor J. Bacigalupi
*By: __________________________
Victor J. Bacigalupi
Senior Vice President, General Counsel and Secretary
A majority of the members of the Board of Directors.
7
<PAGE>
THE PLAN
Pursuant to the requirements of the Securities Act of 1933, the Plan has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Francisco, State of
California, on the 4th day of March, 1998.
THE PMI GROUP, INC. SAVINGS AND PROFIT-SHARING PLAN
Signature Title Date
*
- ------------------------------
Victor J. Bacigalupi Member of the March 4, 1998
Plan Committee
*
- ------------------------------
Charles F. Broom Member of the March 4, 1998
Plan Committee
*
- ------------------------------
John M. Lorenzen, Jr. Member of the March 4, 1998
Plan Committee
/s/ Victor J. Bacigalupi
*By ___________________________
Victor J. Bacigalupi
Senior Vice President, General Counsel and Secretary
A majority of the members of the Plan Committee for The PMI Group, Inc. Savings
and Profit-Sharing Plan.
8
<PAGE>
EXHIBIT INDEX
4.1 The PMI Group, Inc. Savings and Profit-Sharing Plan, as amended through
January 1, 1998.
4.2 Restated Certificate of Incorporation of The PMI Group, Inc.
(incorporated by reference to Exhibit 3.1 to the registrant's
Registration Statement on Form S-1, Commission File No. 33-88542).
4.3 By-Laws of The PMI Group, Inc. (incorporated by reference to Exhibit 3.2
to the registrant's Registration Statement on Form S-1, Commission File
No. 33-88542).
5.1 Undertaking re Status of Favorable Determination Letter Covering the Plan
(See Item 8 of this Registration Statement).
5.2 Opinion of Orrick, Herrington & Sutcliffe LLP.
23.1 Consent of Deloitte & Touche LLP, Independent Auditors.
23.2 Consent of Orrick, Herrington & Sutcliffe LLP is included in Exhibit 5.2
to this Registration Statement.
24.1 Power of Attorney of Directors.
24.2 Power of Attorney of the Plan Committee for The PMI Group, Inc. Savings
and Profit-Sharing Plan.
9
<PAGE>
Exhibit 4.1
Conformed
The PMI Group, Inc. Savings and Profit-Sharing Plan and Trust
Through Amendment No. 2 and Change in Trustee Amendment
Effective January 1, 1998
The PMI Group, Inc. hereby establishes The PMI Group, Inc. Savings and Profit-
Sharing Plan effective April 1, 1995, for the benefit of eligible employees of
the Company and its participating affiliates. The Plan is intended to
constitute (i) a qualified profit sharing plan, as described in Code section
401(a), which includes a qualified cash or deferred arrangement, as described in
Code section 401(k), and (ii) an eligible individual account plan as described
in ERISA section 407(d)(3). It is intended that on or about February 1, 1996,
assets from The Savings and Profit Sharing Fund of Allstate Employees
attributable to the account balances thereunder of participants who immediately
preceding the date of the transfer are employees of The PMI Group, Inc., or an
affiliate thereof, shall be transferred to the Plan.
The provisions of this Plan and Trust relating to the Trustee constitute the
trust agreement which is entered into by and between The PMI Group, Inc. and
Merrill Lynch Trust Company, FSB. The Trust is intended to be tax exempt as
described under Code section 501(a).
The PMI Group, Inc. Savings and Profit-Sharing Plan and Trust, as set forth in
this document, is hereby effective as of April 1, 1995 and includes all
amendments thereafter through January 1, 1998.
Date:_______________, 19____ The PMI Group, Inc.
By:______________________________
Title:__________________________
The trust agreement set forth in those provisions of this Plan and Trust which
relate to the Trustee is hereby executed.
Date:_______________, 19____ Merrill Lynch Trust Company, FSB
By:______________________________
Title:__________________________
1
<PAGE>
1 DEFINITIONS
-----------
When capitalized, the words and phrases below have the following meanings
unless different meanings are clearly required by the context:
1.1 "Account". The records maintained for purposes of accounting for a
Participant's interest in the Plan. "Account" may refer to one or all
of the following accounts which have been created on behalf of a
Participant to hold specific types of Contributions under the Plan or
amounts transferred on behalf of a Participant from The Allstate Plan:
(a) "Pre-Tax Account". An account created to hold Pre-Tax
Contributions and amounts transferred from The Allstate Plan
designated as "Basic Pre-Tax Deposits and Additional Pre-Tax
Deposits" amounts thereunder.
(b) "After-Tax Transfers Account". An account created to hold
amounts transferred from The Allstate Plan designated as "After-
Tax Deposits" amounts thereunder.
(c) "Rollover Account". An account created to hold Rollover
Contributions.
(d) "Company Match Cash Account". An account created to hold basic
Company Matching Contributions.
(e) "Company Match Stock Account". An account created to hold
supplemental Company Matching Contributions.
(f) "Prior Employer Account". An account created to hold amounts
transferred from The Allstate Plan designated as "Employers'
Contribution" amounts thereunder."
(g) "Qualified Nonelective Account". An account created to hold
Qualified Nonelective Contributions.
1.2 "ACP" or "Average Contribution Percentage". The percentage calculated
in accordance with Section 12.1.
1.3 "Administrator". The Company, which may delegate all or a portion of
the duties of the Administrator under the Plan to a Committee in
accordance with Section 15.6.
1.4 "ADP" or "Average Deferral Percentage". The percentage calculated in
accordance with Section 12.1.
1
<PAGE>
1.5 "Allstate Plan Accounts". A Participant's After-Tax Transfers and
Prior Employer Accounts.
1.6 "Allstate Stock". Shares of common stock of The Allstate Corporation,
its predecessor(s), or its successors or assigns, or any corporation
with or into which said corporation may be merged, consolidated or
reorganized, or to which a majority of its assets may be sold.
1.7 "Beneficiary". The person or persons who is to receive benefits after
the death of the Participant pursuant to the "Beneficiary Designation"
paragraph in Section 11, or as a result of a QDRO.
1.8 "Code". The Internal Revenue Code of 1986, as amended. Reference to
any specific Code section shall include such section, any valid
regulation promulgated thereunder, and any comparable provision of any
future legislation amending, supplementing or superseding such
section.
1.9 "Committee". If applicable, the committee which has been appointed by
the Company to administer the Plan in accordance with Section 15.6.
1.10 "Company". The PMI Group, Inc. or any successor by merger, purchase
or otherwise.
1.11 "Company Stock". Shares of common stock of the Company, its
predecessor(s), or its successors or assigns, or any corporation with
or into which said corporation may be merged, consolidated or
reorganized, or to which a majority of its assets may be sold.
1.12 "Compensation". The sum of a Participant's Taxable Income and salary
reductions, if any, pursuant to Code section 125, 402(e)(3),
402(h)(1)(B), 403(b), 408(p)(2)(A)(i) or 457.
For purposes of determining benefits under the Plan, Compensation is
limited to $150,000 per Plan Year, (as adjusted for cost of living
increases pursuant to Code sections 401(a)(17) and 415(d)).
For purposes of determining HCEs and key employees and for purposes of
Section 13.2, Compensation for the entire Plan Year shall be used.
For purposes of determining ADP and ACP, Compensation shall be limited
to amounts paid to an Eligible Employee while a Participant.
1.13 "Contribution". An amount contributed to the Plan by the Employer or
an Eligible Employee, and allocated by
2
<PAGE>
contribution type to Participants' Accounts, as described in Section
1.1. Specific types of contribution include:
(a) "Pre-Tax Contribution". An amount contributed by an eligible
Participant in conjunction with his or her Code section 401(k)
salary deferral election which shall be treated as made by the
Employer on an eligible Participant's behalf.
(b) "Rollover Contribution". An amount contributed by an Eligible
Employee which originated from another employer's or an
Employer's qualified plan.
(c) "Company Matching Contribution". An amount contributed by the
Employer on an eligible Participant's behalf based upon the
amount contributed by the eligible Participant.
(d) "Qualified Nonelective Contribution". An amount contributed by
the Employer on an eligible Participant's behalf and allocated
on a pay based formula.
1.14 "Contribution Dollar Limit". The annual limit placed on each
Participant's Pre-Tax Contributions, which shall be $7,000 per
calendar year (as adjusted for cost of living increases pursuant to
Code sections 402(g)(5) and 415(d)). For purposes of this Section, a
Participant's Pre-Tax Contributions shall include (i) any employer
contribution under a qualified cash or deferred arrangement (as
defined in Code section 401(k)) to the extent not includible in gross
income for the taxable year under Code section 402(e)(3) (determined
without regard to Code section 402(g)), (ii) any employer contribution
to the extent not includible in gross income for the taxable year
under Code section 402(h)(1)(B) (determined without regard to Code
section 402(g)), (iii) any employer contribution to purchase an
annuity contract under Code section 403(b) under a salary reduction
agreement (within the meaning of Code section 3121(a)(5)(D)) and (iv)
any elective employer contribution under Code section 408(p)(2)(A)(i).
1.15 "Conversion Period". The period of converting the prior accounting
system of the Plan and Trust, if such Plan and Trust were in existence
prior to April 1, 1995, or the prior accounting system of any plan and
trust which is merged into this Plan and Trust subsequent to the
Effective Date, to the accounting system described in Section 6.
3
<PAGE>
1.16 "Direct Rollover". An Eligible Rollover Distribution that is paid
directly to an Eligible Retirement Plan for the benefit of a
Distributee.
1.17 "Distributee". An Employee or former Employee, the surviving spouse
of an Employee or former Employee and a spouse or former spouse of an
Employee or former Employee determined to be an alternate payee under
a QDRO.
1.18 "Effective Date". The date through which the provisions of this
document are amended. This date is January 1, 1998, unless stated
otherwise. In general, the provisions of this document only apply to
Participants who are Employees on or after the Effective Date.
However, investment and distribution provisions apply to all
Participants with Account balances to be invested or distributed after
the Effective Date.
1.19 "Eligible Employee". An Employee of an Employer, except any Employee:
(a) whose compensation and conditions of employment are covered by a
collective bargaining agreement to which an Employer is a party
unless the agreement calls for the Employee's participation in
the Plan; or
(b) who is treated as an Employee because he or she is a Leased
Employee.
1.20 "Eligible Retirement Plan". An individual retirement account
described in Code section 408(a), an individual retirement annuity
described in Code section 408(b), an annuity plan described in Code
section 403(a), or a qualified trust described in Code section 401(a),
that accepts a Distributee's Eligible Rollover Distribution, except
that with regard to an Eligible Rollover Distribution to a surviving
spouse, an Eligible Retirement Plan is an individual retirement
account or individual retirement annuity.
1.21 "Eligible Rollover Distribution". A distribution of all or any
portion of the balance to the credit of a Distributee, excluding a
distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or
life expectancy) of a Distributee or the joint lives (or joint life
expectancies) of a Distributee and the Distributee's designated
Beneficiary, or for a specified period of ten years or more; a
distribution to the extent such distribution is required under Code
section
4
<PAGE>
401(a)(9); and the portion of a distribution that is not includible in
gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to Employer securities).
1.22 "Employee". An individual who is:
(a) directly employed by any Related Company and for whom any income
for such employment is subject to withholding of income or
social security taxes, or
(b) a Leased Employee.
1.23 "Employer". The Company and any Subsidiary or other Related Company
of either the Company or a Subsidiary which adopts this Plan with the
approval of the Company. By adopting the Plan, an Employer is deemed
to agree to all of its terms, including (but not limited to) (i) the
provisions granting exclusive authority to the Company's board of
directors and the Committee to amend or terminate the Plan and (ii)
the provisions granting exclusive authority to the Company and the
Committee to administer and interpret the Plan.
1.24 "ERISA". The Employee Retirement Income Security Act of 1974, as
amended. Reference to any specific ERISA section shall include such
section, any valid regulation promulgated thereunder, and any
comparable provision of any future legislation amending, supplementing
or superseding such section.
1.25 "HCE" or "Highly Compensated Employee". An Employee described as a
Highly Compensated Employee in Section 12.
1.26 "Ineligible". The Plan status of an individual during the period in
which he or she is (1) an Employee of a Related Company which is not
then an Employer, (2) an Employee, but not an Eligible Employee, or
(3) not an Employee.
1.27 "Investment Fund" or "Fund". An investment fund as described in
Section 16.2. The Investment Funds authorized by the Administrator to
be offered under the Plan as of the Effective Date are set forth in
Appendix A.
1.28 "Leased Employee". An individual, not otherwise an Employee, who,
pursuant to an agreement between a Related Company and a leasing
organization, has performed, on a substantially full-time basis, for a
5
<PAGE>
period of at least 12 months, services under the primary direction or
control of the Related Company, unless:
(a) the individual is covered by a money purchase pension plan
maintained by the leasing organization and meeting the
requirements of Code section 414(n)(5)(B), and
(b) such individuals do not constitute more than 20% of all Non-
Highly Compensated Employees of all Related Companies (within
the meaning of Code section 414(n)(5)(C)(ii)).
1.29 "Leave of Absence". A period during which an individual is deemed to
be an Employee, but is absent from active employment, provided that
the absence:
(a) was authorized by a Related Company; or
(b) was due to military service in the United States armed forces
and the individual returns to active employment within the
period during which he or she retains employment rights under
federal law.
1.30 "Loan Account". If Participant loans are permitted in accordance with
Section 9, the record maintained for purposes of accounting for a
Participant's loan and payments of principal and interest thereon.
1.31 "NHCE" or "Non-Highly Compensated Employee". An Employee described as
a Non-Highly Compensated Employee in Section 12.
1.32 "Normal Retirement Date". The date of a Participant's 65th birthday.
1.33 "Owner". A person with an ownership interest in the capital, profits,
outstanding stock or voting power of a Related Company within the
meaning of Code section 318 or 416 (which exclude indirect ownership
through a qualified plan).
1.34 "Participant". An Eligible Employee who begins to participate in the
Plan after completing the eligibility requirements as described in
Section 2.1. An Eligible Employee who makes a Rollover Contribution
prior to completing the eligibility requirements as described in
Section 2.1 shall also be considered a Participant, except that he or
she shall not be considered a Participant for purposes of provisions
related to Contributions, other than a Rollover Contribution, until he
or she completes the eligibility requirements as described in Section
2.1. A Participant's participation continues until his or her
employment with all Related
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Companies ends and his or her Account is distributed or forfeited.
1.35 "Pay". All cash compensation paid to an Eligible Employee by an
Employer while a Participant during the current period. Pay excludes
reimbursements or other expense allowances, cash and non-cash fringe
benefits, moving expenses, deferred compensation and welfare benefits.
Pay is neither increased by any salary credit or decreased by any
salary reduction pursuant to Code sections 125 or 402(e)(3). Pay is
limited to $150,000 (as adjusted for the cost of living pursuant to
Code sections 401(a)(17) and 415(d)) per Plan Year, except that for
purposes of the short Plan Year commencing April 1, 1995 and ending
December 31, 1995, $112,500 shall be substituted for the preceding
reference to $150,000.
1.36 "Period of Employment". The period beginning on the date an Employee
first performs an hour of service and ending on the date his or her
employment ends. Employment ends on the date the Employee quits,
retires, is discharged, dies or (if earlier) the first anniversary of
his or her absence for any other reason. The period of absence
starting with the date an Employee's employment temporarily ends and
ending on the date he or she is subsequently reemployed is (1)
included in his or her Period of Employment if the period of absence
does not exceed one year, and (2) excluded if such period exceeds one
year.
An Employee's service with a predecessor or acquired company shall
only be counted in the determination of his or her Period of
Employment for eligibility and/or vesting purposes if (1) the Company
directs that credit for such service be granted, or (2) a qualified
plan of the predecessor or acquired company is subsequently maintained
by any Employer or Related Company.
The Company has directed that with regard to an individual who is an
Employee on April 1, 1995, his or her service on or before March 31,
1995 with Sears Roebuck and Co., or an affiliate thereof, to the
extent credited under The Savings and Profit Sharing Fund of Sear
Employees shall be counted in the determination of his or her Period
of Employment for eligibility and/or vesting purposes.
1.37 "Plan". The PMI Group, Inc. Savings and Profit-Sharing Plan set forth
in this document, as from time to time amended.
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1.38 "Plan Year". The annual accounting period of the Plan and Trust which
ends on each December 31. The Plan Year ending December 31, 1995
shall be a short Plan Year commencing April 1, 1995.
1.39 "QDRO". A domestic relations order which the Administrator has
determined to be a qualified domestic relations order within the
meaning of Code section 414(p).
1.40 "Related Company". With respect to any Employer, that Employer and
any corporation, trade or business which is, together with that
Employer, a member of the same controlled group of corporations, a
trade or business under common control, or an affiliated service group
within the meaning of Code sections 414(b), (c), (m) or (o), except
that for purposes of Section 13 "within the meaning of Code sections
414(b), (c), (m) or (o), as modified by Code section 415(h)" shall be
substituted for the preceding reference to "within the meaning of Code
section 414(b), (c), (m) or (o)".
1.41 Required Beginning Date. The latest date benefit payments shall
commence to a Participant. Such date shall mean the April 1 that next
follows the calendar year in which the Participant attains age 70 1/2.
1.42 "Settlement Date". For each Trade Date, the Trustee's next business
day.
1.43 "Spousal Consent". The written consent given by a spouse to a
Participant's Beneficiary designation. The spouse's consent must
acknowledge the effect on the spouse of the Participant's designation,
and be duly witnessed by a Plan representative or notary public.
Spousal Consent shall be valid only with respect to the spouse who
signs the Spousal Consent and only for the particular choice made by
the Participant which requires Spousal Consent. A Participant may
revoke (without Spousal Consent) a prior designation that required
Spousal Consent at any time before payments begin. Spousal Consent
also means a determination by the Administrator that there is no
spouse, the spouse cannot be located, or such other circumstances as
may be established by applicable law.
1.44 "Subsidiary". A company which is 50% or more owned, directly or
indirectly, by the Company.
1.45 "Sweep Account". The subsidiary Account for each Participant through
which all transactions are processed, which is invested in interest
bearing deposits of the Trustee.
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1.46 "Sweep Date". The cut off date and time for receiving instructions
for transactions to be processed on the next Trade Date.
1.47 "Taxable Income". Compensation in the amount reported by the Employer
or a Related Company as "Wages, tips, other compensation" on Form W-2,
or any successor method of reporting under Code section 6041(d).
1.48 "The Allstate Plan". The Savings and Profit Sharing Fund of Allstate
Employees, a profit sharing and stock bonus plan and leveraged
employee stock ownership plan, originally effective June 30, 1995 and
to which was transferred assets from The Savings and Profit Sharing
Fund of Sears Employees on behalf of employees and former employees of
The Allstate Corporation or a subsidiary thereof.
1.49 "Trade Date". Each day the Investment Funds are valued, which is
normally every day the assets of such Funds are traded.
1.50 "Trust". The legal entity created by those provisions of this
document which relate to the Trustee. The Trust is part of the Plan
and holds the Plan assets which are comprised of the aggregate of
Participants' Accounts and any unallocated funds invested in deposit
or money market type assets pending allocation to Participants'
Accounts or disbursement to pay Plan fees and expenses.
1.51 "Trustee". Merrill Lynch Trust Company, FSB, a federal savings bank,
chartered under the laws of the United States.
1.52 "USERRA". The Uniformed Services Employment and Reemployment Rights
Act of 1994, as amended.
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2 ELIGIBILITY
-----------
2.1 Eligibility
All Participants as of January 1, 1998 shall continue their
eligibility to participate. Each other Eligible Employee shall become
a Participant on the first day of the next payroll period after the
date he or she completes a 12 month Period of Employment. The
eligibility period begins on the date an Employee's Period of
Employment commences.
2.2 Ineligible Employees
If an Employee completes the above eligibility requirements, but is
Ineligible at the time participation would otherwise begin (if he or
she were not Ineligible), he or she shall become a Participant on the
first subsequent date on which he or she is an Eligible Employee.
2.3 Ineligible or Former Participants
A Participant may not make or share in Plan Contributions, nor
generally be eligible for a new Plan loan (if Participant loans are
permitted in accordance with Section 9), during the period he or she
is Ineligible, but he or she shall continue to participate for all
other purposes. An Ineligible Participant or former Participant shall
automatically become an active Participant on the date he or she again
becomes an Eligible Employee.
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3 PARTICIPANT CONTRIBUTIONS
-------------------------
3.1 Pre-Tax Contribution Election
Upon becoming a Participant, an Eligible Employee may elect to reduce
his or her Pay by an amount which does not exceed the Contribution
Dollar Limit, within the limits described in the Contribution
Percentage Limits paragraph of this Section 3, and have such amount
contributed to the Plan by the Employer as a Pre-Tax Contribution.
The election shall be made as a whole percentage of Pay in such manner
and with such advance notice as prescribed by the Administrator. In
no event shall an Employee's Pre-Tax Contributions under the Plan and
comparable contributions to all other plans, contracts or arrangements
of all Related Companies exceed the Contribution Dollar Limit for the
Employee's taxable year beginning in the Plan Year.
3.2 Changing a Contribution Election
A Participant who is an Eligible Employee may change his or her Pre-
Tax Contribution election at any time in such manner and with such
advance notice as prescribed by the Administrator, and such election
shall be effective with the first payroll paid after such date.
Participants' Contribution election percentages shall automatically
apply to Pay increases or decreases.
3.3 Revoking and Resuming a Contribution Election
A Participant may revoke his or her Contribution election at any time
in such manner and with such advance notice as prescribed by the
Administrator, and such revocation shall be effective with the first
payroll paid after such date.
A Participant who is an Eligible Employee may resume Contributions by
making a new Contribution election at any time in such manner and with
such advance notice as prescribed by the Administrator, and such
election shall be effective with the first payroll paid after such
date.
3.4 Contribution Percentage Limits
The Administrator may establish and change from time to time, in
writing, without the necessity of amending this Plan and Trust, the
minimum, if applicable, and maximum Pre-Tax Contribution percentages,
prospectively or retrospectively (for the current Plan Year), for all
Participants. In addition, the Administrator may establish any lower
percentage limits for Highly Compensated Employees as it deems
necessary to satisfy
11
<PAGE>
the tests described in Section 12. As of the Effective Date, the Pre-
Tax Contribution minimum percentage is 1% and the maximum percentage
is 17%.
Irrespective of the limits that may be established by the
Administrator in accordance with this paragraph, in no event shall the
contributions made by or on behalf of a Participant for a Plan Year
exceed the maximum allowable under Code section 415.
3.5 Refunds When Contribution Dollar Limit Exceeded
A Participant who makes Pre-Tax Contributions for a calendar year to
the Plan and comparable contributions to any other qualified defined
contribution plan in excess of the Contribution Dollar Limit may
notify the Administrator in writing by the following March 1 (or as
late as April 14 if allowed by the Administrator) that an excess has
occurred. In this event, the amount of the excess specified by the
Participant, adjusted for investment gain or loss, shall be refunded
to him or her by April 15 following the year of deferral and shall not
be included as an Annual Addition under Code section 415 for the year
contributed. The excess amounts shall first be taken from unmatched
Pre-Tax Contributions and then from matched Pre-Tax Contributions.
Any Company Matching Contributions attributable to refunded excess
Pre-Tax Contributions as described in this Section, adjusted for
investment gain or loss, shall be forfeited and used to reduce future
Contributions to be made by an Employer as soon as administratively
feasible. Refunds and forfeitures shall not include investment gain or
loss for the period between the end of the applicable calendar year
and the date of distribution or forfeiture.
3.6 Timing, Posting and Tax Considerations
Participants' Contributions, other than Rollover Contributions, may
only be made through payroll deduction. Such amounts shall be paid to
the Trustee in cash and posted to each Participant's Account(s) as
soon as such amounts can reasonably be separated from the Employer's
general assets and balanced against the specific amount made on behalf
of each Participant.
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In no event, however, shall such amounts be paid to the Trustee more
than 15 business days following the end of the month that includes the
date amounts are deducted from a Participant's Pay (or as that maximum
period may be otherwise extended by ERISA). Pre-Tax Contributions
shall be treated as Contributions made by an Employer in determining
tax deductions under Code section 404(a).
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4 ROLLOVERS AND TRANSFERS FROM AND TO OTHER QUALIFIED PLANS
---------------------------------------------------------
4.1 Rollovers
The Administrator may authorize the Trustee to accept a rollover
contribution, within the meaning of Code section 402(c) or
408(d)(3)(A)(ii), in cash, directly from an Eligible Employee or as a
Direct Rollover from another qualified plan on behalf of the Eligible
Employee, if he or she is a Participant, except that effective July 1,
1995, "even if he or she is not yet a Participant" shall be
substituted for the preceding reference to "if he or she is a
Participant". The Employee shall be responsible for furnishing
satisfactory evidence, in such manner as prescribed by the
Administrator, that the amount is eligible for rollover treatment. A
rollover contribution received directly from an Eligible Employee must
be paid to the Trustee in cash within 60 days after the date received
by the Eligible Employee from a qualified plan or conduit individual
retirement account. Contributions described in this paragraph shall
be posted to the applicable Employee's Rollover Account as of the date
received by the Trustee.
If it is later determined that an amount contributed pursuant to the
above paragraph did not in fact qualify as a rollover contribution
under Code section 402(c) or 408(d)(3)(A)(ii), the balance credited to
the Employee's Rollover Account shall immediately be (1) segregated
from all other Plan assets, (2) treated as a nonqualified trust
established by and for the benefit of the Employee, and (3)
distributed to the Employee. Any such nonqualifying rollover shall be
deemed never to have been a part of the Plan.
4.2 Transfers From and To Other Qualified Plans
The Administrator may instruct the Trustee to receive assets in cash
or in kind directly from another qualified plan or transfer assets in
cash or in kind directly to another qualified plan; provided that a
transfer should not be directed if:
(a) any amounts are not exempted by Code section 401(a)(11)(B) from
the annuity requirements of Code section 417 unless, in the
event of a receipt of assets, the Plan complies with such
requirements or, in the event of a transfer of assets, the
receiving Plan complies with such requirements; or
(b) any amounts include benefits protected by Code section 411(d)(6)
which would not be preserved under applicable Plan provisions,
in the event of
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<PAGE>
a receipt of assets or, under the applicable provisions of the
receiving plan, in the event of a transfer of assets.
The Trustee may refuse the receipt of any transfer if:
(a) the Trustee finds the in-kind assets unacceptable; or
(b) instructions for posting amounts to Participants' Accounts are
incomplete.
Such amounts shall be posted to the appropriate Accounts of
Participants as of the date received by the Trustee.
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5 EMPLOYER CONTRIBUTIONS
----------------------
5.1 Company Matching Contributions
(a) Frequency and Eligibility.
Basic Contribution: For each Plan Year, the Employer shall make
basic Company Matching Contributions, as described in the
following Allocation Method paragraph, on behalf of each
Participant who contributed during the period and was an Eligible
Employee on the last day of the period.
For the Plan Year ending December 31, 1995, the "period" shall
include the period January 1, 1995 through March 31, 1995 while
such Participant was a participant in The Savings and Profit
Sharing Fund of Sears Employees.
Supplemental Contribution: For each Plan Year, the Employer may
make supplemental Company Matching Contributions, as described
in the following Allocation Method paragraph, on behalf of each
Participant who was determined to be eligible to receive basic
Company Matching Contributions.
(b) Allocation Method.
Basic Contribution: The basic Company Matching Contributions
for each period shall total 25% of each eligible Participant's
Pre-Tax Contributions for the period, provided that no basic
Company Matching Contributions shall be made based upon a
Participant's Contributions in excess of 6% of his or her Pay.
For the Plan Year ending December 31, 1995, "Pre-Tax
Contribution" shall include "Basic and Additional Pre-Tax
Deposits" made to The Savings and Profit Sharing Fund of Sears
Employees for the period January 1, 1995 through March 31, 1995.
Supplemental Contribution: The supplemental Company Matching
Contributions for the period shall total a percentage, up to
50%, as determined by the Employer, of each eligible
Participant's Pre-Tax Contributions for the period provided that
no supplemental Company Matching Contributions shall be made
based upon a Participant's Contributions in excess of 6% of his
or her Pay.
For the Plan Year ending December 31, 1995, "Pre-Tax
Contributions" shall include "Basic and
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<PAGE>
Additional Pre-Tax Deposits" made to The Savings and Profit
Sharing Fund of Sears Employees for the period January 1, 1995
through March 31, 1995.
(a) Timing, Medium and Posting.
Basic Contribution. The Employer shall make each period's basic
Company Matching Contribution in cash as soon as
administratively feasible, and for purposes of deducting such
Contribution, not later than the Employer's federal tax filing
date, including extensions. The Trustee shall post such amount
to each Participant's Company Match Cash Account once the total
Contribution received has been balanced against the specific
amount to be credited to each Participant's Company Match Cash
Account.
Supplemental Contribution. The Employer shall make each
period's supplemental Company Matching Contribution in cash as
soon as administratively feasible, and for purposes of deducting
such Contribution, not later than the Employer's federal tax
filing date, including extensions. The Trustee shall post such
amount to each Participant's Company Match Stock Account once
the total Contribution received has been balanced against the
specific amount to be credited to each Participant's Company
Match Stock Account.
5.2 Qualified Nonelective Contributions
(a) Frequency and Eligibility. For each Plan Year, the Employer may
make a Qualified Nonelective Contribution on behalf of each Non-
Highly Compensated Employee Participant who was an Eligible
Employee on the last day of the period.
(b) Allocation Method. The Qualified Nonelective Contribution for
each period shall be in an amount determined by the Employer and
allocated among eligible Participants in direct proportion to
their Pay, subject to a maximum dollar amount which may be
contributed on behalf of any Participant as determined by the
Employer.
(c) Timing, Medium and Posting. The Employer shall make each
period's Qualified Nonelective Contribution in cash as soon as
administratively feasible, and for purposes of deducting such
Contribution, not later than the Employer's federal tax filing
date, including extensions. Notwithstanding, for purposes of
satisfying the tests described in Section 12, Qualified
17
<PAGE>
Nonelective Contributions shall be made before the end of the
Plan Year following the Plan Year being tested. The Trustee
shall post such amount to each Participant's Qualified
Nonelective Account once the total Contribution received has
been balanced against the specific amount to be credited to each
Participant's Qualified Nonelective Account.
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6 ACCOUNTING
----------
6.1 Individual Participant Accounting
The Administrator shall maintain an individual set of Accounts for
each Participant in order to reflect transactions both by type of
Contribution and investment medium. Financial transactions shall be
accounted for at the individual Account level by posting each
transaction to the appropriate Account of each affected Participant.
Participant Account values shall be maintained in shares for the
Investment Funds and in dollars for the Sweep and Loan Accounts. At
any point in time, the Account value shall be determined using the
most recent Trade Date values provided by the Trustee.
6.2 Sweep Account is Transaction Account
All transactions related to amounts being contributed to or
distributed from the Trust shall be posted to each affected
Participant's Sweep Account. Any amount held in the Sweep Account
shall be credited with interest up until the date on which it is
removed from the Sweep Account.
6.3 Trade Date Accounting and Investment Cycle
Participant Account values shall be determined as of each Trade Date.
For any transaction to be processed as of a Trade Date, the Trustee
must receive instructions for the transaction by the Sweep Date. Such
instructions shall apply to amounts held in the Account on that Sweep
Date. Financial transactions of the Investment Funds shall be posted
to Participants' Accounts as of the Trade Date, based upon the Trade
Date values provided by the Trustee, and settled on the Settlement
Date.
6.4 Accounting for Investment Funds
Investments in each Investment Fund shall be maintained in shares.
The Trustee is responsible for determining the share values of each
Investment Fund as of each Trade Date. To the extent an Investment
Fund is comprised of collective investment funds of the Trustee, or
any other fiduciary to the Plan, the share values shall be determined
in accordance with the rules governing such collective investment
funds, which are incorporated herein by reference. All other share
values shall be determined by the Trustee. The share value of each
Investment Fund shall be based on the fair market value of its
underlying assets.
6.5 Payment of Fees and Expenses
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Except to the extent Plan fees and expenses related to Account
maintenance, transaction and Investment Fund management and
maintenance, as set forth below, are paid by the Employer directly,
such fees and expenses shall be paid as set forth below. The Employer
may pay a lower portion of the fees and expenses allocable to the
Accounts of Participants who are no longer Employees or who are not
Beneficiaries, unless doing so would be impermissible under Code
sections 401(a)(4) or 411(a)(11).
(a) Account Maintenance: Account maintenance fees and expenses, may
include but are not limited to, administrative, Trustee,
government annual report preparation, audit, legal,
nondiscrimination testing and fees for any other special
services. Account maintenance fees shall be charged to
Participants on a per Participant basis provided that no fee
shall reduce a Participant's Account balance below zero.
(b) Transaction: Transaction fees and expenses, may include but are
not limited to, periodic installment payment (if such payment
form is permitted in accordance with Section 11), Investment
Fund election change and loan (if Participant loans are
permitted in accordance with Section 9) fees. Transaction fees
shall be charged to the Participant's Account involved in the
transaction provided that no fee shall reduce a Participant's
Account balance below zero.
(c) Investment Fund Management and Maintenance: Management and
maintenance fees and expenses related to the Investment Funds
shall be charged at the Investment Fund level and reflected in
the net gain or loss of each Fund.
As of the Effective Date, a breakdown of which Plan fees and expenses
shall generally be borne by the Trust (and charged to individual
Participants' Accounts or charged at the Investment Fund level and
reflected in the net gain or loss of each Fund) and those that shall
be paid by the Employer is set forth in Appendix B and may be changed
from time to time by the Administrator, in writing, without the
necessity of amending this Plan and Trust.
20
<PAGE>
The Trustee shall have the authority to pay any such fees and
expenses, which remain unpaid by the Employer for 60 days, from the
Trust.
6.6 Accounting for Participant Loans
Participant loans (if permitted in accordance with Section 9) shall be
held in a separate Loan Account of the Participant and accounted for
in dollars as an earmarked asset of the borrowing Participant's
Account.
6.7 Error Correction
The Administrator may correct any errors or omissions in the
administration of the Plan by restoring any Participant's Account
balance with the amount that would be credited to the Account had no
error or omission been made. Funds necessary for any such restoration
shall be provided through payment made by the Employer, or by the
Trustee to the extent the error or omission is attributable to actions
or inactions of the Trustee.
6.8 Participant Statements
The Administrator shall provide Participants with statements of their
Accounts as soon after the end of each quarter of the Plan Year as
administratively feasible.
6.9 Special Accounting During Conversion Period
The Administrator and Trustee may use any reasonable accounting
methods in performing their respective duties during any Conversion
Period. This includes, but is not limited to, the method for
allocating net investment gains or losses and the extent, if any, to
which contributions received by and distributions paid from the Trust
during this period share in such allocation.
6.10 Accounts for QDRO Beneficiaries
A separate Account shall be established for an alternate payee
entitled to any portion of a Participant's Account under a QDRO as of
the date and in accordance with the directions specified in the QDRO.
In addition, a separate Account may be established during the period
of time the Administrator, a court of competent jurisdiction or other
appropriate person is determining whether a domestic relations order
qualifies as a QDRO.
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Such a separate Account shall be valued and accounted for in the same
manner as any other Account.
(a) Distributions Pursuant to QDROs. If a QDRO so provides, the
portion of a Participant's Account payable to an alternate payee
may be distributed, in a form as permissible under Section 11,
to the alternate payee at the time specified in the QDRO,
regardless of whether the Participant is entitled to a
distribution from the Plan at such time.
(b) Participant Loans. If in accordance with Section 9, Participant
loans are permitted, except to the extent required by law, an
alternate payee, on whose behalf a separate Account has been
established, shall not be entitled to borrow from such Account.
If a QDRO specifies that the alternate payee is entitled to any
portion of the Account of a Participant who has an outstanding
loan balance, all outstanding loans shall generally continue to
be held in the Participant's Account and shall not be divided
between the Participant's and alternate payee's Accounts.
(c) Investment Direction. Where a separate Account has been
established on behalf of an alternate payee and has not yet been
distributed, the alternate payee may direct the investment of
such Account in the same manner as if he or she were a
Participant.
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7 INVESTMENT FUNDS AND ELECTIONS
------------------------------
7.1 Investment Funds
Except for Participants' Sweep and Loan Accounts, the Trust shall be
maintained in various Investment Funds. The Administrator shall
select the Investment Funds offered to Participants and may change the
number or composition of the Investment Funds, subject to the terms
and conditions agreed to with the Trustee. As of the Effective Date,
a list of the Investment Funds offered under the Plan is set forth in
Appendix A, and may be changed from time to time by the Administrator,
in writing, and as agreed to by the Trustee, without the necessity of
amending this Plan and Trust.
7.2 Investment Fund Elections
Each Participant shall direct the investment of all of his or her
Accounts except for his or her Company Match Stock Account which shall
be entirely invested in the Investment Fund specified by the
Administrator, which Investment Fund as of the Effective Date is set
forth in Appendix A.
A Participant shall make his or her investment election in any
combination of one or any number of the Investment Funds offered in
accordance with the procedures established by the Administrator and
Trustee. However, during any Conversion Period, Trust assets may be
held in any investment vehicle permitted by the Plan, as directed by
the Administrator, irrespective of Participant investment elections.
The Administrator may set a maximum percentage of the total election
that a Participant may direct into any specific Investment Fund, which
maximum, if any, as of the Effective Date is set forth in Appendix A,
and may be changed from time to time by the Administrator, in writing,
without the necessity of amending this Plan and Trust.
7.3 Responsibility for Investment Choice
Each Participant shall be solely responsible for the selection of his
or her Investment Fund choices. No fiduciary with respect to the Plan
is empowered to advise a Participant as to the manner in which his or
her Accounts are to be invested, and the fact that an
23
<PAGE>
Investment Fund is offered shall not be construed to be a
recommendation for investment.
7.4 Default if No Election
The Administrator shall specify an Investment Fund for the investment
of that portion of a Participant's Account which is not yet held in an
Investment Fund and for which no valid investment election is on file.
The Investment Fund specified as of the Effective Date is set forth in
Appendix A, and may be changed from time to time by the Administrator,
in writing, without the necessity of amending this Plan and Trust.
7.5 Timing
A Participant shall make his or her initial investment election upon
becoming a Participant and may change his or her investment election
at any time in accordance with the procedures established by the
Administrator and Trustee. Investment elections received by the
Trustee by the Sweep Date shall be effective on the following Trade
Date.
7.6 Investment Fund Election Change Fees
A reasonable processing fee may be charged directly to a Participant's
Account for Investment Fund election changes in excess of a specified
number per year as determined by the Administrator.
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8 VESTING
-------
8.1 Fully Vested Contribution Accounts
A Participant shall be fully vested in all Accounts at all times.
25
<PAGE>
9 PARTICIPANT LOANS
-----------------
9.1 Participant Loans Permitted
Loans to Participants are permitted pursuant to the terms and
conditions set forth in this Section.
9.2 Loan Application, Note and Security
A Participant shall apply for any loan in such manner and with such
advance notice as prescribed by the Administrator. All loans shall be
evidenced by a promissory note, secured only by the portion of the
Participant's Account from which the loan is made, and the Plan shall
have a lien on this portion of his or her Account.
9.3 Spousal Consent
A Participant is not required to obtain Spousal Consent in order to
take out a loan under the Plan.
9.4 Loan Approval
The Administrator, or the Trustee, if otherwise authorized by the
Administrator and agreed to by the Trustee, is responsible for
determining that a loan request conforms to the requirements described
in this Section and granting such request.
9.5 Loan Funding Limits, Account Sources and Funding Order
The loan amount must meet all of the following limits as determined as
of the Sweep Date the loan is processed and shall be funded from the
Participant's Accounts as follows:
(a) Plan Minimum Limit. The minimum amount for any loan is $1,000.
(b) Plan Maximum Limit, Account Sources and Funding Order. Subject
to the legal limit described in (c) below, the maximum a
Participant may borrow, including the outstanding balance of
existing Plan loans, is 100% of the following of the
Participant's Accounts which are fully vested in the priority
order as follows:
Pre-Tax Account
Qualified Nonelective Account
Company Match Cash Account
26
<PAGE>
Company Match Stock Account
Prior Employer Account
Rollover Account
After-Tax Transfers Account
(c) Legal Maximum Limit. The maximum a Participant may borrow,
including the outstanding balance of existing Plan loans, is 50%
of his or her vested Account balance, not to exceed $50,000.
However, the $50,000 maximum is reduced by the Participant's
highest outstanding loan balance during the 12 month period
ending on the day before the Sweep Date as of which the loan is
made. For purposes of this paragraph, the qualified plans of
all Related Companies shall be treated as though they are part
of this Plan to the extent it would decrease the maximum loan
amount.
9.6 Maximum Number of Loans
A Participant may have only one loan outstanding at any given time.
9.7 Source and Timing of Loan Funding
A loan to a Participant shall be made solely from the assets of his or
her own Account. The available assets shall be determined first by
Account type and then within each Account used for funding a loan,
amounts shall first be taken from the Sweep Account and then taken by
Investment Fund in direct proportion to the market value of the
Participant's interest in each Investment Fund as of the Trade Date on
which the loan is processed.
The loan shall be funded on the Settlement Date following the Trade
Date as of which the loan is processed. The Trustee shall make
payment to the Participant as soon thereafter as administratively
feasible.
9.8 Interest Rate
The interest rate charged on Participant loans shall be a fixed
reasonable rate of interest, determined from time to time by the
Administrator, which provides the Plan with a return commensurate with
the prevailing interest rate charged by persons in the business of
lending money for loans which would be made under similar
circumstances. As of the Effective Date, the interest rate is
determined as set forth in Appendix C, and may be changed from time to
time by the Administrator, in writing, without the necessity of
amending this Plan and Trust.
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9.9 Loan Payment
Substantially level amortization shall be required of each loan with
payments made at least monthly, generally through payroll deduction.
Loans may be prepaid in full or in part at any time. The Participant
may choose the loan repayment period, not to exceed 5 years.
9.10 Loan Payment Hierarchy
Loan principal payments shall be credited to the Participant's
Accounts in the inverse of the order used to fund the loan. Loan
interest shall be credited to the Participant's Accounts in direct
proportion to the principal payment. Loan payments credited to
Accounts for which the Participant directs investment as described in
Section 7 are credited to the Investment Funds based upon the
Participant's current investment election for new Contributions. Loan
payments credited to Accounts for which the Participant does not
direct investment as described in Section 7 are credited to the
Investment Funds specified by the Administrator for such Accounts.
9.11 Repayment Suspension
The Administrator may agree to a suspension of loan payments for up to
12 months for a Participant who is on a Leave of Absence without pay.
During the suspension period interest shall continue to accrue on the
outstanding loan balance. At the expiration of the suspension period
all outstanding loan payments and accrued interest thereon shall be
due unless otherwise agreed upon by the Administrator.
9.12 Loan Default
A loan is treated as in default if a scheduled loan payment is not
made at the time required. A Participant shall then have a grace
period to cure the default before it becomes final. Such grace period
shall be for a period that does not extend beyond the last day of the
calendar quarter following the calendar quarter in which the scheduled
loan payment was due or such lesser or greater maximum period as may
later be authorized by Code section 72(p).
In the event the default is not cured within the grace period, the
Administrator may direct the Trustee to report the outstanding
principal balance of the loan and accrued interest thereon as a
taxable distribution. As soon as a Plan withdrawal or distribution to
such Participant would otherwise be permitted, the Administrator may
instruct the Trustee to execute upon
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its security interest in the Participant's Account by distributing the
note to the Participant.
9.13 Call Feature
The Administrator shall have the right to call any Participant loan
once a Participant's employment with all Related Companies has
terminated or if the Plan is terminated.
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10 IN-SERVICE WITHDRAWALS
----------------------
10.1 In-Service Withdrawals Permitted
In-service withdrawals to a Participant who is an Employee are
permitted pursuant to the terms and conditions set forth in this
Section and pursuant to the terms and conditions set forth in Section
11 with regard to an in-service withdrawal made in accordance with a
Participant's Required Beginning Date.
10.2 In-Service Withdrawal Application and Notice
A Participant shall apply for any in-service withdrawal in such manner
and with such advance notice as prescribed by the Administrator. The
Participant shall be provided the notice prescribed by Code section
402(f).
If an in-service withdrawal is one to which Code sections 401(a)(11)
and 417 do not apply, such in-service withdrawal may commence less
than 30 days after the aforementioned notice is provided, if:
(a) the Participant is clearly informed that he or she has the right
to a period of at least 30 days after receipt of such notice to
consider his or her option to elect or not elect a Direct
Rollover for all or a portion, if any, of his or her in-service
withdrawal which shall constitute an Eligible Rollover
Distribution; and
(b) the Participant after receiving such notice, affirmatively
elects a Direct Rollover for all or a portion, if any, of his or
her in-service withdrawal which shall constitute an Eligible
Rollover Distribution or, alternatively, elects to have all or a
portion made payable directly to him or her, thereby not
electing a Direct Rollover for all or a portion thereof.
10.3 Spousal Consent
A Participant is not required to obtain Spousal Consent in order to
make an in-service withdrawal under the Plan.
10.4 In-Service Withdrawal Approval
The Administrator, or the Trustee, if otherwise authorized by the
Administrator and agreed to by the Trustee, is responsible for
determining that an in-service withdrawal request conforms to the
requirements described in this Section and granting such request.
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10.5 Minimum Amount, Payment Form and Medium
The minimum amount for any type of in-service withdrawal is $500.
Except as otherwise provided in this Section with regard to a
Participant's Allstate Plan Accounts, the form of payment and medium
of payment for an in-service withdrawal shall be a single lump sum and
payment shall be made in cash. With regard to the portion of a
withdrawal representing an Eligible Rollover Distribution, a
Participant may elect a Direct Rollover for all or a portion of such
amount.
10.6 Special Provisions Related to Payment Medium for a Participant's
Allstate Plan Accounts
Regarding a Participant's Allstate Plan Accounts, the medium of
payment for an in-service withdrawal shall be in cash, except that a
Participant may instead elect payment in the form of whole shares of
Allstate Stock and cash in lieu of fractional shares to the extent of
his or her Prior Employer Fund balance or, if greater, to the extent
of his or her Allstate Plan Accounts balance if he or she elects to
liquidate the portion of his or her Allstate Plan Accounts balance not
otherwise invested in the Prior Employer Fund. Such liquidation
proceeds shall be deposited to the Prior Employer Fund and used to
purchase shares of Allstate Stock on his or her behalf.
The provisions of this Section 10.6 are subject to Section 10.7.
10.7 Discontinuance of Special Provisions Related to Payment Medium for a
Participant's Allstate Plan Accounts
The provisions of Section 10.6 are for the purpose of continuing a
comparable provision as formerly provided under The Allstate Plan.
The Plan in its form as stated is intended to constitute a qualified
profit sharing plan, as described in Code section 401(a), which
includes a qualified cash or deferred arrangement. The Company will
apply for a letter of determination from the Internal Revenue Service
that the Plan so qualifies.
The Allstate Corporation is not a Related Company and the Company does
not intend to maintain an Investment Fund comprised of Allstate Stock.
The Company intends to discontinue the availability of payments in the
form of shares of Allstate Stock. Upon receipt of a favorable
determination from the Internal Revenue Service that the Plan,
following such discontinuation,
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will qualify under Code section 401(a), the provisions of Section 10.6
shall be deemed to be discontinued as provided in the application for
determination and the favorable determination.
10.8 Source and Timing of In-Service Withdrawal Funding
An in-service withdrawal to a Participant shall be made solely from
the assets of his or her own Account and shall be based on the Account
values as of the Trade Date the in-service withdrawal is processed.
The available assets shall be determined first by Account type and
then within each Account used for funding an in-service withdrawal,
amounts shall first be taken from the Sweep Account and then taken by
Investment Fund in direct proportion to the market value of the
Participant's interest in each Investment Fund (which, if Participant
loans are permitted in accordance with Section 9, excludes his or her
Loan Account balance) as of the Trade Date on which the in-service
withdrawal is processed.
The in-service withdrawal shall be funded on the Settlement Date
following the Trade Date as of which the in-service withdrawal is
processed. The Trustee shall make payment as soon thereafter as
administratively feasible.
10.9 Hardship Withdrawals
(a) Requirements. A Participant who is an Employee may request the
withdrawal of up to the amount necessary to satisfy a financial
need including amounts necessary to pay any resultant federal,
state or local income taxes or penalties reasonably anticipated
from the withdrawal. Only requests for withdrawals (1) on
account of a Participant's "Deemed Financial Need", and (2)
which are "Deemed Necessary" to satisfy the financial need shall
be approved.
(b) "Deemed Financial Need". An immediate and heavy financial need
relating to:
(1) the payment of unreimbursable medical expenses described
under Code section 213(d) incurred (or to be incurred) by
the Employee, his or her spouse or dependents;
(2) the purchase (excluding mortgage payments) of the
Employee's principal residence;
(3) the payment of unreimbursable tuition, related educational
fees and room and board
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for up to the next 12 months of post-secondary education
for the Employee, his or her spouse or dependents;
(4) the payment of funeral expenses of an Employee's family
member;
(5) the payment of amounts necessary for the Employee to
prevent losing his or her principal residence through
eviction or foreclosure on the mortgage; or
(6) any other circumstance specifically permitted under Code
section 401(k)(2)(B)(i)(IV).
(c) "Deemed Necessary". A withdrawal is "deemed necessary" to
satisfy the financial need only if the withdrawal amount does
not exceed the financial need and all of these conditions are
met:
(1) the Employee has obtained all possible withdrawals (other
than hardship withdrawals) and nontaxable loans available
from this Plan and all other plans maintained by Related
Companies;
(2) the Administrator shall suspend the Employee from making
any contributions to this Plan and all other qualified and
nonqualified plans of deferred compensation and all stock
option or stock purchase plans maintained by Related
Companies for 12 months from the date the withdrawal
payment is made; and
(3) the Administrator shall reduce the Contribution Dollar
Limit for the Employee with regard to this Plan and all
other plans maintained by Related Companies, for the
calendar year next following the calendar year of the
withdrawal by the amount of the Employee's Pre-Tax
Contributions for the calendar year of the withdrawal.
(d) Account Sources and Funding Order. All available amounts must
first be withdrawn from a Participant's After-Tax Transfers
Account. The remaining withdrawal amount shall come from the
following of the Participant's fully vested Accounts, in the
priority order as follows:
Rollover Account
Company Match Cash Account
Company Match Stock Account
Prior Employer Account
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Pre-Tax Account
The amount that may be withdrawn from a Participant's Pre-Tax
Account shall not include any earnings credited to his or her
Pre-Tax Account.
(e) Permitted Frequency. There is no restriction on the number of
Hardship withdrawals permitted to a Participant.
(f) Suspension from Further Contributions. Upon making a Hardship
withdrawal, a Participant may not make additional Pre-Tax (or
additional contributions to all other qualified and nonqualified
plans of deferred compensation and all stock option or stock
purchase plans maintained by Related Companies) for a period of
12 months from the date the withdrawal payment is made.
10.10 After-Tax Transfers Account Withdrawals
(a) Requirements. A Participant who is an Employee may withdraw
from the Accounts listed in paragraph (b) below.
(b) Account Sources and Funding Order. The withdrawal amount shall
come from a Participant's After-Tax Transfers Account.
(c) Permitted Frequency. There is no restriction on the number of
After-Tax Transfers Account withdrawals permitted to a
Participant.
(d) Suspension from Further Contributions. An After-Tax Transfers
Account withdrawal shall not affect a Participant's ability to
make or be eligible to receive further Contributions.
10.11 Rollover Account Withdrawals
(a) Requirements. A Participant who is an Employee may withdraw
from the Accounts listed in paragraph (b) below.
(b) Account Sources and Funding Order. The withdrawal amount shall
come from a Participant's Rollover Account.
(c) Permitted Frequency. There is no restriction on the number of
Rollover Account withdrawals permitted to a Participant.
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<PAGE>
(d) Suspension from Further Contributions. A Rollover Account
withdrawal shall not affect a Participant's ability to make or
be eligible to receive further Contributions.
10.12 Over Age 59 1/2 Withdrawals
(a) Requirements. A Participant who is an Employee and over age 59
1/2 may withdraw from the Accounts listed in paragraph (b)
below.
(b) Account Sources and Funding Order. The withdrawal amount shall
come from the following of the Participant's fully vested
Accounts, in the priority order as follows, except that the
Participant may instead choose to have amounts taken from his or
her After-Tax Transfers Account first:
Rollover Account
Pre-Tax Account
Qualified Nonelective Account
Company Match Cash Account
Company Match Stock Account
Prior Employer Account
After-Tax Transfers Account
(c) Permitted Frequency. There is no restriction on the number of
Over Age 59 1/2 withdrawals permitted to a Participant.
(d) Suspension from Further Contributions. An Over Age 59 1/2
withdrawal shall not affect a Participant's ability to make or
be eligible to receive further Contributions.
10.13 After-Tax Transfers and Prior Employer Accounts Withdrawals
(a) Requirements. In order to preserve benefits protected by Code
section 411(d)(6) with regard to amounts held in a Participant's
Prior Employer Account, which amounts under the terms of The
Allstate Plan were available for withdrawal by a Participant to
the extent of the amount of such that had been on deposit for at
least two years or to the extent of the total amount of such if
the Participant had participated in The Allstate Plan (or its
predecessor plan) for at least 5 years, which under the terms of
the Plan are no longer permitted withdrawal conditions, a
Participant who is an Employee may withdraw any amount credited
to such Account.
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<PAGE>
(b) Account Sources and Funding Order. The withdrawal amount shall
come from the following of the Participant's fully vested
Accounts, in the priority order as follows, except that the
Participant may instead choose to have amounts taken from his or
her After-Tax Transfers Account first:
Prior Employer Account
After-Tax Transfers Account
(c) Permitted Frequency. There is no restriction on the number of
After-Tax Transfers and Prior Employer Accounts withdrawals
permitted to a Participant.
(d) Suspension from Further Contributions. An After-Tax Transfers
and Prior Employer Accounts withdrawal shall not affect a
Participant's ability to make or be eligible to receive further
Contributions.
36
<PAGE>
11 DISTRIBUTIONS ONCE EMPLOYMENT ENDS OR BY REASON OF A PARTICIPANT'S REQUIRED
---------------------------------------------------------------------------
BEGINNING DATE
--------------
11.1 Benefit Information, Notices and Election
A Participant, or his or her Beneficiary in the case of his or her
death, shall be provided with information regarding all optional times
and forms of distribution available under the Plan, including the
notices prescribed by Code sections 402(f) and 411(a)(11). Subject to
the other requirements of this Section, a Participant, or his or her
Beneficiary in the case of his or her death, may elect, in such manner
and with such advance notice as prescribed by the Administrator, to
have his or her vested Account balance paid to him or her beginning
upon any Settlement Date following the Participant's termination of
employment with all Related Companies and a reasonable period of time
during which the Administrator shall process, and inform the Trustee
of, the Participant's termination or, if earlier, at the time of the
Participant's Required Beginning Date.
Notwithstanding, if a Participant's termination of employment with all
Related Companies does not constitute a separation from service for
purposes of Code section 401(k)(2)(B)(i)(I) or otherwise constitute an
event set forth under Code section 401(k)(10)(A)(ii) or (iii) as
described in Section 19.3, the portion of a Participant's Account
subject to the distribution rules of Code section 401(k) may not be
distributed until such time as he or she separates from service for
purposes of Code section 401(k)(2)(B)(i)(I) or, if earlier, upon such
other event as described in Code section 401(k)(2)(B) and as provided
for in the Plan.
If a distribution is one to which Code sections 401(a)(11) and 417 do
not apply, such distribution may commence less than 30 days after the
aforementioned notices are provided, if:
(a) the Participant is clearly informed that he or she has the right
to a period of at least 30 days after receipt of such notices to
consider the decision as to whether to elect a distribution and
if so to elect a particular form of distribution and to elect or
not elect a Direct Rollover for all or a portion, if any, of his
or her distribution which shall constitute an Eligible Rollover
Distribution; and
(b) the Participant after receiving such notices, affirmatively
elects a distribution and a Direct Rollover for all or a
portion, if any, of his or her distribution which shall
constitute an Eligible
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Rollover Distribution or, alternatively, elects to have all or a
portion made payable directly to him or her, thereby not
electing a Direct Rollover for all or a portion thereof.
11.2 Spousal Consent
A Participant is not required to obtain Spousal Consent in order to
receive a distribution under the Plan.
11.3 Payment Form and Medium
Except to the extent otherwise provided by Section 11.6, a Participant
may elect to be paid in any of these forms:
(a) a single lump sum, or
(b) a portion paid in a lump sum, and the remainder paid later.
Except as otherwise provided in this Section with regard to a
Participant's Allstate Plan Accounts, the medium of payment for a
distribution shall be in cash, except to the extent a distribution
consists of a loan call as described in Section 9 and except that a
Participant may elect that a lump sum payment be made in the form of
whole shares of Company Stock and cash in lieu of fractional shares to
the extent invested in the Company Stock Fund. With regard to the
portion of a distribution representing an Eligible Rollover
Distribution, a Distributee may elect a Direct Rollover for all or a
portion of such amount.
11.4 Special Provisions Related to Payment Medium for a Participant's
Allstate Plan Accounts
Regarding a Participant's Allstate Plan Accounts, a Participant may
elect payment of a single lump sum in the form of whole shares of
Allstate Stock and cash in lieu of fractional shares to the extent of
his or her Prior Employer Fund balance or, if greater, to the extent
of his or her Allstate Plan Accounts balance if he or she elects to
liquidate the portion of his or her Allstate Plan Accounts balance not
otherwise invested in the Prior Employer Fund. Such liquidation
proceeds shall be deposited to the Prior Employer Fund and used to
purchase shares of Allstate Stock on his or her behalf.
The provisions as stated in the preceding paragraph shall also apply
with regard to payment of a partial payment but only with regard to a
Participant whose termination of employment with all Related Companies
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(for reason other than death) occurred after his or her (i) attainment
of age 55 and completion of 20 or more years of continuous service,
(ii) attainment of age 60 and completion of 10 or more years of
continuous service or (iii) only with regard to a Participant whose
termination of employment with all Related Companies is by reason of
health problems or as a direct result (as determined by the
Administrator) of the closing or reorganization of a unit, attainment
of age 50 and completion of 10 or more years of continuous service,
and with regard to any such Participant only for any such partial
payment made to the Participant within 15 months following his or her
termination of employment with all Related Companies. Continuous
service for this purpose shall include a Participant's service for
this purpose as credited under The Allstate Plan.
The provisions of this Section 11.4 are subject to Section 11.5.
11.5 Discontinuance of Special Provisions Related to Payment Medium for a
Participant's Allstate Plan Accounts
The provisions of Section 11.4 are for the purpose of continuing a
comparable provision as formerly provided under The Allstate Plan.
The Plan in its form as stated is intended to constitute a qualified
profit sharing plan, as described in Code section 401(a), which
includes a qualified cash or deferred arrangement. The Company will
apply for a letter of determination from the Internal Revenue Service
that the Plan so qualifies.
The Allstate Corporation is not a Related Company and the Company does
not intend to maintain an Investment Fund comprised of Allstate Stock.
The Company intends to discontinue the availability of payments in the
form of shares of Allstate Stock. Upon receipt of a favorable
determination from the Internal Revenue Service that the Plan,
following such discontinuation, will qualify under Code section
401(a), the provisions of Section 11.4 shall be deemed to be
discontinued as provided in the application for determination and the
favorable determination.
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<PAGE>
11.6 Distribution of Small Amounts
If after a Participant's employment with all Related Companies ends,
the Participant's vested Account balance is $5,000 or less, and if at
the time of any prior in-service withdrawal or distribution the
Participant's vested Account balance did not exceed $5,000, the
Participant's benefit shall be paid as a single lump sum as soon as
administratively feasible in accordance with procedures prescribed by
the Administrator.
11.7 Source and Timing of Distribution Funding
A distribution to a Participant shall be made solely from the assets
of his or her own Accounts and shall be based on the Account values as
of the Trade Date the distribution is processed. The available assets
shall be determined first by Account type and then within each Account
used for funding a distribution, amounts shall first be taken from the
Sweep Account and then taken by Investment Fund in direct proportion
to the market value of the Participant's interest in each Investment
Fund as of the Trade Date on which the distribution is processed.
The distribution shall be funded on the Settlement Date following the
Trade Date as of which the distribution is processed. The Trustee
shall make payment as soon thereafter as administratively feasible.
11.8 Latest Commencement Permitted
In addition to any other Plan requirements and unless a Participant
elects otherwise, his or her benefit payments shall begin not later
than 60 days after the end of the Plan Year in which he or she attains
his or her Normal Retirement Date or retires, whichever is later.
However, if the amount of the payment or the location of the
Participant (after a reasonable search) cannot be ascertained by that
deadline, payment shall be made no later than 60 days after the
earliest date on which such amount or location is ascertained but in
no event later than the Participant's Required Beginning Date. A
Participant's failure to elect in such manner as prescribed by the
Administrator to have his or her vested Account balance paid to him or
her, shall be deemed an election by the Participant to defer his or
her distribution but in no event shall his or her benefit payments
commence later than his or her Required Beginning Date.
If benefit payments cannot begin at the time required because the
location of the Participant cannot be
40
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ascertained (after a reasonable search), the Administrator may, at any
time thereafter, treat such person's Account as forfeited subject to
the provisions of Section 18.6.
11.9 Payment Within Life Expectancy
The Participant's payment election must be consistent with the
requirement of Code section 401(a)(9) that all payments are to be
completed within a period not to exceed the lives or the joint and
last survivor life expectancy of the Participant and his or her
Beneficiary. The life expectancies of a Participant and his or her
Beneficiary may not be recomputed annually.
11.10 Incidental Benefit Rule
The Participant's payment election must be consistent with the
requirement that, if the Participant's spouse is not his or her sole
primary Beneficiary, the minimum annual distribution for each calendar
year, beginning with the calendar year preceding the calendar year
that includes the Participant's Required Beginning Date, shall not be
less than the quotient obtained by dividing (a) the Participant's
vested Account balance as of the last Trade Date of the preceding year
by (b) the applicable divisor as determined under the incidental
benefit requirements of Code section 401(a)(9).
11.11 Payment to Beneficiary
Payment to a Beneficiary must either: (1) be completed by the end of
the calendar year that contains the fifth anniversary of the
Participant's death or (2) begin by the end of the calendar year that
contains the first anniversary of the Participant's death and be
completed within the period of the Beneficiary's life or life
expectancy, except that:
(a) If the Participant dies after his or her Required Beginning Date,
payment to his or her Beneficiary must be made at least as
rapidly as provided in the Participant's distribution election;
(b) If the surviving spouse is the Beneficiary, payments need not
begin until the end of the calendar year in which the Participant
would have attained age 70 1/2 and must be completed within the
spouse's life or life expectancy; and
(c) If the Participant and the surviving spouse who is the
Beneficiary die (i) before the Participant's Required Beginning
Date and (ii) before payments
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<PAGE>
have begun to the spouse, the spouse shall be treated as the
Participant in applying these rules.
11.12 Beneficiary Designation
Each Participant may complete a beneficiary designation form
indicating the Beneficiary who is to receive the Participant's
remaining Plan interest at the time of his or her death. The
designation may be changed at any time. However, a Participant's
spouse shall be the sole primary Beneficiary unless the designation
includes Spousal Consent for another Beneficiary. If no proper
designation is in effect at the time of a Participant's death or if
the Beneficiary does not survive the Participant, the Beneficiary
shall be, in the order listed, the:
(a) Participant's surviving spouse,
(b) Participant's children, in equal shares, (or if a child does not
survive the Participant, and that child leaves issue, the issue
shall be entitled to that child's share, by right of
representation) or
(c) Participant's estate.
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12 ADP AND ACP TESTS
-----------------
12.1 Contribution Limitation Definitions
The following definitions are applicable to this Section 12 (where a
definition is contained in both Sections 1 and 12, for purposes of
Section 12 the Section 12 definition shall be controlling):
(a) "ACP" or "Average Contribution Percentage". The Average
Percentage calculated using Contributions allocated to
Participants as of a date within the Plan Year.
(b) "ACP Test". The determination of whether the ACP is in
compliance with the Basic or Alternative Limitation for a Plan
Year (as defined in Section 12.2).
(c) "ADP" or "Average Deferral Percentage". The Average Percentage
calculated using Deferrals allocated to Participants as of a
date within the Plan Year.
(d) "ADP Test". The determination of whether the ADP is in
compliance with the Basic or Alternative Limitation for a Plan
Year (as defined in Section 12.2).
(e) "Average Percentage". The average of the calculated percentages
for Participants within the specified group. The calculated
percentage refers to either the "Deferrals" or "Contributions"
(as defined in this Section) made on each Participant's behalf
for the Plan Year, divided by his or her Compensation for the
portion of the Plan Year in which he or she was an Eligible
Employee while a Participant. (Pre-Tax Contributions to this
Plan or comparable contributions to plans of Related Companies
which shall be refunded solely because they exceed the
Contribution Dollar Limit are included in the percentage for the
HCE Group but not for the NHCE Group.)
(f) "Contributions" shall include Company Matching Contributions. In
addition, Contributions may include Pre-Tax and Qualified
Nonelective Contributions, but only to the extent that (1) the
Employer elects to use them, (2) they are not used or counted in
the ADP Test, (3) Qualified Nonelective Contributions are fully
vested when made, not withdrawable by an Employee before he or
she attains age 59 1/2 and (4) they otherwise satisfy the
requirements as prescribed under Code section
43
<PAGE>
401(m) permitting treatment as Contributions for purposes of the
ACP Test, including with regard to Qualified Nonelective
Contributions satisfaction of the requirements of Code section
401(a) in the manner prescribed under Code section 401(m).
(g) "Deferrals" shall include Pre-Tax Contributions. In addition,
Deferrals may include Qualified Nonelective Contributions, but
only to the extent that (1) the Employer elects to use them, (2)
they are not used or counted in the ACP Test, (3) they are fully
vested when made, not withdrawable by an Employee before he or
she attains age 59 1/2 and (4) they otherwise satisfy the
requirements as prescribed under Code section 401(k) permitting
treatment as Deferrals for purposes of the ADP Test, including
satisfaction of the requirements of Code section 401(a) in the
manner prescribed under Code section 401(k).
(h) "HCE" or "Highly Compensated Employee". With respect to all
Related Companies, an Employee who (in accordance with Code
section 414(q)):
(1) Was a more than 5% Owner (within the meaning of Code section
414(q)(2)) at any time during the Plan Year or the preceding
Plan Year; or
(2) Received Compensation during the preceding Plan Year in
excess of $80,000 (as adjusted for such Year pursuant to
Code sections 414(q)(1) and 415(d)) or, if the Company
elects for such preceding Plan Year "in excess of $80,000
(as adjusted for such Year pursuant to Code sections
414(q)(1) and 415(d)) and was a member of the "top-paid
group" (within the meaning of Code section 414(q)(3)) for
such preceding Plan Year" shall be substituted for the
preceding reference to "in excess of $80,000 (as adjusted
for such Year pursuant to Code sections 414(q)(1) and
415(d))".
A former Employee shall be treated as an HCE if (1) such former
Employee was an HCE when he or she separated from service, or (2)
such former Employee was an HCE in service at any time after
attaining age 55.
The determination of who is an HCE and the determination of the
number and identity of Employees in the top-paid group shall be
made in accordance with Code section 414(q).
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(i) "HCE Group" and "NHCE Group". With respect to all Related
Companies, the respective group of HCEs and NHCEs who are
eligible to have amounts contributed on their behalf for the Plan
Year, including Employees who would be eligible but for their
election not to participate or to contribute, or because their
Pay is greater than zero but does not exceed a stated minimum.
For Plan Years commencing after December 31, 1998, with respect
to all Related Companies, if the Plan permits participation prior
to an Eligible Employee's satisfaction of the minimum age and
service requirements of Code section 410(a)(1)(A), Eligible
Employees who have not met the minimum age and service
requirements of Code section 410(a)(1)(A) may be excluded in the
determination of the NHCE Group, but not in the determination of
the HCE Group, for purposes of (i) the ADP Test, if Code section
410(b)(4)(B) is applied in determining whether the 401(k) portion
of the Plan meets the requirements of Code section 410(b), or
(ii) the ACP Test, if Code 410(b)(4)(B) is applied in determining
whether the 401(m) portion of the Plan meets the requirements of
Code section 410(b).
(1) If the Related Companies maintain two or more plans which
are subject to the ADP or ACP Test and are considered as one
plan for purposes of Code sections 401(a)(4) or 410(b), all
such plans shall be aggregated and treated as one plan for
purposes of meeting the ADP and ACP Tests provided that the
plans may only be aggregated if they have the same Plan
Year.
(2) If an HCE is covered by more than one cash or deferred
arrangement, or more than one arrangement permitting
employee or matching contributions, maintained by the
Related Companies, all such plans shall be aggregated and
treated as one plan (other than those plans that may not be
permissively aggregated) for purposes of calculating the
separate percentage for the HCE which is used in the
determination of the Average Percentage. For purposes of the
preceding sentence, if such plans have different plan years,
the plans are aggregated with respect to the plan years
ending with or within the same calendar year.
(j) "Multiple Use Test". The test described in Section 12.4 which a
Plan must meet where the Alternative
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Limitation (described in Section 12.2(b)) is used to meet both
the ADP and ACP Tests.
(k) "NHCE" or "Non-Highly Compensated Employee". An Employee who is
not an HCE.
12.2 ADP and ACP Tests
For each Plan Year, the ADP and ACP for the HCE Group must meet either
the Basic or Alternative Limitation when compared to the respective
preceding Plan Year's ADP and ACP for the preceding Plan Year's NHCE
Group, defined as follows:
(a) Basic Limitation. The HCE Group Average Percentage may not
exceed 1.25 times the NHCE Group Average Percentage.
(b) Alternative Limitation. The HCE Group Average Percentage is
limited by reference to the NHCE Group Average Percentage as
follows:
IF THE NHCE GROUP THEN THE MAXIMUM HCE
AVERAGE GROUP AVERAGE PERCENTAGE
------- -------------------------
PERCENTAGE IS: IS:
-------------- ---
Less than 2% 2 times NHCE Group
2% to 8% Average %
More than 8% NHCE Group Average %
plus 2%
NA - Basic Limitation
applies
Alternatively, the Company may elect to use the Plan Year's ADP for
the NHCE Group for the Plan Year and/or the Plan Year's ACP for the
NHCE Group for the Plan Year. If such election is made, such election
may not be changed except as provided by the Code.
12.3 Correction of ADP and ACP Tests
If the ADP or ACP Tests are not met, the Administrator shall
determine, no later than the end of the next Plan Year, a maximum
percentage to be used in place of the calculated percentage for all
HCEs that would reduce the ADP and/or ACP for the HCE Group by a
sufficient amount to meet the ADP and ACP Tests.
With regard to each HCE whose Deferral percentage and/or Contribution
percentage is in excess of the maximum percentage, a dollar amount of
excess Deferrals and/or excess Contributions shall then be determined
by (i) subtracting the product of such maximum percentage for the ADP
and the HCE's Compensation from the HCE's actual
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Deferrals and (ii) subtracting the product of such maximum percentage
for the ACP and the HCE's Compensation from the HCE's actual
Contributions. Such amounts shall then be aggregated to determine the
total dollar amount of excess Deferrals and/or excess Contributions.
ADP and/or ACP corrections shall be made in accordance with the
leveling method as described below.
(a) ADP Correction. The HCE with the highest Deferral dollar amount
shall have his or her Deferral dollar amount reduced in an amount
equal to the lesser of the dollar amount of excess deferrals for
all HCEs or the dollar amount that would cause his or her
Deferral dollar amount to equal that of the HCE with the next
highest Deferral dollar amount. The process shall be repeated
until the total of the Deferral dollar amount reductions equals
the dollar amount of excess Deferrals for all HCEs.
To the extent an HCE's Deferrals were determined to be reduced as
described in the paragraph above, Pre-Tax Contributions shall, by
the end of the next Plan Year, be refunded to the HCE, except
that such amount to be refunded shall be reduced by Pre-Tax
Contributions previously refunded because they exceeded the
Contribution Dollar Limit. The excess amounts shall first be
taken from unmatched Pre-Tax Contributions and then from matched
Pre-Tax Contributions. Any Company Matching Contributions
attributable to refunded excess Pre-Tax Contributions as
described in this Section, adjusted for investment gain or loss
for the Plan Year to which the excess Pre-Tax Contributions
relate, shall be forfeited and used to reduce future
Contributions to be made by an Employer as soon as
administratively feasible.
(b) ACP Correction. The HCE with the highest Contribution dollar
amount shall have his or her Contribution dollar amount reduced
in an amount equal to the lesser of the dollar amount of excess
Contributions for all HCEs or the dollar amount that would cause
his or her Contribution dollar amount to equal that of the HCE
with the next highest Contribution dollar amount. The process
shall be repeated until the total of the Contribution dollar
amount reductions equals the dollar amount of excess
Contributions for all HCEs.
To the extent an HCE's Contributions were determined to be
reduced as described in the paragraph above, Company Matching
Contributions
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shall, by the end of the next Plan Year, be refunded to the HCE.
(c) Investment Fund Sources. Once the amount of excess Deferrals
and/or Contributions is determined amounts shall first be taken
from the Sweep Account and then taken by Investment Fund in
direct proportion to the market value of the Participant's
interest in each Investment Fund (which excludes his or her Loan
Account balance, if Participant loans are permitted in accordance
with Section 9) as of the Trade Date on which the correction is
processed.
12.4 Multiple Use Test
If the Alternative Limitation (defined in Section 12.2) is used to
meet both the ADP and ACP Tests, the ADP and ACP for the HCE Group
must also comply with the requirements of Code section 401(m)(9). Such
Code section requires that the sum of the ADP and ACP for the HCE
Group (as determined after any corrections needed to meet the ADP and
ACP Tests have been made) not exceed the sum (which produces the most
favorable result) of:
(a) the Basic Limitation (defined in Section 12.2) applied to either
the ADP or ACP for the NHCE Group, and
(b) the Alternative Limitation applied to the other NHCE Group
percentage.
12.5 Correction of Multiple Use Test
If the multiple use limit is exceeded, the Administrator shall
determine a maximum percentage to be used in place of the calculated
percentage for all HCEs that would reduce either or both the ADP or
ACP for the HCE Group by a sufficient amount to meet the multiple use
limit. Any excess shall be handled in the same manner that the
distribution of excess Deferrals or Contributions are handled.
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<PAGE>
12.6 Adjustment for Investment Gain or Loss
Any excess Deferrals or Contributions to be refunded to a Participant
in accordance with Section 12.3 or 12.5 shall be adjusted for
investment gain or loss. Refunds shall not include investment gain or
loss for the period between the end of the applicable Plan Year and
the date of distribution.
12.7 Testing Responsibilities and Required Records
The Administrator shall be responsible for ensuring that the Plan
meets the ADP Test, the ACP Test and the Multiple Use Test, and that
the Contribution Dollar Limit is not exceeded. In carrying out its
responsibilities, the Administrator shall have sole discretion to
limit or reduce Deferrals or Contributions at any time. The
Administrator shall maintain records which are sufficient to
demonstrate that the ADP Test, the ACP Test and the Multiple Use Test,
have been met for each Plan Year for at least as long as the
Employer's corresponding tax year is open to audit.
12.8 Separate Testing
(a) Multiple Employers: The determination of HCEs, NHCEs, and the
performance of the ADP Test, the ACP Test and Multiple Use Test,
and any corrective action resulting therefrom, shall be made
separately with regard to the Employees of each Employer (and its
Related Companies) that is not a Related Company with the other
Employer(s).
(b) Collective Bargaining Units: The performance of the ADP Test,
and if applicable, the ACP Test and Multiple Use Test, and any
corrective action resulting therefrom, shall be applied
separately to Employees who are eligible to participate in the
Plan as a result of a collective bargaining agreement.
In addition, separate testing may be applied, at the discretion of the
Administrator and to the extent permitted under Treasury regulations,
to any group of Employees for whom separate testing is permissible.
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13 MAXIMUM CONTRIBUTION AND BENEFIT LIMITATIONS
--------------------------------------------
13.1 "Annual Addition" Defined
The sum of all amounts allocated to the Participant's Account for a
Plan Year. Amounts include contributions (except for rollovers or
transfers from another qualified plan), forfeitures and, if the
Participant is a Key Employee (pursuant to Section 14) for the
applicable or any prior Plan Year, medical benefits provided pursuant
to Code section 419A(d)(1). For purposes of this Section 13.1,
"Account" also includes a Participant's account in all other defined
contribution plans currently or previously maintained by any Related
Company. The Plan Year refers to the year to which the allocation
pertains, regardless of when it was allocated. The Plan Year shall be
the Code section 415 limitation year.
13.2 Maximum Annual Addition
The Annual Addition to a Participant's accounts under this Plan and
any other defined contribution plan maintained by any Related Company
for any Plan Year shall not exceed the lesser of (1) 25% of his or her
Compensation or (2) $30,000 (as adjusted for the cost of living
pursuant to Code section 415(d)).
13.3 Avoiding an Excess Annual Addition
If, at any time during a Plan Year, the allocation of any additional
Contributions would produce an excess Annual Addition for such year,
Contributions to be made for the remainder of the Plan Year shall be
limited to the amount needed for each affected Participant to receive
the maximum Annual Addition.
13.4 Correcting an Excess Annual Addition
Upon the discovery of an excess Annual Addition to a Participant's
Account (resulting from forfeitures, allocations, reasonable error in
determining Participant compensation or the amount of elective
contributions, or other facts and circumstances acceptable to the
Internal Revenue Service) the excess amount (adjusted to reflect
investment gains) shall first be returned to the Participant to the
extent of his or her Pre-Tax Contributions (however to the extent Pre-
Tax Contributions were matched, the applicable Company Matching
Contributions shall be forfeited in proportion to the returned matched
Pre-Tax Contributions) and the remaining excess, if any, shall be
forfeited by the Participant and used to reduce Contributions made by
an Employer as soon as administratively feasible.
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<PAGE>
13.5 Correcting a Multiple Plan Excess
If a Participant, whose Account is credited with an excess Annual
Addition, received allocations to more than one defined contribution
plan, the excess shall be corrected by reducing the Annual Addition to
this Plan only after all possible reductions have been made to the
other defined contribution plans.
13.6 "Defined Benefit Fraction" Defined
The fraction, for any Plan Year, where the numerator is the "projected
annual benefit" and the denominator is the greater of 125% of the
"protected current accrued benefit" or the normal limit which is the
lesser of (1) 125% of the maximum dollar limitation provided under
Code section 415(b)(1)(A) for the Plan Year or (2) 140% of the amount
which may be taken into account under Code section 415(b)(1)(B) for
the Plan Year, where a Participant's:
(a) "projected annual benefit" is the annual benefit provided by the
Plan determined pursuant to Code section 415(e)(2)(A), and
(b) "protected current accrued benefit" in a defined benefit plan in
existence (1) on July 1, 1982, shall be the accrued annual
benefit provided for under Public Law 97-248, section 235(g)(4),
as amended, or (2) on May 6, 1986, shall be the accrued annual
benefit provided for under Public Law 99-514, section 1106(i)(3).
This Section 13.6 is deleted effective January 1, 2000.
13.7 "Defined Contribution Fraction" Defined
The fraction where the numerator is the sum of the Participant's
Annual Addition for each Plan Year to date and the denominator is the
sum of the "annual amounts" for each year in which the Participant has
performed service with a Related Company. The "annual amount" for any
Plan Year is the lesser of (1) 125% of the Code section 415(c)(1)(A)
dollar limitation (determined without regard to subsection (c)(6)) in
effect for the Plan Year and (2) 140% of the Code section 415(c)(1)(B)
amount in effect for the Plan Year, where:
(a) each Annual Addition is determined pursuant to the Code section
415(c) rules in effect for such Plan Year, and
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<PAGE>
(b) the numerator is adjusted pursuant to Public Law 97-248, section
235(g)(3), as amended, or Public Law 99-514, section 1106(i)(4).
This Section 13.7 is deleted effective January 1, 2000.
13.8 Combined Plan Limits and Correction
If a Participant has also participated in a defined benefit plan
maintained by a Related Company, the sum of the Defined Benefit
Fraction and the Defined Contribution Fraction for any Plan Year may
not exceed 1.0. If the combined fraction exceeds 1.0 for any Plan
Year, the Participant's benefit under any defined benefit plan (to the
extent it has not been distributed or used to purchase an annuity
contract) shall be limited so that the combined fraction does not
exceed 1.0 before any defined contribution limits shall be enforced.
This Section 13.8 is deleted effective January 1, 2000.
52
<PAGE>
14 TOP HEAVY RULES
---------------
14.1 Top Heavy Definitions
When capitalized, the following words and phrases have the following
meanings when used in this Section:
(a) "Aggregation Group". The group consisting of each qualified
plan of an Employer (and its Related Companies) (1) in which a
Key Employee is a participant or was a participant during the
determination period (regardless of whether such plan has
terminated), or (2) which enables another plan in the group to
meet the requirements of Code sections 401(a)(4) or 410(b). The
Employer may also treat any other qualified plan as part of the
group if the group would continue to meet the requirements of
Code sections 401(a)(4) and 410(b) with such plan being taken
into account.
(b) "Determination Date". The last Trade Date of the preceding Plan
Year or, in the case of the Plan's first year, the last Trade
Date of the first Plan Year.
(c) "Key Employee". A current or former Employee (or his or her
Beneficiary) who at any time during the five year period ending
on the Determination Date was:
(1) an officer of a Related Company whose Compensation (i)
exceeds 50% of the amount in effect under Code section
415(b)(1)(A) and (ii) places him within the following
highest paid group of officers:
NUMBER OF
EMPLOYEES
NOT EXCLUDED UNDER NUMBER OF
CODE HIGHEST PAID
SECTION 414(q)(8) OFFICERS INCLUDED
--------------------- ------------------
Less than 30 3
30 to 500 10% of the number
of
Employees not
excluded
More than 500 under Code
section
414(q)(8)
50
(2) a more than 5% Owner,
53
<PAGE>
(3) a more than 1% Owner whose Compensation exceeds $150,000, or
(4) a more than 0.5% Owner who is among the 10 Employees owning
the largest interest in a Related Company and whose
Compensation exceeds the amount in effect under Code section
415(c)(1)(A).
(d) "Plan Benefit". The sum as of the Determination Date of (1) an
Employee's Account, (2) the present value of his or her other
accrued benefits provided by all qualified plans within the
Aggregation Group, and (3) the aggregate distributions made
within the five year period ending on such date. Plan Benefits
shall exclude Rollover Contributions and plan to plan transfers
made after December 31, 1983 which are both employee initiated
and from a plan maintained by a non-related employer.
(e) "Top Heavy". The Plan's status when the Plan Benefits of Key
Employees account for more than 60% of the Plan Benefits of all
Employees who have performed services at any time during the five
year period ending on the Determination Date. The Plan Benefits
of Employees who were, but are no longer, Key Employees (because
they have not been an officer or Owner during the five year
period), are excluded in the determination.
14.2 Special Contributions
(a) Minimum Contribution Requirement. For each Plan Year in which
the Plan is Top Heavy, the Employer shall not allow any
contributions (other than a Rollover Contribution from a plan
maintained by a non-related employer) to be made by or on behalf
of any Key Employee unless the Employer makes a contribution
(other than contributions made by an Employer in accordance with
a Participant's salary deferral election or contributions made by
an Employer based upon the amount contributed by a Participant)
on behalf of all Participants who were Eligible Employees as of
the last day of the Plan Year in an amount equal to at least 3%
of each such Participant's Taxable Income. The Administrator
shall remove any such contributions (including applicable
investment gain or loss) credited to a Key Employee's Account in
violation of the foregoing rule and return them to the Employer
or Employee to the extent permitted by the Limited Return of
Contributions paragraph of Section 18.
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<PAGE>
(b) Overriding Minimum Benefit. Notwithstanding, contributions
shall be permitted on behalf of Key Employees if the Employer
also maintains a defined benefit plan which automatically
provides a benefit which satisfies the Code section 416(c)(1)
minimum benefit requirements, including the adjustment provided
in Code section 416(h)(2)(A), if applicable. If this Plan is
part of an aggregation group in which a Key Employee is receiving
a benefit and no minimum is provided in any other plan, a minimum
contribution of at least 3% of Taxable Income shall be provided
to the Participants specified in the preceding paragraph. In
addition, the Employer may offset a defined benefit minimum by
contributions (other than contributions made by an Employer in
accordance with a Participant's salary deferral election or
contributions made by an Employer based upon the amount
contributed by a Participant) made to this Plan.
14.3 Adjustment to Combined Limits for Different Plans
For each Plan Year in which the Plan is Top Heavy, 100% shall be
substituted for 125% in determining the Defined Benefit Fraction and
the Defined Contribution Fraction.
This Section 14.3 is deleted effective January 1, 2000.
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<PAGE>
15 PLAN ADMINISTRATION
-------------------
15.1 Plan Delineates Authority and Responsibility
Plan fiduciaries include the Company, the Administrator, the Committee
and/or the Trustee, as applicable, whose specific duties are
delineated in this Plan and Trust. In addition, Plan fiduciaries also
include any other person to whom fiduciary duties or responsibility is
delegated with respect to the Plan. Any person or group may serve in
more than one fiduciary capacity with respect to the Plan. To the
extent permitted under ERISA section 405, no fiduciary shall be liable
for a breach by another fiduciary.
15.2 Fiduciary Standards
Each fiduciary shall:
(a) discharge his or her duties in accordance with this Plan and
Trust to the extent they are consistent with ERISA;
(b) use that degree of care, skill, prudence and diligence that a
prudent person acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims;
(c) act with the exclusive purpose of providing benefits to
Participants and their Beneficiaries, and defraying reasonable
expenses of administering the Plan;
(d) diversify Plan investments, to the extent such fiduciary is
responsible for directing the investment of Plan assets, so as to
minimize the risk of large losses, unless under the circumstances
it is clearly prudent not to do so; and
(e) treat similarly situated Participants and Beneficiaries in a
uniform and nondiscriminatory manner.
15.3 Company is ERISA Plan Administrator
The Company is the plan administrator, within the meaning of ERISA
section 3(16), which is responsible for compliance with all reporting
and disclosure requirements, except those that are explicitly the
responsibility of the Trustee under applicable law. The Administrator
and/or Committee shall have any necessary authority to carry out such
functions through the
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<PAGE>
actions of the Administrator, duly appointed officers of the Company,
and/or the Committee.
15.4 Administrator Duties
The Administrator shall have the discretionary authority to construe
this Plan and Trust, other than the provisions which relate to the
Trustee, and to do all things necessary or convenient to effect the
intent and purposes thereof, whether or not such powers are
specifically set forth in this Plan and Trust. Actions taken in good
faith by the Administrator shall be conclusive and binding on all
interested parties, and shall be given the maximum possible deference
allowed by law. In addition to the duties listed elsewhere in this
Plan and Trust, the Administrator's authority shall include, but not
be limited to, the discretionary authority to:
(a) determine who is eligible to participate, if a contribution
qualifies as a rollover contribution, the allocation of
Contributions, and the eligibility for loans (if permitted in
accordance with Section 9), withdrawals and distributions;
(b) provide each Participant with a summary plan description no later
than 90 days after he or she has become a Participant (or such
other period permitted under ERISA section 104(b)(1)), as well as
informing each Participant of any material modification to the
Plan in a timely manner;
(c) make a copy of the following documents available to Participants
during normal work hours: this Plan and Trust (including
subsequent amendments), all annual and interim reports of the
Trustee related to the entire Plan, the latest annual report and
the summary plan description;
(d) determine the fact of a Participant's death and of any
Beneficiary's right to receive the deceased Participant's
interest based upon such proof and evidence as it deems
necessary;
(e) establish and review at least annually a funding policy bearing
in mind both the short-run and long-run needs and goals of the
Plan and to the extent Participants may direct their own
investments, the funding policy shall focus on which Investment
Funds are available for Participants to use;
(f) apportion the costs of the Plan among the Company and the other
Employers; and
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<PAGE>
(g) adjudicate claims pursuant to the claims procedure described in
Section 18.
15.5 Advisors May be Retained
The Administrator may retain such agents and advisors (including
attorneys, accountants, actuaries, consultants, record keepers,
investment counsel and administrative assistants) as it considers
necessary to assist it in the performance of its duties. The
Administrator shall also comply with the bonding requirements of ERISA
section 412.
15.6 Delegation of Administrator Duties
The Company, as Administrator of the Plan, has appointed a Committee
to administer the Plan on its behalf. The Company shall provide the
Trustee with the names and specimen signatures of any persons
authorized to serve as Committee members and act as or on its behalf.
Any Committee member appointed by the Company shall serve at the
pleasure of the Company, but may resign by written notice to the
Company. Committee members shall serve without compensation from the
Plan for such services. Except to the extent that the Company
otherwise provides, any delegation of duties to a Committee shall
carry with it the full discretionary authority of the Administrator to
complete such duties.
15.7 Committee Operating Rules
(a) Actions of Majority. Any act delegated by the Company to the
Committee may be done by a majority of its members. The majority
may be expressed by a vote at a meeting or in writing without a
meeting, and a majority action shall be equivalent to an action
of all Committee members.
(b) Meetings. The Committee shall hold meetings upon such notice,
place and times as it determines necessary to conduct its
functions properly.
(c) Reliance by Trustee. The Committee may authorize one or more of
its members to execute documents on its behalf and may authorize
one or more of its members or other individuals who are not
members to give written direction to the Trustee in the
performance of its duties. The Committee shall provide such
authorization in writing to the Trustee with the name and
specimen signatures of any person authorized to act on its
behalf. The Trustee shall accept such direction and rely upon it
until notified in writing that the Committee has revoked the
authorization to give such direction.
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<PAGE>
The Trustee shall not be deemed to be on notice of any change in
the membership of the Committee, parties authorized to direct the
Trustee in the performance of its duties, or the duties delegated
to and by the Committee until notified in writing.
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<PAGE>
16 MANAGEMENT OF INVESTMENTS
-------------------------
16.1 Trust Agreement
All Plan assets shall be held by the Trustee in trust, in accordance
with those provisions of this Plan and Trust which relate to the
Trustee, for use in providing Plan benefits and paying Plan fees and
expenses not paid directly by the Employer. Plan benefits shall be
drawn solely from the Trust and paid by the Trustee as directed by the
Administrator. Notwithstanding, the Administrator may appoint, with
the approval of the Trustee, another trustee to hold and administer
Plan assets which do not meet the requirements of Section 16.2.
16.2 Investment Funds
The Administrator is hereby granted authority to direct the Trustee to
invest Trust assets in one or more Investment Funds. The number and
composition of Investment Funds may be changed from time to time,
without the necessity of amending this Plan and Trust. The Trustee
may establish reasonable limits on the number of Investment Funds as
well as the acceptable assets for any such Investment Fund. Each of
the Investment Funds may be comprised of any of the following:
(a) shares of a registered investment company, whether or not the
Trustee or any of its affiliates is an advisor to, or other
service provider to, such company;
(b) collective investment funds maintained by the Trustee, or any
other fiduciary to the Plan, which are available for investment
by trusts which are qualified under Code sections 401(a) and
501(a);
(c) individual equity and fixed income securities which are readily
tradeable on the open market;
(d) guaranteed investment contracts issued by a bank or insurance
company;
(e) interest bearing deposits of the Trustee;
(f) Sears, Roebuck and Co. common stock, Dean Witter, Discover & Co.
common stock and The Allstate Corporation common stock, subject
to the limitations as set forth in Appendix A; and
(g) Company Stock.
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<PAGE>
Any Investment Fund assets invested in a collective investment fund,
shall be subject to all the provisions of the instruments establishing
and governing such fund. These instruments, including any subsequent
amendments, are incorporated herein by reference.
16.3 Authority to Hold Cash
The Trustee shall have the authority to cause the investment manager
of each Investment Fund to maintain sufficient deposit or money market
type assets in each Investment Fund to handle the Fund's liquidity and
disbursement needs. Each Participant's and Beneficiary's Sweep
Account, which is used to hold assets pending investment or
disbursement, shall consist of interest bearing deposits of the
Trustee.
16.4 Trustee to Act Upon Instructions
The Trustee shall carry out instructions to invest assets in the
Investment Funds as soon as practicable after such instructions are
received from the Administrator, Participants, or Beneficiaries. Such
instructions shall remain in effect until changed by the
Administrator, Participants or Beneficiaries.
16.5 Administrator Has Right to Vote Registered Investment Company Shares
The Administrator shall be entitled to vote proxies or exercise any
shareholder rights relating to shares held on behalf of the Plan in a
registered investment company. Notwithstanding, the authority to vote
proxies and exercise shareholder rights related to such shares held in
a Custom Fund is vested as provided otherwise in Section 16.
16.6 Custom Fund Investment Management
The Administrator may designate, with the consent of the Trustee, an
investment manager for any Investment Fund established by the Trustee
solely for Participants of this Plan (a "Custom Fund"). The
investment manager may be the Administrator, Trustee or an investment
manager pursuant to ERISA section 3(38). The Administrator shall
advise the Trustee in writing of the appointment of an investment
manager and shall cause the investment manager to acknowledge to the
Trustee in writing that the investment manager is a fiduciary to the
Plan.
A Custom Fund shall be subject to the following:
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<PAGE>
(a) Guidelines. Written guidelines, acceptable to the Trustee, shall
be established for a Custom Fund. If a Custom Fund consists
solely of collective investment funds or shares of a registered
investment company (and sufficient deposit or money market type
assets to handle the Fund's liquidity and disbursement needs),
its underlying instruments shall constitute the guidelines.
(b) Authority of Investment Manager. The investment manager of a
Custom Fund shall have the authority to vote or execute proxies,
exercise shareholder rights, manage, acquire, and dispose of
Trust assets. Notwithstanding, the authority to vote proxies and
exercise shareholder rights related to shares of Company Stock
held in a Custom Fund is vested as provided otherwise in Section
16.
(c) Custody and Trade Settlement. Unless otherwise agreed to by the
Trustee, the Trustee shall maintain custody of all Custom Fund
assets and be responsible for the settlement of all Custom Fund
trades. For purposes of this section, shares of a collective
investment fund, shares of a registered investment company and
guaranteed investment contracts issued by a bank or insurance
company, shall be regarded as the Custom Fund assets instead of
the underlying assets of such instruments.
(d) Limited Liability of Co-Fiduciaries. Neither the Administrator
nor the Trustee shall be obligated to invest or otherwise manage
any Custom Fund assets for which the Trustee or Administrator is
not the investment manager nor shall the Administrator or Trustee
be liable for acts or omissions with regard to the investment of
such assets except to the extent required by ERISA.
16.7 Authority to Segregate Assets
The Company may direct the Trustee to split an Investment Fund into
two or more funds in the event any assets in the Fund are illiquid or
the value is not readily determinable. In the event of such
segregation, the Company shall give instructions to the Trustee on
what value to use for the split-off assets, and the Trustee shall not
be responsible for confirming such value.
16.8 Maximum Permitted Investment in Company Stock
If the Company provides for a Company Stock Fund, the Fund shall be
comprised of Company Stock and sufficient deposit or money market type
assets to handle the Fund's
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liquidity and disbursement needs. The Fund may be as large as
necessary to provide for the total investment of Participants' and
Beneficiaries' Company Match Stock Accounts and, if designated as an
Investment Fund available to Participants and Beneficiaries, to comply
with Participants' and Beneficiaries' investment elections.
16.9 Participants Have Right to Vote and Tender Company Stock
Each Participant or Beneficiary shall be entitled to instruct the
Trustee as to the voting or tendering of any full or partial shares of
Company Stock held on his or her behalf in the Company Stock Fund.
Prior to such voting or tendering of Company Stock, each Participant
or Beneficiary shall receive a copy of the proxy solicitation or other
material relating to such vote or tender decision and a form for the
Participant or Beneficiary to complete which confidentially instructs
the Trustee to vote or tender such shares in the manner indicated by
the Participant or Beneficiary. Upon receipt of such instructions,
the Trustee shall act with respect to such shares as instructed. The
Administrator shall instruct the Trustee with respect to how to vote
or tender any shares for which instructions are not received from
Participants or Beneficiaries.
16.10 Registration and Disclosure for Company Stock
The Administrator shall be responsible for determining the
applicability (and, if applicable, complying with) the requirements of
the Securities Act of 1933, as amended, the California Corporate
Securities Law of 1968, as amended, and any other applicable blue sky
law. The Administrator shall also specify what restrictive legend or
transfer restriction, if any, is required to be set forth on the
certificates for the securities and the procedure to be followed by
the Trustee to effectuate a resale of such securities.
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<PAGE>
17 TRUST ADMINISTRATION
--------------------
17.1 Trustee to Construe Trust
The Trustee shall have the discretionary authority to construe those
provisions of this Plan and Trust which relate to the Trustee and to
do all things necessary or convenient to the administration of the
Trust, whether or not such powers are specifically set forth in this
Plan and Trust. Actions taken in good faith by the Trustee shall be
conclusive and binding on all interested parties, and shall be given
the maximum possible deference allowed by law.
17.2 Trustee To Act As Owner of Trust Assets
Subject to the specific conditions and limitations set forth in this
Plan and Trust, the Trustee shall have all the power, authority,
rights and privileges of an absolute owner of the Trust assets and,
not in limitation but in amplification of the foregoing, may:
(a) receive, hold, manage, invest and reinvest, sell, tender,
exchange, dispose of, encumber, hypothecate, pledge, mortgage,
lease, grant options respecting, repair, alter, insure, or
distribute any and all property in the Trust;
(b) borrow money, participate in reorganizations, pay calls and
assessments, vote or execute proxies, exercise subscription or
conversion privileges, exercise options and register any
securities in the Trust in the name of the nominee, in federal
book entry form or in any other form as shall permit title
thereto to pass by delivery;
(c) renew, extend the due date, compromise, arbitrate, adjust,
settle, enforce or foreclose, by judicial proceedings or
otherwise, or defend against the same, any obligations or claims
in favor of or against the Trust; and
(d) lend, through a collective investment fund, any securities held
in such collective investment fund to brokers, dealers or other
borrowers and to permit such securities to be transferred into
the name and custody and be voted by the borrower or others.
17.3 United States Indicia of Ownership
The Trustee shall not maintain the indicia of ownership of any Trust
assets outside the jurisdiction of the
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<PAGE>
United States, except as authorized by ERISA section 404(b).
17.4 Tax Withholding and Payment
(a) Withholding. The Trustee shall calculate and withhold federal
(and, if applicable, state) income taxes with regard to any
Eligible Rollover Distribution that is not paid as a Direct
Rollover in accordance with the Participant's withholding
election or as required by law if no election is made or the
election is less than the amount required by law. With regard to
any taxable distribution that is not an Eligible Rollover
Distribution, the Trustee shall calculate and withhold federal
(and, if applicable, state) income taxes in accordance with the
Participant's withholding election or as required by law if no
election is made.
(b) Taxes Due From Investment Funds. The Trustee shall pay from the
Investment Fund any taxes or assessments imposed by any taxing or
governmental authority on such Fund or its income, including
related interest and penalties.
17.5 Trust Accounting
(a) Annual Report. Within 60 days (or other reasonable period)
following the close of the Plan Year, the Trustee shall provide
the Administrator with an annual accounting of Trust assets and
information to assist the Administrator in meeting ERISA's annual
reporting and audit requirements.
(b) Periodic Reports. The Trustee shall maintain records and provide
sufficient reporting to allow the Administrator to properly
monitor the Trust's assets and activity.
(c) Administrator Approval. Approval of any Trustee accounting shall
automatically occur 90 days after such accounting has been
received by the Administrator, unless the Administrator files a
written objection with the Trustee within such time period. Such
approval shall be final as to all matters and transactions stated
or shown therein and binding upon the Administrator.
17.6 Valuation of Certain Assets
If the Trustee determines the Trust holds any asset which is not
readily tradeable and listed on a national securities exchange
registered under the Securities
65
<PAGE>
Exchange Act of 1934, as amended, the Trustee may engage a qualified
independent appraiser to determine the fair market value of such
property, and the appraisal fees shall be paid from the Investment
Fund containing the asset.
17.7 Legal Counsel
The Trustee may consult with legal counsel of its choice, including
counsel for the Employer or counsel of the Trustee, upon any question
or matter arising under this Plan and Trust. When relied upon by the
Trustee, the opinion of such counsel shall be evidence that the
Trustee has acted in good faith.
17.8 Fees and Expenses
The Trustee's fees for its services as Trustee shall be such as may be
mutually agreed upon by the Company and the Trustee. Trustee fees and
all reasonable expenses of counsel and advisors retained by the
Trustee shall be paid in accordance with Section 6.
17.9 Trustee Duties and Limitations
The Trustee's duties, unless otherwise agreed to by the Trustee, shall
be confined to construing the terms of the Plan and Trust as they
relate to the Trustee, receiving funds on behalf of and making
payments from the Trust, safeguarding and valuing Trust assets,
investing and reinvesting Trust assets in the Investment Funds as
directed by the Administrator, Participants or Beneficiaries and those
duties as described in this Section 17.
The Trustee shall have no duty or authority to ascertain whether
Contributions are in compliance with the Plan, to enforce collection
or to compute or verify the accuracy or adequacy of any amount to be
paid to it by the Employer. The Trustee shall not be liable for the
proper application of any part of the Trust with respect to any
disbursement made at the direction of the Administrator.
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<PAGE>
18 RIGHTS, PROTECTION, CONSTRUCTION AND JURISDICTION
-------------------------------------------------
18.1 Plan Does Not Affect Employment Rights
The Plan does not provide any employment rights to any Employee. The
Employer expressly reserves the right to discharge an Employee at any
time, with or without cause, without regard to the effect such
discharge would have upon the Employee's interest in the Plan.
18.2 Compliance With USERRA
Notwithstanding any provision of the Plan to the contrary, with regard
to an Employee who after serving in the uniformed services is
reemployed on or after December 12, 1994, within the time required by
USERRA, contributions shall be made and benefits and service credit
shall be provided under the Plan with respect to his or her qualified
military service (as defined in Code section 414(u)(5)) in accordance
with Code section 414(u). Furthermore, notwithstanding any provision
of the Plan to the contrary, Participant loan payments may be
suspended during a period of qualified military service.
18.2 Limited Return of Contributions
Except as provided in this paragraph, (1) Plan assets shall not revert
to the Employer nor be diverted for any purpose other than the
exclusive benefit of Participants or their Beneficiaries; and (2) a
Participant's vested interest shall not be subject to divestment. As
provided in ERISA section 403(c)(2), the actual amount of a
Contribution made by the Employer (or the current value of the
Contribution if a net loss has occurred) may revert to the Employer
if:
(a) such Contribution is made by reason of a mistake of fact;
(b) initial qualification of the Plan under Code section 401(a) is
not received and a request for such qualification is made within
the time prescribed under Code section 401(b) (the existence of
and Contributions under the Plan are hereby conditioned upon such
qualification); or
(c) such Contribution is not deductible under Code section 404 (such
Contributions are hereby conditioned upon such deductibility) in
the taxable year of the Employer for which the Contribution is
made.
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The reversion to the Employer must be made (if at all) within one year
of the mistaken payment of the Contribution, the date of denial of
qualification, or the date of disallowance of deduction, as the case
may be. A Participant shall have no rights under the Plan with
respect to any such reversion.
18.3 Assignment and Alienation
As provided by Code section 401(a)(13) and to the extent not otherwise
required by law, no benefit provided by the Plan may be anticipated,
assigned or alienated, except:
(a) to create, assign or recognize a right to any benefit with
respect to a Participant pursuant to a QDRO, or
(b) if Participant loans are permitted in accordance with Section 9,
to use a Participant's vested Account balance as security for a
loan from the Plan which is permitted pursuant to Code section
4975.
18.4 Facility of Payment
If a Plan benefit is due to be paid to a minor or if the Administrator
reasonably believes that any payee is legally incapable of giving a
valid receipt and discharge for any payment due him or her, the
Administrator shall have the payment of the benefit, or any part
thereof, made to the person (or persons or institution) whom it
reasonably believes is caring for or supporting the payee, unless it
has received due notice of claim therefor from a duly appointed
guardian or conservator of the payee. Any payment shall to the extent
thereof, be a complete discharge of any liability under the Plan to
the payee.
18.5 Reallocation of Lost Participant's Accounts
If the Administrator cannot locate a person entitled to payment of a
Plan benefit after a reasonable search, the Administrator may at any
time thereafter treat such person's Account as forfeited and use such
amount to reduce Contributions made by an Employer as soon as
administratively feasible. If such person subsequently presents the
Administrator with a valid claim for the benefit, such person shall be
paid the amount treated as forfeited, plus the interest that would
have been earned in the Sweep Account to the date of determination.
The Administrator shall pay the amount through an additional amount
contributed by the Employer.
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<PAGE>
18.6 Claims Procedure
(a) Right to Make Claim. An interested party who disagrees with the
Administrator's determination of his or her right to Plan
benefits must submit a written claim and exhaust this claim
procedure before legal recourse of any type is sought. The claim
must include the important issues the interested party believes
support the claim. The Administrator, pursuant to the authority
provided in this Plan, shall either approve or deny the claim.
(b) Process for Denying a Claim. The Administrator's partial or
complete denial of an initial claim must include an
understandable, written response covering (1) the specific
reasons why the claim is being denied (with reference to the
pertinent Plan provisions) and (2) the steps necessary to perfect
the claim and obtain a final review.
(c) Appeal of Denial and Final Review. The interested party may make
a written appeal of the Administrator's initial decision, and the
Administrator shall respond in the same manner and form as
prescribed for denying a claim initially.
(d) Time Frame. The initial claim, its review, appeal and final
review shall be made in a timely fashion, subject to the
following time table:
Days to Respond
Action From Last Action
------ ----------------
Administrator determines benefit NA
Interested party files initial request 60 days
Administrator's initial decision 90 days
Interested party requests final review 60 days
Administrator's final decision 60 days
However, the Administrator may take up to twice the maximum
response time for its initial and final review if it provides an
explanation within the normal period of why an extension is
needed and when its decision shall be forthcoming.
18.7 Construction
Headings are included for reading convenience. The text shall control
if any ambiguity or inconsistency exists between the headings and the
text. The singular and plural shall be interchanged wherever
appropriate. References to Participant shall include Beneficiary when
69
<PAGE>
appropriate and even if not otherwise already expressly stated.
18.8 Jurisdiction and Severability
The Plan and Trust shall be construed, regulated and administered
under ERISA and other applicable federal laws and, where not otherwise
preempted, by the laws of the State of New Jersey. If any provision
of this Plan and Trust shall become invalid or unenforceable, that
fact shall not affect the validity or enforceability of any other
provision of this Plan and Trust. All provisions of this Plan and
Trust shall be so construed as to render them valid and enforceable in
accordance with their intent.
18.9 Indemnification by Employer
The Employers hereby agree to indemnify all Plan fiduciaries against
any and all liabilities resulting from any action or inaction,
(including a Plan termination in which the Company fails to apply for
a favorable determination from the Internal Revenue Service with
respect to the qualification of the Plan upon its termination), in
relation to the Plan or Trust (1) including (without limitation)
expenses reasonably incurred in the defense of any claim relating to
the Plan or its assets, and amounts paid in any settlement relating to
the Plan or its assets, but (2) excluding liability resulting from
actions or inactions made in bad faith, or resulting from the
negligence or willful misconduct of the Trustee. The Company shall
have the right, but not the obligation, to conduct the defense of any
action to which this Section applies. The Plan fiduciaries are not
entitled to indemnity from the Plan assets relating to any such
action.
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<PAGE>
19 AMENDMENT, MERGER, DIVESTITURES AND TERMINATION
-----------------------------------------------
19.1 Amendment
The Company reserves the right to amend this Plan and Trust at any
time, to any extent and in any manner it may deem necessary or
appropriate. The Company (and not the Trustee) shall be responsible
for adopting any amendments necessary to maintain the qualified status
of this Plan and Trust under Code sections 401(a) and 501(a). If the
Committee is acting as the Administrator in accordance with Section
15.6, it shall have the authority to adopt Plan and Trust amendments
which have no substantial adverse financial impact upon any Employer
or the Plan. All interested parties shall be bound by any amendment,
provided that no amendment shall:
(a) become effective unless it has been adopted in accordance with
the procedures set forth in Section 19.5;
(b) except to the extent permissible under ERISA and the Code, make
it possible for any portion of the Trust assets to revert to an
Employer or to be used for, or diverted to, any purpose other
than for the exclusive benefit of Participants and Beneficiaries
entitled to Plan benefits and to defray reasonable expenses of
administering the Plan;
(c) decrease the rights of any Employee to benefits accrued
(including the elimination of optional forms of benefits) to the
date on which the amendment is adopted, or if later, the date
upon which the amendment becomes effective, except to the extent
permitted under ERISA and the Code; nor
(d) permit an Employee to be paid the balance of his or her Pre-Tax
Account unless the payment would otherwise be permitted under
Code section 401(k).
19.2 Merger
This Plan and Trust may not be merged or consolidated with, nor may
its assets or liabilities be transferred to, another plan unless each
Participant and Beneficiary would, if the resulting plan were then
terminated, receive a benefit just after the merger, consolidation or
transfer which is at least equal to the benefit which would be
received if either plan had terminated just before such event.
19.3 Divestitures
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In the event of a sale by an Employer which is a corporation of: (1)
substantially all of the Employer's assets used in a trade or business
to an unrelated corporation, or (2) a sale of such Employer's interest
in a subsidiary to an unrelated entity or individual, lump sum
distributions shall be permitted from the Plan, except as provided
below, to Participants with respect to Employees who continue
employment with the corporation acquiring such assets or who continue
employment with such subsidiary, as applicable.
Notwithstanding, distributions shall not be permitted if the purchaser
agrees, in connection with the sale, to be substituted as the Company
as the sponsor of the Plan or to accept a transfer of the assets and
liabilities representing the Participants' benefits into a plan of the
purchaser or a plan to be established by the purchaser.
19.4 Plan Termination
The Company may, at any time and for any reason, terminate the Plan in
accordance with the procedures set forth in Section 19.5, or
completely discontinue contributions. Upon either of these events, or
in the event of a partial termination of the Plan within the meaning
of Code section 411(d)(3), the Accounts of each affected Employee
shall be fully vested. If no successor plan is established or
maintained, lump sum distributions shall be made in accordance with
the terms of the Plan as in effect at the time of the Plan's
termination or as thereafter amended provided that a post-termination
amendment shall not be effective to the extent that it violates
Section 19.1 unless it is required in order to maintain the qualified
status of the Plan upon its termination. The Trustee's and Employer's
authority shall continue beyond the Plan's termination date until all
Trust assets have been liquidated and distributed.
19.5 Amendment and Termination Procedures
The following procedural requirements shall govern the adoption of any
amendment or termination (a "Change") of this Plan and Trust:
(a) The Company may adopt any Change by action of its board of
directors in accordance with its normal procedures.
(b) The Committee, if acting as Administrator in accordance with
Section 15.6, may adopt any amendment within the scope of its
authority
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<PAGE>
provided under Section 19.1 and in the manner specified in
Section 15.7(a).
(c) Any Change must be (1) set forth in writing, and (2) signed and
dated by an executive officer of the Company or, in the case of
an amendment adopted by the Committee, at least one of its
members.
(d) If the effective date of any Change is not specified in the
document setting forth the Change, it shall be effective as of
the date it is signed by the last person whose signature is
required under clause (2) above, except to the extent that
another effective date is necessary to maintain the qualified
status of this Plan and Trust under Code sections 401(a) and
501(a).
(e) No Change shall become effective until it is accepted and signed
by the Trustee (which acceptance shall not unreasonably be
withheld), after which it shall become effective as provided in
(d) above.
19.6 Termination of Employer's Participation
Any Employer may, at any time and for any reason, terminate its Plan
participation by action of its board of directors in accordance with
its normal procedures. Written notice of such action shall be signed
and dated by an executive officer of the Employer and delivered to the
Company. If the effective date of such action is not specified, it
shall be effective on, or as soon as reasonably practicable after, the
date of delivery. Upon the Employer's request, the Company may
instruct the Trustee and Administrator to spin off all affected
Accounts and underlying assets into a separate qualified plan under
which the Employer shall assume the powers and duties of the Company.
Alternatively, the Company may treat the event as a partial
termination described above or continue to maintain the Accounts under
the Plan.
19.7 Replacement of the Trustee
The Trustee may resign as Trustee under this Plan and Trust or may be
removed by the Company at any time upon at least 90 days written
notice (or less if agreed to by both parties). In such event, the
Company shall appoint a successor trustee by the end of the notice
period. The successor trustee shall then succeed to all the powers
and duties of the Trustee under this Plan and Trust. If no successor
trustee has been named by the end of the notice period, the Company's
chief executive officer shall become the trustee, or if he or she
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<PAGE>
declines, the Trustee may petition the court for the appointment of a
successor trustee.
19.8 Final Settlement and Accounting of Trustee
(a) Final Settlement. As soon as administratively feasible after
its resignation or removal as Trustee, the Trustee shall
transfer to the successor trustee all property currently held by
the Trust. However, the Trustee is authorized to reserve such
sum of money as it may deem advisable for payment of its
accounts and expenses in connection with the settlement of its
accounts or other fees or expenses payable by the Trust. Any
balance remaining after payment of such fees and expenses shall
be paid to the successor trustee.
(b) Final Accounting. The Trustee shall provide a final accounting
to the Administrator within 90 days of the date Trust assets are
transferred to the successor trustee.
(c) Administrator Approval. Approval of the final accounting shall
automatically occur 90 days after such accounting has been
received by the Administrator, unless the Administrator files a
written objection with the Trustee within such time period. Such
approval shall be final as to all matters and transactions
stated or shown therein and binding upon the Administrator.
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<PAGE>
APPENDIX A - INVESTMENT FUNDS
I. Investment Funds Available
The Investment Funds offered under the Plan as of the Effective Date
include this set of daily valued funds:
CATEGORY FUNDS
-------- -----
INCOME Money Market
------
Short-Intermediate Term
EQUITY Company Stock
------ International Equity
S&P 500 Stock
S&P MidCap Stock
Templeton Foreign
Founders Growth
COMBINATION LifePath
-----------
Assets from The Allstate Plan attributable to the account balances
thereunder of participants who immediately preceding the date of the
transfer are employees of The PMI Group, Inc., or an affiliate thereof,
shall be transferred to the Plan on or about February 1, 1996. Such assets
may include Sears, Roebuck and Co. common stock, Dean Witter, Discover &
Co. common stock and Allstate Stock. Upon receipt, shares of Sears,
Roebuck and Co. common stock, Dean Witter, Discover & Co. common stock and
Allstate Stock shall be deposited to the Prior Employer Fund. As soon as
administratively feasible thereafter, it is the Company's intention to
direct the Trustee to liquidate all such shares of Sears, Roebuck and Co.
common stock, Dean Witter, Discover & Co. common stock and Allstate Stock
and invest the proceeds thereof in a money market type fund. A
Participant's investment in the Prior Employer Fund as of the date of
transfer (the amount deposited to the Prior Employer Fund on his or her
behalf) and earnings thereon may continue to be invested in the Prior
Employer Fund until the Participant otherwise directs or the date the Prior
Employer Fund is liquidated in accordance with the direction of the
Administrator. The Administrator shall be entitled to vote proxies or
exercise any shareholder rights relating to shares of Sears, Roebuck and
Co. common stock, Dean Witter, Discover & Co. common stock and Allstate
Stock.
The Prior Employer Fund is not designated as available for investment by
Participants or Beneficiaries, except to the
75
<PAGE>
APPENDIX A - INVESTMENT FUNDS
(cont'd)
extent described in the preceding paragraph. Notwithstanding, if in accordance
with Section 10.6 or Section 11.4, a Participant elects to liquidate the portion
of his or her Allstate Plan Accounts balance, if any, not otherwise invested in
the Prior Employer Fund, such liquidation proceeds shall be deposited to the
Prior Employer Fund and used to purchase shares of Allstate Stock on his or her
behalf.
Effective September 12, 1997, the Prior Employer Fund was discontinued.
All assets as of such date were invested in the Money Market Fund. The
Money Market Fund was designated as an Investment Fund offered under the
Plan effective September 12, 1997.
II. Default Investment Fund
The default Investment Fund as of the Effective Date is the Short-
Intermediate Term Fund.
III. Accounts For Which Investment is Restricted
A Participant or Beneficiary may direct the investment of his or her entire
Account except for his or her Company Match Stock Account which shall be
invested as of the Effective Date in the Company Stock Fund.
IV. Maximum Percentage Restrictions Applicable to Certain Investment Funds
As of the Effective Date, there are no maximum percentage restrictions
applicable to any Investment Funds.
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<PAGE>
APPENDIX B - PAYMENT OF PLAN FEES AND EXPENSES
As of the Effective Date, payment of Plan fees and expenses shall be as follows:
1) Investment Management Fees: These are paid by Participants in that
management fees reduce the investment return reported and credited to
Participants, except that if the Company provides for a Company Stock Fund,
the Employer shall pay the fees related to the Company Stock Fund. These
are paid by the Employer on a quarterly basis.
2) Recordkeeping Fees: These are paid by the Employer on a quarterly basis.
3) Loan Fees: A $3.50 per month fee is assessed and billed/collected
quarterly from the Account of each Participant who has an outstanding loan
balance.
4) Additional Fees Paid by Employer: All other Plan related fees and expenses
shall be paid by the Employer. To the extent that the Administrator later
elects that any such fees shall be borne by Participants, estimates of the
fees shall be determined and reconciled, at least annually, and the fees
shall be assessed monthly and billed/collected from Accounts quarterly.
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<PAGE>
APPENDIX C - LOAN INTEREST RATE
As of the Effective Date, the interest rate charged on Participant loans shall
be equal to the prime rate published in the Wall Street Journal at the time the
loan is processed, plus 1%. If multiple prime rates are published in the Wall
Street Journal, the prime rate selected shall be the rate closest to the last
prime rate used for this purpose.
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<PAGE>
Exhibit 5.2
March 4, 1998
The PMI Group, Inc.
601 Montgomery Street
San Francisco, CA 94111
Re: Registration Statement on Form S-8/
The PMI Group, Inc. Savings and Profit-Sharing Plan
Ladies and Gentlemen:
At your request, we are rendering this opinion in connection with the
proposed issuance pursuant to The PMI Group, Inc. Savings and Profit-Sharing
Plan (the "Plan"), of up to 50,000 shares of common stock, $0.01 par value
("Common Stock"), of The PMI Group, Inc., a Delaware corporation (the
"Company").
We have examined instruments, documents, and records which we deemed
relevant and necessary for the basis of our opinion hereinafter expressed. In
such examination, we have assumed the following: (a) the authenticity of
original documents and the genuineness of all signatures; (b) the conformity to
the originals of all documents submitted to us as copies; and (c) the truth,
accuracy and completeness of the information, representations and warranties
contained in the records, documents, instruments and certificates we have
reviewed.
Based on such examination, we are of the opinion that the 50,000
shares of Common Stock to be issued by the Company pursuant to the Plan after
the filing of this Registration Statement on Form S-8 are validly authorized
shares of Common Stock and, when issued in accordance with the provisions of the
Plan, will be legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to this
Registration Statement on Form S-8 and to the use of our name wherever it
appears in said Registration Statement. In giving such consent, we do not
consider that we are "experts" within the meaning of such term as used in the
Securities Act of
<PAGE>
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission issued thereunder, with respect to any part of the Registration
Statement, including this opinion as an exhibit or otherwise.
Very truly yours,
/s/ Orrick, Herrington & Sutcliffe LLP
ORRICK, HERRINGTON & SUTCLIFFE LLP
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
The PMI Group, Inc. on Form S-8 of: (i) our report dated January 22, 1997
(February 4, 1997 as to Note 16) incorporated by reference in the Annual Report
on Form 10-K of The PMI Group, Inc. for the year ended December 31, 1996, (ii)
our report dated January 22, 1997 relating to the financial statement schedules
appearing in such Form 10-K, and (iii) our report dated August 22, 1997 on the
financial statements and supplemental schedule (modified cash basis) of The PMI
Group, Inc. Savings and Profit-Sharing Plan (also known as The PMI Group, Inc.
401(k) Plan) (the "Plan") in the Annual Report on Form 11-K for the year ended
December 31, 1996.
We also consent to the reference to us under the heading "Experts" in the Plan's
Summary Plan Description and Prospectus included in this Registration Statement.
/s/ Deloitte & Touche LLP
March 6, 1998
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY OF DIRECTORS
KNOW BY ALL PERSONS BY THESE PRESENTS:
Each of the undersigned hereby constitutes and appoints Victor J.
Bacigalupi, Mark C. Berkowitz, Charles F. Broom, John M. Lorenzen, Jr., Claude
J. Seaman, and William A. Seymore and each of them with power to act alone, his
or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign a Registration Statement on Form
S-8 relating to 50,000 shares of Common Stock issuable under The PMI Group, Inc.
Savings and Profit-Sharing Plan, and any and all amendments of such Registration
Statement, including post-effective amendments, and to file the same, together
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto such attorney-in-fact full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises hereof, as fully to all intents
and purposes as he or she might do or could do in person, thereby ratifying and
confirming all that said attorney-in-fact or his or her substitutes may lawfully
do or cause to be done by virtue hereof.
/s/ W. Roger Haughton February 27, 1998
------------------------------
W. Roger Haughton
/s/ Wayne E. Hedien February 26, 1998
------------------------------
Wayne E. Hedien
/s/ Edward M. Liddy February 27, 1998
------------------------------
Edward M. Liddy
/s/ Donald C. Clark February 25, 1998
------------------------------
Donald C. Clark
/s/ Kenneth T. Rosen February 26, 1998
------------------------------
Kenneth T. Rosen
/s/ Mary Lee Widener February 25, 1998
------------------------------
Mary Lee Widener
<PAGE>
/s/ Richard L. Thomas February 26, 1998
------------------------------
Richard L. Thomas
/s/ James C. Castle February 27, 1998
------------------------------
James C. Castle
/s/ John D. Roach February 27, 1998
----------------------------
John D. Roach
<PAGE>
Exhibit 24.2
POWER OF ATTORNEY OF THE PLAN COMMITTEE FOR
THE PMI GROUP, INC. SAVINGS AND PROFIT-SHARING PLAN
KNOW BY ALL PERSONS BY THESE PRESENTS:
Each of the undersigned hereby constitutes and appoints Victor J.
Bacigalupi, Mark C. Berkowitz, Charles F. Broom, John M. Lorenzen, Jr., Claude
J. Seaman, and William A. Seymore, and each of them with power to act alone, his
or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign a Registration Statement on Form
S-8 relating to 50,000 shares of Common Stock and an indeterminate number of
interests issuable under The PMI Group, Inc. Savings and Profit-Sharing Plan,
and any and all amendments of such Registration Statement, including post-
effective amendments, and to file the same, together with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorney-in-fact full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises hereof, as fully to all intents and purposes as he or she
might do or could do in person, thereby ratifying and confirming all that said
attorney-in-fact or his or her substitutes may lawfully do or cause to be done
by virtue hereof.
/s/ Victor J. Bacigalupi February 27, 1998
------------------------------
Victor J. Bacigalupi
/s/ Charles F. Broom February 27, 1998
------------------------------
Charles F. Broom
/s/ John M. Lorenzen, Jr. February 27, 1998
------------------------------
John M. Lorenzen, Jr.
