EXHIBIT 10.20
THE PMI GROUP, INC.
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
EFFECTIVE APRIL 1, 1995
(AMENDED AND RESTATED AS OF JANUARY 1, 1998)
ARTICLE I
Definitions
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1.01 "Committee" means the Committee under the PMI Retirement Plan.
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1.02 "Company" means The PMI Group, Inc.
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1.03 "Early Retirement Age" means Early Retirement Age as defined under the
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Retirement Plan.
1.04 "Early Retirement Benefit" means the Early Retirement Benefit as
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defined under the Retirement Plan.
1.05 "Employer" means The PMI Group, Inc. as defined under the Retirement Plan.
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1.06 "Participant" means any employee who: (a) is eligible for benefits under
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the Retirement Plan, (b) retires on or after January 1, 1989, and (c) meets the
eligibility requirements of Section 3.01 of this Plan.
1.07 "Plan" means this plan, The PMI Group, Inc. Supplemental Employee
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Retirement Plan as set forth in the instrument and as heretofore or hereafter
amended from time to time.
1.08 "Retirement Plan Benefits" is defined in Section 4.03 of this Plan.
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1.09 "Retirement Plan" means The PMI Group, Inc. Retirement Plan.
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1.10 "Retired Participant" means a Participant who retired in accordance
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with the provisions of the Retirement Plan as heretofore or hereafter amended.
1.11 "Spouse" means Spouse as defined in the Retirement Plan.
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1.12 "Trust" shall mean a trust established pursuant to Section 4.07 of the
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Plan for the purposes of holding assets for the payment of the Employer's
general creditors, including the Employer's Participants. Such Trust shall be
intended to be a grantor trust, of which the Employer is the grantor, within the
meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Code.
In addition, the Trust, if established, shall be irrevocable and shall conform
to the provisions of Revenue Procedure 92-64.
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ARTICLE II
Introduction
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2.01 Purpose. The purpose of this Plan is: (1) to restore to employees
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of the Company the benefits they lose under the Retirement Plan as a
result of the compensation limit in section 401(a)(17) of the Internal
Revenue Code of 1986, as amended, or any successor provision ("section
401(a)(17)"), (2) to restore to employees the benefits they lose as a
result of Section 415 of the Internal Revenue Code of 1986, as amended,
or any successor provision ("Section 415"), (3) to provide the "Beef-up"
benefit for eligible employees as described in Section 3.02(b), and (4)
to make up lost early retirement payments for individuals who failed to
reach their 20th anniversary with Allstate as described in Section
3.02(c). The Plan is an unfunded deferred compensation program for a
select group of management and highly compensated employees. Thus, the
Plan is subject to Part 1 of Title I of ERISA, but is exempt from Parts
2, 3 and 4 thereof.
2.02 Administration. The Plan will be administered by the Committee.
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The Committee has all discretionary authority to issue such rules as it
deems appropriate and to interpret the provisions of the Plan and make
factual determinations, including the power to determine the rights or
eligibility of employees or participants and any other persons, and the
amounts of their benefits under the Plan, and to remedy ambiguities,
inconsistencies, or omissions. Any decision by the Committee shall be
final, binding, and conclusive on all participants and all other persons.
ARTICLE III
Eligibility and Amount of Benefits
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3.01 Eligibility. Each Participant is eligible to receive a benefit under
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this Plan if he or she is vested in benefits under the Retirement Plan
and if:
(a) such vested benefits have been reduced because of the application
of section 401(A)(17) or 415; or
(b) he or she is eligible for the "Beef-up" as described in the
Allstate Retirement Plan Document in effect on April 1, 1995; or
(c) he or she less than 20 years of service with Allstate on April 1,
1995 and retires from the Company with at least 20 years of total service
with the Company and Allstate combined and has reached his or her 55th
birthday but has not reached his or her normal retirement date as defined
by the Allstate Retirement Plan.
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3.02 Amount of Benefit. The amount of benefit paid from the Plan will be
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equal to: (a) plus (b) plus (c) minus (d) below:
(a) The benefit which would have been payable to the Participant under
the term of the Retirement Plan, but for the restrictions of section
401(a)(17) and section 415.
(b) For Participants who retire from the Retirement Plan before
December 31, 1999 and who are at least age 55 but less than age 60, the
Company will enhance their benefit as described in (i) and (ii) below:
(i) The Participant's Final Average Earnings (FAE) will be calculated
as if he or she had continued to work until the earlier of December
31, 1999 or age 60 at their current pensionable earnings. If the FAE
is greater when calculated in this manner, it will be used in place of
the FAE calculated in the normal manner at termination.
(ii) For Participants who were hired at Allstate before 1978, his or
her benefit will be first decreased by (A) below and then increased by
(B) below:
(A) The number of years from termination to the latter of
December 31, 1999 or age 60 divided by the number of years of
Allstate service prior to January 1, 1978 times the Allstate pre-
1978 benefit.
(B) The number of years from termination to the latter of
December 31, 1999 or age 60 divided by the number of years of
service from January 1, 1988 to April 1, 1995 times the Allstate
post-1988 benefit.
(c) For Participants who retire from the Retirement Plan with at least
55 years of age and 20 years of combined service with The Company and
Allstate and who did not have 20 years of service with Allstate on April 1,
1995, The Company will provide a temporary annuity equal to: (i) as reduced
in (ii) payable for the period described in (iii) below:
(i) The monthly life annuity payable from the Allstate Retirement
Plan starting at the Participant's Normal Retirement Date as described
by the Allstate Retirement Plan. This is the accrued Allstate benefit
at the Company spin-off date as communicated by Allstate.
(ii) The monthly life annuity will be reduced by one half percent per
month (6% per year) for each month the Participant's retirement
precedes his or her Normal Retirement as described by the Allstate
Retirement Plan.
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(iii) The monthly life annuity will be paid starting on the first day
of the month following retirement until the earlier of the
Participant's death or the date which the Participant becomes eligible
to receive his or her benefit from the Allstate Retirement Plan.
Alternatively, the Participant may elect to have, in the event of his
or her death, the monthly life annuity continue to his or her
surviving spouse but not beyond the date when the Participant would
have become eligible to receive his or her benefit from the Allstate
Retirement Plan. If the Participant elects to have the full benefit
continue to his or her spouse, then the benefit in 3.02(c)(ii) above
will be further reduced two percent. If the Participant elects to have
half of the benefit continue to his or her spouse, then the benefit in
3.02(c)(ii) above will be further reduced one percent.
(d) The amount of benefit payable from the Retirement Plan.
3.03 Preretirement Surviving Spouse Benefit. Preretirement Surviving
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Spouse Benefits will be payable under this Plan on behalf of a
Participant if such Participant's surviving Spouse is eligible for
benefits payable from the Retirement Plan. The benefit payable will be
determined in a manner consistent with similar benefits under the
Retirement Plan.
3.04 Death Benefits After Retirement. Benefits will be payable from this Plan
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to a beneficiary or contingent annuitant designated by a Retired
Participant only if such beneficiary or contingent annuitant will also
receive benefits from the Retirement Plan after such Participant's
death. The amount of the benefit payable will be determined in a manner
consistent with similar benefits under the Retirement Plan.
ARTICLE IV
Payment of Benefits
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4.01 Forms and Timing of Benefit Payments. All benefits except those described
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in 3.02(c) above will be paid as a single lump sum based on the life
annuity at the time the Participant terminates or retires. The
Retirement Plan factors for calculating lump sums in effect at the time
of termination or retirement will be used to calculate the lump sum.
4.02 Plan Termination. No further benefits may be earned under this Plan with
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respect to the Retirement Plan after the termination of such Retirement
Plan.
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4.03 Retirement Plan Benefits. The term "Retirement Plan Benefits" generally
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means the benefits actually payable to a Participant, Spouse,
beneficiary, or contingent annuitant under the Retirement Plan. However,
this Plan is only intended to remedy pension reductions caused by the
operation of sections 401(a)(17) and 415 and not reductions caused for
any other reason. In those instances where pension benefits are reduced
for some other reason, the term "Retirement Plan Benefits" shall be
deemed to mean the benefits that would have been actually payable but
for such other reason.
Examples of such other reasons include, but are not limited to, the
following:
(a) A reduction in pension benefits as a result of a distress
termination (as described in ERISA (S)4041(c) or any comparable
successor provision of law) of the Retirement Plan. In such a case, the
Retirement Plan Benefits will be deemed to refer to the payments that
would have been made from the Retirement Plan had it terminated on a
fully funded basis as a standard termination (as described in ERISA
(S)4041(b) or any comparable successor provision of law).
(b) A reduction of accrued benefits as permitted under section
412(c)(8) of the Internal Revenue Code of 1986, as amended, or any
comparable successor provision of law.
(c) A reduction of pension benefits as a result of payment of all or
a portion of a Participant's benefits to a third party on behalf of or
with respect to a Participant.
4.04 Facility of Payment. Any amount payable under the Plan to a person under
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legal disability or who, in the judgment of the Committee, is unable to
properly manage his financial affairs, may be paid to such person's
legal representative, or may be applied for the benefit of such person
in any manner selected by the Committee.
4.05 Review of Benefit Determinations. The Committee will provide notice in
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writing to any Participant or Beneficiary whose claim for benefits under
the Plan is denied and the Committee shall afford such Participant or
Beneficiary a review of its decision if so requested.
4.06 Payment and Funding of Benefits. Amounts payable under the Plan to or on
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account of a Participant shall be paid directly by the Employers, and
shall be provided solely from the general assets of the Employers.
Benefits under the Plan are not funded, the Employers' obligation to pay
such benefits is merely an unsecured contractual obligation, and a
Participant or Beneficiary shall be treated as a general creditor of the
Employers with respect to any benefits payable under the Plan. Except as
provided in Section 4.07, nothing in this Plan shall be deemed to create
a trust of any kind for the benefit of the Participant or any
beneficiary, or create any fiduciary relationship
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between the Company and the Participant or any beneficiary with respect
to any assets of the Company.
4.07 Contributions to Trust Upon a Change of Control. Upon a "Change of
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Control" (as defined below) and by the fifteenth business day following
the end of each calendar month of each Plan year thereafter, the
Employer shall irrevocably deposit cash (or its equivalent) to a Trust
for the investment of benefits payable under the Plan to or on account
of each Participant. However, any contributions made to the Trust in
respect of each Participant shall remain subject to the claims of the
general creditors of the Employers. Nothing contained in this Section
4.07 shall give any Participant or beneficiary any interest in or claim
against any specific assets of the Company. For purposes of this Plan,
"Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), the following shall
not constitute a Change of Control: (i) any acquisition directly from
the Company, (ii) any acquisition by the Company, (iii) any acquisition
by any employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company, (iv) any
beneficial ownership maintained by (but not additional acquisitions by),
The Allstate Corporation and its subsidiaries, and their respective
successors ("Allstate"), pending such time that Allstate distributes or
transfers its current ownership interest in the Outstanding Company
Common Stock and Outstanding Company Voting Securities as contemplated
by the Prospectus dated April 10, 1995, relating to the initial public
offering of the common stock of the Company, or (v) any acquisition
pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (c) of this Section 4.07. Notwithstanding the
foregoing, in its sole discretion, the Board may increase the 20%
threshold set forth above in this subsection (a) prior to any
acquisition of 20% or more beneficial ownership of the Outstanding
Company Common Stock or the Outstanding Company Voting Securities;
provided, that (i) such increased threshold shall apply only to the
acquisition and maintenance of beneficial ownership by any Person
eligible to report such beneficial ownership at the time of such
acquisition on Schedule 13G under the Exchange Act, and (ii) in the
event that any Person initially eligible to so report on Schedule 13G
thereafter ceases to be eligible to so report on Schedule 13G, the
occurrence of the event causing such Person no longer to be eligible to
so report shall be deemed an acquisition by such Person of all of the
Outstanding
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Company Common Stock and Outstanding Company Voting Securities
beneficially owned by such Person immediately prior to such occurrence;
or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(c) Consummation by the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of
the assets of the Company or the acquisition of assets of another entity (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination or
the combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
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Notwithstanding the foregoing, a Change of Control shall not be deemed to
occur solely because any Person acquires beneficial ownership of 20% or
more of the Outstanding Company Voting Securities or Outstanding Company
Common Stock as a result of the acquisition of such securities or stock by
the Company, which acquisition reduces the number of the Outstanding
Company Voting Securities or Outstanding Company Common Stock; provided,
that if after such acquisition by the Company such Person (while such
Person remains the beneficial owner of 20% or more of the Outstanding
Company Voting Securities or Outstanding Company Common Stock) becomes the
beneficial owner of additional shares of such Outstanding Company Voting
Securities or Outstanding Company Common Stock (as the case may be), a
Change of Control shall then occur. Capitalized terms used in this Section
4.07, not otherwise defined, shall have the meaning set forth in the form
of change of control employment agreement approved at the February 12, 1998
meeting of the Board of Directors.
ARTICLE V
Miscellaneous
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5.01 Action by Company. Any action required or permitted to be taken by the
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Company under the Plan shall be by resolution of its Board of Directors,
by resolution of a duly authorized committee of its Board of Directors,
or by a person or persons authorized by resolution of its Board of
Directors or such committee.
5.02 Amendment and Plan Termination. The Company may, in its sole
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discretion, terminate, suspend, or amend this Plan at any time or from
time to time, in whole or in part, but no amendment, suspension, or
termination of the Plan shall, without the consent of a Participant,
reduce the accrued benefit of the Participant or any Spouse; provided,
however, that this Section 5.02 shall not prevent reductions on account
of the Participant's (or Spouse's) benefit ceasing to be affected (or
becoming affected to a lesser degree) by the limitations of section
401(a)(17) and section 415.
5.03 No Effect on Employment. Nothing in the Plan shall interfere with or limit
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in any way the right of the Company or the Employer directly employing
the Participant to terminate any Participant's employment at any time,
with or without cause. Employment with the Company and its affiliates is
on an at-will basis only.
5.04 Assignment of Benefits. A Participant, Retired Participant, surviving
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Spouse, or beneficiary may not, either voluntarily or involuntarily,
assign, anticipate, alienate, commute, pledge, or encumber any benefits
to which he or she is or may become entitled under the Plan, nor may the
same be subject to attachment or garnishment by any creditor's claim or
to legal process.
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5.05 Construction. The Committee shall have full discretionary authority
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to determine eligibility and to construe and interpret the terms of the
Plan, including the power to remedy possible ambiguities,
inconsistencies, or omissions.
5.06 Governing Law; Severability. The Plan shall be construed, administered and
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governed in all respects in accordance with the laws of the State of
California (but without giving effect to any choice or conflict of law,
provision or rule which would cause the application of the laws of any
jurisdiction other than the State of California), and, to the extent
applicable, ERISA and the Code. If any provision of the Plan shall be
held invalid or unenforceable by a court of competent jurisdiction, the
remaining provisions hereof shall continue to be fully effective.
5.07 Number. The singular, where appearing in this Plan, will be deemed to
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include the plural, unless the context clearly indicates the contrary.
5.08 Participation of Affiliates. One or more affiliates of the Company may
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become participating employers by adopting the Plan. By adopting the
Plan, an affiliate is deemed to agree to all of its terms, including (but
not limited to) the provisions granting exclusive authority to the
Company to amend the Plan and the provisions granting exclusive authority
to the Committee to administer and interpret the Plan. Any affiliate may
terminate its participation in the Plan at any time subject, in each
case, to the approval of the Company. The liabilities incurred under the
Plan to the Participants employed by each employer shall be solely the
liabilities of that employer, and no other employer shall be liable for
benefits accrued by a Participant during any period when he or she was
not employed by such employer.
5.09 Indemnification. The Company shall, and hereby does, indemnify and hold
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harmless the members of the Committee, from and against any and all
losses, claims, damages or liabilities (including attorneys' fees and
amounts paid, with the approval of the Company's Board of Directors, in
settlement of any claim) arising out of or resulting from the
implementation of a duty, act or decision with respect to the Plan, so
long as such duty, act or decision does not involve gross negligence or
willful misconduct on the part of any such individual.
EXECUTION
IN WITNESS WHEREOF, The PMI Group, Inc., by it duly authorized officer, has
executed the amended and restated Plan on the date indicated below, such
amendments shall be effective as of January 1, 1998.
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THE PMI GROUP, INC.
Dated: July 28, 1998 By: /s/ CHARLES BROOM
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Title: AVP/HR
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