As filed with the Securities and Exchange Commission on January 7, 2004
Registration No. 333-[_________]
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIRST ADVANTAGE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware 61-1437565
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
One Progress Plaza, Suite 2400
St. Petersburg, Florida 33701
(Address, Including Zip Code, of Registrant's Principal Executive Offices)
FIRST ADVANTAGE CORPORATION 401(K) SAVINGS PLAN
(Full Title of Plan)
Kenneth D. DeGiorgio, Esq. With a copy to:
Vice President, General Counsel, Assistant Secretary Neil W. Rust, Esq.
1 First American Way White & Case LLP
Santa Ana, California 92707 633 West Fifth Street
(714) 800-3000 Los Angeles, California 90071
(Name, Address and Telephone Number, (213) 620-7700
Including Area Code, of Agent For Service)
CALCULATION OF REGISTRATION FEE
========================= ====================== ======================= ====================== ======================
Title Of Each Class Of Amount Proposed Proposed Maximum Amount of
Securities To Be To Be Maximum Offering Aggregate Registration
Registered Registered(1) Price Per Share(2) Offering Price(3) Fee(4)
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Class A Common stock,
$.001 par value... 2,000,000 shares $18.60 $37,200,000 $3010
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Interests in the Plan
(5) (5) (5) (5)
========================= ====================== ======================= ====================== ======================
(1) Pursuant to Rule 416 under the Securities Act, this Registration Statement
will include any additional shares of First Advantage Class A common stock
that may become issuable as a result of any stock split, stock dividend,
recapitalization or other similar transaction effected without the receipt
of consideration that results in an increase in the number of outstanding
shares of First Advantage Class A common stock.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) and 457(h) under the Securities Act, based on the
average of the high and low prices of the Class A common stock quoted on
the Nasdaq National Market on January 5, 2004.
(3) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457 under the Securities Act.
(4) Calculated in accordance with Section 6 of the Securities Act and Rule 457
under the Securities Act by multiplying 0.00008090 and the proposed maximum
aggregate offering price.
(5) Pursuant to Rule 416(c) under the Securities Act, this Registration
Statement also covers an indeterminate amount of interests to be offered or
sold pursuant to the Plan described herein for which no separate fee is
required.
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
All information required by Part I to be contained in the prospectus is
omitted from this Registration Statement on Form S-8 in accordance with Rule 428
under the Securities Act.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The SEC allows First Advantage to "incorporate by reference" information
into this Registration Statement which means that First Advantage can disclose
important information to you by referring you to another document or documents
filed separately with the SEC. This Registration Statement incorporates by
reference the documents set forth below that First Advantage has previously
filed with the SEC. These documents contain important business and financial
information about First Advantage, including information concerning its
financial performance.
Each of First Advantage and the plan incorporates by reference into this
Registration Statement the following documents:
o First Advantage's Pre-Effective Amendment No. 5 to Registration
Statement on Form S-4 (Registration No. 333-102565) filed May 14,
2003;
o First Advantage's quarterly reports on Form 10-Q for the periods ended
June 30, 2003 and September 30, 2003;
o First Advantage's current reports on Form 8-K filed June 6, 2003, June
10, 2003, June 19, 2003, July 22, 2003, July 28, 2003, and September
16, 2003;
o the description of the First Advantage Class A Common Stock, $.001 par
value, contained in a Registration Statement on Form 8-A, filed May
12, 2003, including any amendment or report filed for the purpose of
updating such description.
All documents subsequently filed by First Advantage and the plan pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing
of a post-effective amendment which indicates that all securities registered
hereby have been sold or which deregisters all securities then remaining unsold,
shall be deemed to be incorporated by reference into this Registration Statement
and to be a part hereof from the date of filing of such documents, except as to
any portion of any future report or other document that is not deemed filed with
the SEC. For purposes of this Registration Statement, any statement in a
document incorporated by reference shall be deemed to be modified or superseded
to the extent that a statement contained in this Registration Statement modifies
or supersedes a statement in such document. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law (the "DGCL") provides for the power to
indemnify any directors, officers, employees and agents and to purchase and
maintain insurance with respect to liability arising out of their
capacity or status as directors, officers, employees and agents. The
indemnification provisions are not exclusive of any other rights to which
directors and officers may be entitled under a corporation's certificate of
incorporation or bylaws, any agreement, a vote of stockholders or otherwise.
The Registrant's certificate of incorporation provides that its directors
will not be personally liable to the Registrant or its stockholders for damages
for breach of any duty owed to the Registrant or its stockholders except for
liability:
o for any breach of the director's duty of loyalty to the Registrant or
its stockholders;
o for any acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
o under section 174 of the DGCL regarding negligent or wilful unlawful
payment of dividends and stock redemption; or
o for any transaction from which a director derived an improper personal
benefit.
The Bylaws of the Registrant provide that:
o subject to applicable law and certain qualifications, each person who was
or is made a party or is threatened to be made a party to or is otherwise
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she is or was a director or officer of the Registrant or is or
was serving at the request of the Registrant as a director or officer of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as a director or officer or in any other capacity while
serving as a director or officer, shall be indemnified and held harmless by the
Registrant to the fullest extent permitted by the DGCL (but, in the case of any
future amendment to the DGCL, only to the extent that such amendment permits the
Registrant to provide broader indemnification rights than permitted prior
thereto), against all expense, liability and loss (including attorneys' fees,
judgments, fines, excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith, and such indemnification shall continue as to an indemnitee who has
ceased to be a director or officer, and shall inure to the benefit of the
indemnitee's heirs, executors and administrators. The right to indemnification
described in this paragraph is a contract right and, to the extent not
prohibited by applicable law, includes the right to be paid by the Registrant
the expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however, that,
if the DGCL so requires, an advancement of expenses incurred by an indemnitee in
his or her capacity as a director or officer shall be made only upon delivery to
the Registrant of an undertaking, by or on behalf of such indemnitee, to repay
all amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal that such indemnitee is
not entitled to be indemnified for such expenses; and
o the Registrant is permitted to secure insurance on behalf of any
director, officer, employee or agent of the Registrant or another business
entity for any expense, liability or loss, regardless of whether the DGCL would
permit indemnification.
Pursuant to the Agreement and Plan of Merger, dated December 13, 2002,
among the Registrant, US SEARCH.com Inc. and the other parties thereto, the
Registrant has agreed to indemnify and hold harmless the then present and former
officers, directors, employees and agents of US SEARCH and its subsidiaries
(each, an "Indemnified Party") in respect of acts or omissions occurring on or
prior to the effective time of the mergers contemplated thereby to the extent
provided under US SEARCH's and its subsidiaries' certificates of incorporation
(or equivalent organizational documents) and bylaws or any indemnification
agreement with US SEARCH's and its subsidiaries' officers and directors to which
US SEARCH and/or its subsidiaries is a party, in each case in effect on the date
of the merger agreement; provided that such indemnification shall be subject to
any limitation imposed from time to time under applicable law. The Registrant
also agreed under the merger agreement that for a period of six years after the
effective time of the mergers, the Registrant will use its reasonable best
efforts to procure officers'
and directors' liability insurance in respect of acts or omissions occurring on
or prior to the effective time of the mergers covering each Indemnified Party
previously covered by US SEARCH's and/or its subsidiaries' officers' and
directors' liability insurance policy on terms substantially similar to those of
such policy in effect on the date of the merger agreement (the "D&O Insurance"),
provided that the Registrant shall not be required to maintain the D&O Insurance
with respect to a specific officer or director if the premium for obtaining the
D&O Insurance exceeds 200% of the amount per annum US SEARCH paid in fiscal year
2002 (the "Premium Limit"). If the Registrant is unable to obtain the D&O
Insurance, it will obtain as much comparable insurance as possible for an annual
premium equal to the Premium Limit. In the event the Registrant would be
required to spend in excess of the Premium Limit per year to obtain the D&O
Insurance, the Registrant will notify each Indemnified Party who would be
covered thereby and permit any such Indemnified Party to pay the excess amount
over the Premium Limit that may be necessary to maintain such D&O Insurance
covering such Indemnified Party.
The Registrant's 2003 Incentive Compensation Plan (for purposes of this
paragraph only, the "Plan") provides that, "Each person who is or shall have
been a member of the Committee or of the Board, shall be indemnified and held
harmless by the Company against and from any loss, cost, liability, or expense
that may be imposed upon or reasonably incurred by him or her in connection with
or resulting from any claim, action, suit, or proceeding to which he or she may
be a party or in which he or she may be involved by reason of any action taken
or failure to act under the Plan and against and from any and all amounts paid
by him or her in settlement thereof, with the Company's approval, or paid by him
or her in satisfaction of any judgment in any such action, suit, or proceeding
against him or her, provided he or she shall give the Company an opportunity, at
its own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Certificate of
Incorporation or By-Laws, as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless."
Present and future directors and officers of the Registrant are covered by
a policy of liability insurance obtained by First American which insures against
the cost of defense, settlement or payment of a judgment under certain
circumstances.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
The following exhibits are filed as part of this Registration Statement:
Exhibit
Number Description
- ----- -----------
4.1 Form of certificate representing shares of First Advantage's Class A
common stock (incorporated by reference from Exhibit 4.1 to the
Registration Statement on Form S-8 (333-105847) filed June 5, 2003).
4.2 Description of First Advantage's capital stock in Article IV of First
Advantage's First Amended and Restated Certificate of Incorporation
(included in Exhibit 3.1 of First Advantage's Registration Statement
on Form S-4 filed January 17, 2003 and incorporated by reference
herein).
4.3 First Advantage Corporation 401(k) Savings Plan
5.1 Opinion of White & Case LLP.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants to The
First American Corporation Screening Technology Division.
23.2 Consent of PricewaterhouseCoopers LLP, independent accountants to US
SEARCH.com Inc.
23.3 Consent of White & Case LLP (contained in Exhibit 5.1).
24.1 Power of Attorney.
ITEM 9. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during the 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;
(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; and
(iii) to include any additional or changed material information on the
plan of distribution;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
SEC by First American pursuant to Section 13 or 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, 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.
(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.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a) or
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.
(5) 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
Securities 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 Securities
Act and will be governed by the final adjudication of such issue.
* * *
SIGNATURES
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 St. Petersburg, state of Florida, on this 7th day of
January, 2004.
FIRST ADVANTAGE CORPORATION
By: /s/ John Long
--------------------------------------------------
John Long
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Date: January 7, 2004 By: /s/ John Long
--------------------------------------------------
John Long
Chief Executive Officer
(Principal Executive Officer)
Date: January 7, 2004 By: /s/ John Lamson
--------------------------------------------------
John Lamson
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, the committee
responsible for administering the First Advantage Corporation 401(k) Savings
Plan has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of St. Petersburg, State
of Florida, on January 7, 2004.
THE FIRST AMERICAN CORPORATION
401(K) SAVINGS PLAN
By: /s/ John Lamson
----------------------------------------
Name: John Lamson
(Authorized Individual)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Date: January 7, 2004 By: *
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Parker S. Kennedy, Chairman
Date: January 7, 2004 By: *
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John Long, Director
Date: January 7, 2004 By: *
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J. David Chatham, Director
Date: January 7, 2004 By: *
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Barry Connelly, Director
Date: January 7, 2004 By: *
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Lawrence D. Lenihan, Jr., Director
Date: January 7, 2004 By: *
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Donald Nickelson, Director
Date: January 7, 2004 By: *
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Donald Robert, Director
Date: January 7, 2004 By: *
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Alex Sink, Director
Date: January 7, 2004 By: *
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David Walker, Director
* By: /s/ Kenneth D. DeGiorgio
-------------------------------
Kenneth D. DeGiorgio
Attorney-in-Fact
EXHIBIT INDEX
Exhibit
Number Description
- ----- -----------
4.1 Form of certificate representing shares of First Advantage's Class A
common stock (incorporated by reference from Exhibit 4.1 to the
Registration Statement on Form S-8 (333-105847) filed June 5, 2003).
4.2 Description of First Advantage's capital stock in Article IV of First
Advantage's First Amended and Restated Certificate of Incorporation
(included in Exhibit 3.1 of First Advantage's Registration Statement
on Form S-4 filed January 17, 2003 and incorporated by reference
herein).
4.3 First Advantage Corporation 401(k) Savings Plan
5.1 Opinion of White & Case LLP.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants to The
First American Corporation Screening Technology Division.
23.2 Consent of PricewaterhouseCoopers LLP, independent accountants to US
SEARCH.com Inc.
23.3 Consent of White & Case LLP (contained in Exhibit 5.1).
24.1 Power of Attorney.
First Advantage Corporation
401(k) Savings Plan
Contents
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Article 1. Introduction 1
1.1 Establishment and Name of the Plan 1
1.2 Purpose of the Plan 1
1.3 Transfer of Accounts from the First American Plan 1
1.4 Applicability of the Plan 1
1.5 Conformance with EGTRRA 2
Article 2. Definitions 3
2.1 Definitions 3
2.2 Gender and Number 13
2.3 Requirement to Be in "Written Form" 13
Article 3. Participation and Service 14
3.1 Date of Participation 14
3.2 Acquisitions 14
3.3 Duration 15
3.4 Transfers 15
3.5 Qualified Military Service 15
Article 4. Pretax Deferrals 16
4.1 Amount of Deferral 16
4.2 Excess Deferrals 16
4.3 Elections 18
4.4 Compensation Reduction 18
4.5 Transfer and Crediting of Pretax Deferrals 18
4.6 Restrictions on Pretax Deferrals 18
4.7 Refunds of Excess Pretax Deferrals 21
4.8 Rights of Returning Servicemen 22
4.9 Interim "Good Faith" Catch Up Provisions 23
Article 5. Matching Contributions 24
5.1 Matching Contributions 24
5.2 Overall Conditions on Matching Contributions 24
5.3 Transfer and Crediting of Matching Contributions 25
i
5.4 Restrictions on Matching Contributions 25
5.5 Correction of Excess Matching Contributions 26
5.6 Multiple Use of Alternative Limitation; Aggregation Limitations. 27
Article 6. Profit Sharing, Rollover and Other Contributions 29
6.1 Discretionary Profit Sharing Contributions 29
6.2 Correcting Contributions 29
6.3 Rollover Contributions 30
Article 7. Maximum Contributions and Benefit Limitations 32
7.1 Limitation on Annual Addition 32
7.2 "Annual Addition" Defined 32
7.3 Excess Annual Additions 32
Article 8. Vesting and Benefits 34
8.1 Vesting 34
8.2 Account Balance at Distribution 34
8.3 Benefits Upon Separation From Service 34
8.4 Death Benefits 35
8.5 Minimum Distribution Requirements 35
8.6 Hardship Withdrawal 40
8.7 Withdrawal After Attaining Age 59-1/2 42
8.8 Withdrawals From Rollover Accounts 42
8.9 Mandatory Tax Withholding and Direct Rollover 42
8.10 Loans to Participants 44
Article 9. Investment Elections 49
9.1 Investment of New Contributions 49
9.2 Investment Transfers 49
9.3 Investment Elections 49
9.4 Transfer of Assets 50
9.5 Company Stock Fund Rights 50
9.6 Restrictions on Transfer of Stock 52
9.7 ERISA Rules Regarding Participant-Directed Investment 52
9.8 Article Not Applicable to ESOP Fund. 53
Article 10. Participant Accounts and Records 54
10.1 Accounts and Records 54
10.2 Valuation Adjustments 54
10.3 Company Stock Fund Accounting and Valuation 54
Article 11. Financing 56
ii
11.1 Funding of the Plan 56
11.2 Company Contributions 56
11.3 Non-Reversion 56
11.4 Custody of Assets 57
11.5 Payment of Expenses 57
11.6 Absence of Guaranty 57
Article 12. Administration 58
12.1 Committee 58
12.2 Activities, Duties and Responsibilities of the Committee 58
12.3 Committee's Decisions Conclusive 60
12.4 Allocation of Fiduciary Responsibility 61
12.5 Indemnity 61
12.6 Fidelity Bonds 62
12.7 Data 62
12.8 Missing Persons 63
12.9 Claims and Appeals Procedures 63
12.10 Effect of a Mistake 64
Article 13. Amendment and Termination 66
13.1 Authority to Amend or Terminate 66
13.2 Discontinuance of Participation by an Employer 66
13.3 Permanent Cessation of Contributions or Plan Termination 66
13.4 Plan Merger or Transfer 67
Article 14. Top-Heavy Provisions 68
14.1 Application 68
14.2 Key Employee 68
14.3 Top-Heavy Group 69
14.4 Additional Rules 70
14.5 Minimum Contribution Requirement 71
14.6 Top-Heavy Vesting 72
Article 15. Miscellaneous Provisions 73
15.1 Employment Rights 73
15.2 Notice of Address 73
15.3 Incompetency 73
15.4 Nonalienation 74
15.5 No Examination or Accounting 75
15.6 Severability 75
15.7 Counterparts 75
15.8 Service of Legal Process 75
iii
15.9 Headings of Articles and Sections 75
15.10 Applicable Law 75
A.1 Applicability 76
A.2 Background of ESOP 76
A.3 Definitions 76
A.4 ESOP Fund Frozen 78
A.5 Profit Sharing Fund 78
A.6 Distributions 79
A.7 Investment and Voting Rights 80
A.8 Accounting and Valuation of Assets 83
iv
Article 1. Introduction
1.1 Establishment and Name of the Plan
Certain employees of The First American Corporation were participants in The
First American Corporation 401(k) Savings Plan (the "First American Plan") on
December 31, 2003. These employees transferred to employment with First
Advantage Corporation (the "Company") on or about July 1, 2003. Effective
January 1, 2004, the Company hereby establishes the First Advantage Corporation
401(k) Savings Plan (the "Plan") to provide retirement benefits to certain
employees transferring to employment with the Company from The First American
Corporation and to certain other individuals who become employees of the
Company. Capitalized terms used in this Article shall have the meanings set
forth in Article 2.
1.2 Purpose of the Plan
This Plan is intended to encourage and assist Eligible Employees in adopting a
regular program of savings to provide future benefits. For tax purposes, the
Plan is intended to qualify as a defined contribution profit sharing plan with a
qualified cash or deferred arrangement, within the meaning of Code section
401(k) and related regulations. In accordance with Code section 401(a)(27), the
determination of the Plan as a qualified profit sharing plan shall be made
without regard to whether the Company has current or accumulated profits.
1.3 Transfer of Accounts from the First American Plan
During January, 2004, all accounts maintained for First American Participants
(as defined in Plan section 2.1(u)) under the First American Plan who were
transferred to First Advantage Corporation were transferred to this Plan and
thereafter shall be maintained under and shall be part of this Plan. The
transfer of the First American Participant's accounts from the First American
Plan to this Plan is a transfer of assets and liabilities, within the meaning of
Treasury regulation section 1.414(l)-1(b)(3), from the First American Plan to
this Plan. After the transfer of a First American Participant's account from the
First American Plan to this Plan, the First American Participant shall cease to
have any right to benefits under the First American Plan with respect to service
before the Effective Date.
As of the date the accounts of the First American Participants were transferred
from the First American Plan to this Plan, the First American Plan also included
a employee stock ownership plan, within the meaning of Code section 4975(e)(7)
and section 407(d)(6) of ERISA. This Plan continues to maintain an employee
stock ownership plan holding such transferred assets and liabilities.
1.4 Applicability of the Plan
Except as otherwise provided, the provisions of this Plan are effective January
1, 2004, and are applicable only to Employees in the employ of the Company or an
Affiliate on or after January 1, 2004.
1
Notwithstanding any contrary Plan provision, if any modification of ERISA or the
Code (or regulations or rulings thereunder) requires that a conforming Plan
amendment be adopted as of a stated effective date in order for this Plan to
continue to be a qualified plan, this Plan shall be operated in accordance with
such requirements until the date when a conforming Plan amendment is adopted, or
the date when a clear and nonconforming Plan amendment is adopted, whichever
occurs first.
Except as provided in this Plan section 1.3 any Employee retired or terminated
shall have his or her rights under the Plan determined under the terms of the
Plan as in effect at the time the determination is made.
1.5 Conformance with EGTRRA
The Plan is intended to reflect certain provisions of the Economic Growth and
Tax Relief Reconciliation Act of 2001 ("EGTRRA"). These provisions are intended
as good faith compliance with the requirements of EGTRRA and are to be construed
in accordance with EGTRRA and guidance issued thereunder.
2
Article 2. Definitions
2.1 Definitions
These definitions are in addition to the definitions of any other terms that
appear elsewhere in the Plan. Whenever used in the Plan the following terms
shall have the respective meanings set forth below unless otherwise required by
the context in which they are used:
(a) "Account" means the separate recordkeeping account maintained for each
Participant that represents the total proportionate interest of the
Participant in the Trust Fund and that consists of the sum of the following
subaccounts:
(1) "Matching Account" means the subaccount that evidences the value of
Matching Contributions made on behalf of the Participant pursuant to
Plan section 5.1, including related investment gains and losses of the
Trust Fund.
(2) "Pretax Deferral Account" means the subaccount that evidences the
value of Pretax Deferrals made on behalf of the Participant pursuant
to Plan section 4.1, including related investment gains and losses of
the Trust Fund.
(3) "Profit Sharing Account" means the subaccount that evidences the value
of Profit Sharing Contributions, if any, made on behalf of the
Participant pursuant to Plan section 6.1, including related investment
gains and losses of the Trust Fund.
(4) "Rollover Account" means the subaccount that evidences the value of
Rollover Contributions made by the Participant pursuant to Plan
section 6.3, including related investment gains and losses of the
Trust Fund.
(5) "Catch Up Account" means the subaccount that evidences the value of
catch up contributions made by the Participant pursuant to Plan
section 4.9 including related investment gains and losses of the Trust
Fund.
(6) "ESOP Account" means the sum of the Participant's subaccounts listed
below and in Appendix A. The ESOP Account is divided into the separate
recordkeeping account that represents the sum of the following
subaccount, if any:
(A) "ESOP Profit Sharing Account" means the subaccount that evidences
the value of Employer contributions to the ESOP Profit Sharing
Fund made on behalf of the Participant to the ESOP through
December 1, 2001 and thereafter under Appendix A, including
related investment gains and losses of the Trust Fund.
3
(B) "Stock Account" means the subaccount that evidences the value of
The First American Corporation Stock and other assets held in the
ESOP Fund, including related investment gains and losses of the
Trust Fund.
(C) "Transfer Account" means the subaccount that evidences the value
of any amounts transferred directly from another qualified plan
to the ESOP before it was merged into The First American
Corporation 401(k) Savings Plan, as permitted under the Code and
the rules of the ESOP in existence at that time, including
related investment gains and losses of the Trust Fund.
(D) "Voluntary Contribution Account" means a subaccount that
evidences the value of the Participant's voluntary, after-tax
contributions to the ESOP, as merged into The First American
Corporation 401(k) Savings Plan, including investment gains and
losses of the Trust Fund.
Unless a Plan provision explicitly provides otherwise, ESOP Accounts
shall be maintained and administered separately from other Accounts
under the Plan.
(b) "Affiliate" means:
(1) A corporation or other business organization while it is controlled by
or under common control with the Company within the meaning of Code
sections 414(b) or (c) and 1563, with the determination of control
made without reference to paragraphs (a)(4) and (e)(3)(C) of Code
section 1563; or
(2) Except for purposes of Article 14, any corporation or partnership in
which the Company owns, directly or indirectly, less than 80 percent
but more than 50 percent of:
(A) The total voting stock or total value of the classes of stock; or
(B) The profits or capital of the partnership.
For purposes of paragraph (1) and solely for the purpose of applying the
limitations of Article 7, the phrase "more than 50 percent" shall be
substituted for the phrase "at least 80 percent" each place it appears in
Code section 1563(a)(1). Affiliate also means any member of an affiliated
service group (within the meaning of Code section 414(m) and the related
regulations promulgated by the United States Department of the Treasury
("Treasury regulations")) of which the Company or any Affiliate is a
member; and any entity that, pursuant to Code section 414(o) and related
Treasury regulations, must be aggregated with the Company or any Affiliate
for plan qualification purposes.
4
(c) "Beneficiary" means the person or persons (who may be named contingently or
successively) designated by a Participant to receive the Participant's
Account in the event of the Participant's death. Each designation shall be
in the manner prescribed by the Committee, shall be effective only when
properly filed with the recordkeeper, and shall revoke all prior
designations by the same Participant. The designation by a married
Participant of someone other than the Participant's spouse as a Beneficiary
shall be invalid unless:
(1) The spouse consents in writing to the designation of a specific
nonspouse Beneficiary that may not be changed without spousal consent
(unless the spousal consent expressly permits the Participant to
change Beneficiary designations without further consent by the
spouse);
(2) The consent acknowledges the effect of such designation; and
(3) The consent is notarized or is witnessed by a Plan representative.
No spousal consent shall be required if it is established to the
satisfaction of the Plan representative that such consent cannot be
obtained because there is no spouse or because the spouse cannot be
located. If no Beneficiary is properly designated at the time of the
Participant's death, or if no person so designated shall survive the
Participant, the Beneficiary shall be the Participant's spouse, or if the
deceased Participant has no surviving spouse, the Participant's estate.
The Beneficiary designation of any First American Participant, as defined
in Plan section 2.1(u), who became a Participant in this Plan on January 1,
2004, shall be treated as the beneficiary designation of the Participant
under this Plan unless and until such designation is superseded by a new
Beneficiary designation under this subsection.
(d) "Board of Directors" means the Board of Directors of the Company.
(e) "Break in Service" means any computation period in which an Employee is not
credited with more than 500 Hours of Service. However, if an Employee is
absent from employment due to pregnancy, birth of the Employee's child,
adoption of a child by the Employee, or child care immediately following
such birth or adoption, any Hour of Service for which the Employee would
have received credit (or if not determinable, eight hours for each day of
absence) during such absence, up to a maximum of 501 Hours of Service,
shall be credited to the Employee solely to prevent the Employee from
incurring a Break in Service. Any such Hours of Service shall be credited
for the computation period in which the absence begins if necessary to
prevent a Break in Service during that computation period and, in all other
cases, in the immediately following computation period. The term
"computation period"
5
means the 12-month period measured from the Employee's Date of Hire and
each Plan Year.
(f) "Code" means the Internal Revenue Code of 1986, as amended from time to
time. Each reference in this Plan to the Code or any provision thereof
shall be deemed to include reference to any comparable or succeeding
statutory provision that supplements or replaces the provision(s) of the
Code to which such reference is made.
(g) "Committee" means the committee as constituted from time to time under
Article 12 and having the duties set forth therein and elsewhere in the
Plan.
(h) "Company" means the First Advantage Corporation.
(i) "Company Stock" means the common stock of the Company that constitutes
"qualifying employer securities" within the meaning of Treasury regulations
section 54.4975-12.
(j) "Compensation" means all wages, within the meaning of Code section 3401(a),
and all other payments of compensation to an Employee by the Company or
Affiliate for which the Company or Affiliate is required to furnish the
Employee a written statement under Code sections 6041 and 6051.
Compensation under this subsection shall be determined without regard to
any rules under Code section 3401(a) that limit the remuneration included
in wages based on the nature or location of employment or the services
performed.
For nondiscrimination testing purposes, including the identification of
Highly Compensated Employees under Plan section 2.1(t) in accordance with
Code section 414(q) and related regulations, the actual deferral percentage
test of Code section 401(k) as provided in Plan section 4.6, the
contribution percentage test of Code section 401(m) as provided in Plan
section 5.4, and the nondiscrimination requirements of Code section
401(a)(4) as they apply to the allocation of Profit Sharing Contributions,
if any, Compensation shall include elective contributions that are made by
the Employer on behalf of the Employee that are not includible in gross
income under Code section 125, relating to deferrals under a cafeteria
plan, or Code section 402(e)(3), relating to deferral under a qualified
cash or deferred arrangement (including Pretax Deferrals under this Plan),
and elective amounts that are not includible in gross income of the
Employee by reason of Code section 132(f)(4), relating to qualified
transportation fringe benefits. Compensation shall also include such
elective contributions for purposes of applying the Code section 415 limits
described in Article 7.
6
The annual Compensation of each Participant taken into account in
determining allocations for any Plan Year shall not exceed $200,000,
as adjusted for cost-of-living increases in accordance with Code
section 401(a)(17)(B).
It is intended that the above definition of Compensation shall comply
with the safe harbor definition of compensation in Treasury regulation
section 1.414(s)-1(c)(2) and (4). Notwithstanding any Plan provision
to the contrary, the Committee shall take steps to ensure that this
subsection is interpreted and administered so as to comply with such
requirements. In the event of any conflict, the provisions of the Code
and the Treasury regulations thereunder shall control.
(k) "Date of Hire" means the first date on which an Employee is credited with
an Hour of Service.
(l) "Disability" means a physical or mental condition that renders the Employee
eligible for disability payments under the Social Security Act.
(m) "Eligible Employee" means any Employee employed by the Company or an
Affiliate except:
(1) Any Employee who is included in a unit of Employees covered by a
collective bargaining agreement, if there is evidence that retirement
benefits were the subject of good faith bargaining, unless such
agreement provides for participation of those Employees in this Plan;
(2) Any Employee who is a nonresident alien and who receives no earned
income from an Employer that constitutes income from sources within
the United States;
(3) Any Employee who is a leased employee within the meaning of Code
section 414(n)(2); and
(4) Any person not designated as an "employee" in an Employer's employment
records during a particular period of time, including a person
designated as an "independent contractor," is not considered to be an
Eligible Employee during that period of time. Such a person shall not
be considered an "Eligible Employee" even if a determination is made
by the Internal Revenue Service, the Department of Labor, or any other
government agency, court, or other tribunal, that such person is an
employee for any purpose, unless and until the Employer in fact
designates such person as an Employee for purposes of this Plan. If
such a designation is made, the designation shall be applied
prospectively only, unless the Employer specifically provides
otherwise.
(n) "Eligible Participant" means, for purposes of determining eligibility to
receive an allocation of Profit Sharing Contributions for any Plan Year:
7
(1) Each Participant who is employed as an Eligible Employee by an
Employer on the last day of the Plan Year and who completed at least
1,000 Hours of Service during the Plan Year;
(2) Each Participant who is employed as an Employee in a capacity other
than that of an Eligible Employee by the Company or an Affiliate on
the last day of the Plan Year and who completed at least 1,000 Hours
of Service as an Eligible Employee with an Employer during the Plan
Year before ceasing to be an Eligible Employee; and
(3) Each Participant whose Separation from Service occurred during the
Plan Year, while the Participant was an Eligible Employee, by reason
of retirement at or after age 65, Disability or death, notwithstanding
the number of Hours of Service completed by such Participant during
such Plan Year.
(o) "Employee" means any person employed by the Company or an Affiliate.
(p) "Employer" means the Company and any Affiliate that, with the approval of
the Company or the Committee, if so empowered by the Company, has adopted
or adopts this Plan for the benefit of its Eligible Employees. Each
Employer agrees to be bound by such terms and conditions relating to the
Plan as the Company or the Committee may reasonably require.
(q) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time. Each reference in this Plan to ERISA or any
provision thereof shall be deemed to include reference to any comparable or
succeeding statutory provision that supplements or replaces the
provision(s) of ERISA to which such reference is made.
(r) "ESOP" means The First American Corporation Employee Profit Sharing and
Stock Ownership Plan as merged into The First American Corporation 401(k)
Savings Plan, effective December 1, 2001, and described in Appendix A
herein.
(s) "ESOP Trust Fund" means the assets of every kind and description held under
any Trust Agreement forming a part of the ESOP as merged into The First
American Corporation 401(k) Savings Plan, including the following and any
other subfunds that may be established thereunder:
(1) The "Profit Sharing Fund" consisting of a diversified portfolio of
assets attributable to Employer contributions and Employee
contributions (including after-tax, rollover, and direct transfer
contributions) that have been received pursuant to the ESOP; and
(2) The "ESOP Fund" consisting of The First American Corporation Stock and
other assets that fund the employee stock ownership portion of the
ESOP.
8
(t) "First American Corporation Stock" means the common stock of The First
American Corporation that constitutes "qualifying employer securities"
within the meaning of Treasury regulations section 54.4975-12.
(u) "First American Participant" means a Participant in this Plan who, as of
December 31, 2003, was a Participant in The First American Corporation
401(k) Savings Plan.
(v) "Highly Compensated Employee" means an Employee described in Code section
414(q) and includes any Employee of the Company or an Affiliate who:
(1) Was a five-percent owner (as defined in Plan section 14.2) at any time
during the year or the preceding year, or
(2) For the preceding year, received Compensation in excess of $80,000 (as
adjusted by reference to Code section 414(q)(1)) and, if the Company
elects the application of this clause for such preceding year, was in
the top-paid group (as defined in Code section 414(q)) of Employees
for such preceding year.
Employees who are nonresident aliens and who receive no U.S.-source income
from the Company or an Affiliate shall not be counted as Employees when
identifying Highly Compensated Employees. The family aggregation rules of
Code section 414(d)(6), as it existed prior to the repeal of these rules,
shall not to apply to this Plan.
The rules of this section shall be applied separately to each Employer
controlled group, as determined after any aggregation required pursuant to
Code subsections 414(b), (c), (m), (n) and (o).
(w) "Hour of Service" means:
(1) Each hour for which an Employee is paid or entitled to payment by the
Company or an Affiliate for the performance of duties.
(2) Each hour for which an Employee is paid or entitled to payment by the
Company or an Affiliate on account of a period of time during which no
duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness,
incapacity (including Disability), layoff, jury duty, or leave of
absence.
(3) Each hour for which back pay (irrespective of mitigation of damages)
for an Employee is either awarded or agreed to by the Company or an
Affiliate, with no duplication of credit for hours under paragraphs
(1) or (2) and this paragraph.
9
(4) Each hour credited pursuant to applicable ERISA regulations for unpaid
periods of absence for service in the United States armed forces or
Public Health Service during which an Employee's reemployment rights
are guaranteed by law, provided that the Employee is reemployed by the
Company or an Affiliate as an Employee within the time limits
prescribed by such law.
(5) To the extent and solely for the purposes required by the Family and
Medical Leave Act of 1993, as amended from time to time (the "FMLA"),
each hour credited pursuant to applicable regulations for periods of
absence, to the extent that the Employer was required by the FMLA to
permit the Employee to be absent from work during that period.
Notwithstanding the foregoing, no more than 501 Hours of Service shall be
credited to an Employee on account of any single continuous period during
which the Employee performs no duties.
To the extent a record of an Employee's hours of employment is not
maintained by the Company or an Affiliate, the Employee shall be credited
with 10 Hours of Service for each day for which the Employee would be
required to be credited with at least one Hour of Service.
All Hours of Service shall be determined and credited to computation
periods in accordance with reasonable standards and policies consistent
with United States Department of Labor ("Department of Labor") regulations
section 2530.200b-2(b) and (c).
(x) "Investment Fund" means any of the funds that the Committee may from time
to time designate, each of which may hold, in addition to the primary
investment assets described for the fund, a reasonable amount of cash,
liquid assets, and such other assets as may be specified in the fund's
prospectus to facilitate the appropriate administration of the Investment
Fund and this Plan.
The Plan is intended to constitute a plan described in ERISA section 404(c)
and Department of Labor regulations section 2550.404c-1 and will be
administered in accordance with the requirements for such a plan.
Participants, Beneficiaries and Alternate Payees shall assume all risks in
connection with any decrease in the value of any assets or funds that may
be invested or reinvested in the Investment Funds. Neither the Company, any
Employer, any employee or director of any Employer or the Company, the
Committee, any member of the Committee, or any fiduciary with respect to
the Plan shall be liable to any Participant, Beneficiary, or Alternate
Payee with respect to the Participant's, Beneficiary's, or Alternate
Payee's Investment Elections, including (without limitation) any losses
which are the direct and necessary result of Investment Elections made by
the Participant, Beneficiary, or Alternate Payee and including any
investment of the Participant's Account which is
10
made if the Participant, Beneficiary, or Alternate Payee fails to make an
affirmative Investment Election.
(y) "Leased Employee" means any person defined as such by Code section 414(n).
In general, a Leased Employee is any person who is not otherwise an
Employee of the Company or an Affiliate (referred to collectively as the
"recipient") who pursuant to an agreement between the recipient and any
other person ("leased organization") has performed services for the
recipient (or for the recipient and related persons determined in
accordance with Code section 414(n)(6)) on a substantially full-time basis
for a period of at least one year, and such services are performed under
the primary direction or control by the recipient. No Leased Employee shall
be an Eligible Employee or a Participant in this Plan.
(z) "Matching Contributions" means the matching contributions, as described in
Plan section 5.1 made by an Employer on behalf of a Participant that are
conditioned on Pretax Deferrals made on behalf of the Participant. Matching
Contributions shall satisfy the additional requirements of Code section
401(k)(3)(D) and related regulations to qualify as qualified matching
contributions within the meaning of Treasury regulation section
1.401(k)-1(g)(13)(i), so that they may be used in the actual deferral
percentage test of Code section 401(k), as provided in Plan section 4.6, or
the contribution percentage test of Code section 401(m), as provided in
Plan section 5.4.
(aa) "Participant" means any Eligible Employee who becomes a Participant as
provided in Article 3 and includes, where appropriate to the context, any
former or inactive Participant described in Plan sections 3.3 and 3.4.
(bb) "Pay" means all wages, salary, commissions, overtime and cash bonuses paid
to an Employee, while a Participant, by an Employer. Pay shall be
determined before any reduction for elective contributions that are made by
the Employer on behalf of the Employee and that are not includible in gross
income under Code section 125, relating to deferrals under a cafeteria
plan, Code section 402(e)(3), relating to deferral under a qualified cash
or deferred arrangement (including Pretax Deferrals under this Plan), or
elective amounts not includible in gross income by reason of Code section
132(f)(4), relating to qualified transportation fringe benefits.
Pay of each Participant taken into account for determining all benefits
provided under this Plan for any Plan Year shall not exceed $170,000, as
adjusted for increases in the cost-of-living in accordance with Code
section 401(a)(17)(B). If a determination period (as distinguished from the
period during which the Employee is a Participant) consists of fewer than
12 months, the Pay limit under this paragraph is an amount equal to the
otherwise applicable Pay limit multiplied by a fraction, the numerator of
which is the number of whole and fractional months in the short
determination period, and the denominator of which is 12.
11
The family aggregation rules contained in the Code shall not apply.
(cc) "Plan" means the First Advantage Corporation 401(k) Savings Plan as set
forth herein and as amended from time to time.
(dd) "Plan Year" means the calendar year.
(ee) "Pretax Deferrals" means the contributions made by the Employer on behalf
of a Participant pursuant to the Participant's election to reduce
Compensation, as described in Plan section 4.1.
(ff) "Profit Sharing Contributions" means the discretionary contribution, if
any, determined by the Board or its delegate to be made to the Trust Fund
and allocated to Participant Accounts under Plan section 6.1. Profit
Sharing Contributions shall satisfy the additional requirements of Code
section 401(k)(3)(D) and related regulations to qualify as qualified
nonelective contributions within the meaning of Treasury regulation section
1.401(k)-1(g)(13)(ii), so that they may be used in the actual deferral
percentage test of Code section 401(k), as provided in Plan section 4.6, or
the contribution percentage test of Code section 401(m), as provided in
Plan section 5.4.
(gg) "Rollover Contributions" means those contributions made by a Participant
pursuant to Plan section 6.3.
(hh) "Separation from Service" means any termination of the employment
relationship between an Employee and the Company and all Affiliates for
reasons such as resignation, discharge, or retirement, but only if that
termination of employment constitutes a "severance from employment" within
the meaning of Code section 401(k)(2)(B)(i)(I). A Separation from Service
shall not occur for an Employee if:
(1) The Employee transfers to a position with the Company or an Affiliate
in which the Employee is no longer an Eligible Employee;
(2) The Employee goes on a leave of absence authorized by the Company or
Affiliate, so long as the Employee returns to active employment upon
expiration of such leave;
(3) The Employee transfers to employment with another Employer or an
Affiliate which is not a participating Employer; or
(4) The Committee determines that the employee has not had a severance
from employment for purposes of Code section 401(k)(2)(B)(i)(I).
(ii) "Trust Agreement" means any agreement in the nature of a trust established
to form a part of the Plan to receive, hold, invest, and dispose of the
Trust Fund.
12
(jj) "Trust Fund" means the assets of every kind and description held under any
Trust Agreement forming a part of the Plan.
(kk) "Trustee" means the Fidelity Management Trust Company or any other legal or
natural person or persons selected by the Board to act as trustee under any
Trust Agreement at any time.
(ll) "Valuation Date" means each business day of each Plan Year.
2.2 Gender and Number
Except when otherwise indicated by the context, any masculine or feminine
terminology in this document shall also include the other gender, and the use of
any term in the singular or plural shall also include the opposite number.
2.3 Requirement to Be in "Written Form"
Various notices provided by the Company or Committee, and various elections made
by a Participant are required to be in written form. Except as otherwise
provided under Treasury or Department of Labor regulations or other guidance,
these notices and elections may be conveyed through an electronic system.
13
Article 3. Participation and Service
3.1 Date of Participation
Each Eligible Employee shall become a Participant in the Plan on the first day
of the calendar month coincident with or next following the later of:
(a) The date the Eligible Employee attains age 21; or
(b) The date that the Eligible Employee completes 30 days of eligibility
service with the Company or an Affiliate. The following rules shall apply
for determining eligibility service under this subsection:
(1) Eligibility service credit shall be given for the period of time
beginning on the date the Employee first performs an Hour of Service
and ending on the date of such Employee's Separation from Service.
(2) Eligibility service credit shall be given to an Employee for each
period beginning on the date the Employee Separates from Service and
ending on the date the Employee first performs an Hour of Service
thereafter, but only if the Employee is reemployed and performs such
Hour of Service within 12 months of the date of such Separation from
Service.
(3) Eligibility service credit shall be given to an Employee after a
Separation from Service for any period beginning on the date the
Employee first performs an Hour of Service after more than a 12-month
separation and ending on the date the Employee has a separation from
Service thereafter.
(4) All non-continuous periods of eligibility service credited to such
Employee under paragraphs (1), (2), and (3) above, shall be
aggregated.
An Eligible Employee who is otherwise eligible to participate in the Plan but is
then on an approved leave of absence shall not be eligible to become a
Participant until the Eligible Employee is first credited with an Hour of
Service following the leave of absence.
3.2 Acquisitions
In the event a business entity becomes an Affiliate or a part of the Company or
an Affiliate, the Board or the Committee, as authorized by the Board, in its
discretion, may, in connection with such event, waive, shorten or lengthen, on a
nondiscriminatory basis, the minimum service requirement of Plan section 3.1(b)
with respect to Eligible Employees of the entity at the time of the acquisition.
Notwithstanding the foregoing, no waiver or shortening of the minimum service
requirement shall occur if such action would cause the Plan to be unable to meet
the ratio percentage test of Code section 410(b)(1) and related Treasury
regulations, relating to minimum coverage requirements for qualified plans. Any
action taken to waive or
14
shorten the minimum service requirement under this paragraph shall be recorded
in an added Appendix, which shall be updated by the Committee at such times as
may be appropriate.
3.3 Duration
Subject to Plan section 3.4, an Eligible Employee who becomes a Participant
shall remain a Participant until the Employee has a Separation from Service, and
shall be a former Participant thereafter for as long as the individual is
entitled to receive any benefits under this Plan. A Participant or an Employee
other than an Eligible Employee who has completed the requirements of Plan
section 3.1 shall, if the Employee has a Separation from Service and is
subsequently reemployed as an Eligible Employee, become a Participant as of the
first day of the calendar month coincident with or next following the date of
reemployment. An Employee who has not completed such requirements on the date of
Separation from Service shall become a Participant after the Employee's rehire
on the date determined pursuant to Plan section 3.1.
3.4 Transfers
An Employee who becomes an Eligible Employee shall become a Participant on the
first day of the calendar month coincident with or next following the later of
the date that the Employee first performs duties as an Eligible Employee or the
date prescribed under Plan section 3.1.
Any Participant who ceases to be an Eligible Employee but who remains employed
by the Company or an Affiliate shall become an inactive Participant. An inactive
Participant shall not be eligible to elect Pretax Deferrals or to share in any
allocation of Profit Sharing Contributions with respect to Pay and Compensation
earned on or after the date on which the Employee ceased to be an Eligible
Employee and the Employee's Account shall continue to be held under the Plan
until the Employee becomes entitled to a distribution under other provisions of
the Plan.
3.5 Qualified Military Service
If a Participant is absent from employment for voluntary or involuntary military
service with the armed forces of the United States and returns to employment
within the period required under the law pertaining to veterans' reemployment
rights, the Participant shall receive service for the period of absence from
employment. Notwithstanding any provisions of this Plan to the contrary,
contributions, benefits, and service credit with respect to qualified military
service will be provided in accordance with Code section 414(u).
15
Article 4. Pretax Deferrals
4.1 Amount of Deferral
Each Participant who is a Highly Compensated Employee may elect to have the
Employer contribute on the Participant's behalf as Pretax Deferrals an amount
that is equal to any whole percentage from one percent to fifteen percent of the
Participant's Pay from such Employer during the period for which the election is
in effect. Each Participant who is not a Highly Compensated Employee may elect
to have the Employer contribute on the Participant's behalf as Pretax Deferrals
an amount that is equal to any whole percentage from one percent to sixty
percent of the Participant's Pay from such Employer during the period for which
the election is in effect. No benefits other than Matching Contributions shall
be conditioned on a Participant's election to make Pretax Deferrals under this
Plan.
The Participant's election and changes in any such election shall be made in
accordance with the rules set forth in this section 4.1 and such other
administrative rules as the Committee may prescribe. The Committee shall
prescribe such procedures and provide such forms as may be necessary or
appropriate to implement the timing and making, changing or stopping of Pretax
Deferrals.
4.2 Excess Deferrals
(a) In accordance with Code section 401(a)(30), this Plan and all other plans
of the Company and Affiliates shall not permit elective deferrals
(including Pretax Deferrals under this Plan) to exceed the limit prescribed
under Code section 402(g) for the Participant's taxable year. The Committee
shall adopt procedures designed to prevent this limit from being exceeded
and to cause Pretax Deferrals (and the corresponding salary reductions)
that have been elected by the Participant to be stopped at any time during
the Participant's taxable year when this limit has been reached.
The rules of this Plan section 4.2(a) shall be applied separately to each
Employer controlled group, as determined after any aggregation required
pursuant Code subsections 414(b), (c), (m), (n), and (o).
(b) In addition, the Committee shall adopt reasonable procedures to assist a
Participant in fulfilling the Participant's responsibility of ensuring that
Pretax Deferrals made on behalf of the Participant under this Plan for the
Participant's taxable year do not exceed the limit prescribed under Code
section 402(g) less any other elective deferrals made on behalf of the
Participant by someone other than the Company or an Affiliate. If the
Participant notifies the Committee in writing no later than March 1
following the Participant's taxable year of the amount of any excess Pretax
Deferrals under this subsection for such taxable year, the Plan may, but
need not, distribute such excess (and any income or investment gains or
losses allocable to such excess) to the Participant no later than April 15
following such taxable year.
16
(c) The Participant will be treated as having a calendar taxable year, unless
the Participant notifies the Committee differently, in writing, before the
beginning of the Participant's taxable year or, if later, by the date that
the Employee first becomes a Participant.
(d) For purposes of this Plan section 4.2, "elective deferrals" includes:
(1) Employer contributions to a qualified cash or deferred arrangement to
the extent excluded from the Participant's gross income for the
taxable year pursuant to Code section 402(a)(8);
(2) Employer contributions to a simplified employee pension to the extent
excluded from the Participant's gross income for the taxable year
under Code section 402(h)(1)(b); and
(3) Employer contributions to purchase an annuity contract under Code
section 403(b) under a salary reduction agreement.
(e) Excess Pretax Deferrals that are distributed from the Plan under Plan
section 4.2 shall not be included as an Annual Addition for purposes of
Plan section 7.2 and Code section 415.
(f) Excess Pretax Deferrals of Participants who are Highly Compensated
Employees are taken into account for purposes of the actual deferral
percentage test of Code section 401(k), as provided in Plan section 4.6,
even if they are distributed under this section. Excess Pretax Deferrals of
Participants who are not Highly Compensated Employees are not taken into
account for purposes of the actual deferral percentage test of Code section
401(k), as provided in Plan section 4.6, to the extent they are distributed
under Plan section 4.2 because they are prohibited by Code section
401(a)(30) and Plan section 4.2(a).
(g) The Committee shall adopt reasonable procedures for coordinating
distributions of excess Pretax Deferrals and allocable income under Plan
section 4.2 and Plan section 4.7 in accordance with applicable Treasury
regulations. Allocable income and investment gains or losses shall be
determined in the manner described in Plan section 4.7. The amount of any
excess deferrals for a Plan Year that may be distributed under Plan section
4.2 shall be reduced by the amount of excess contributions previously
distributed to the Participant under Plan section 4.7.
(h) Excess Pretax Deferrals that are distributed under Plan section 4.2 shall
be included in the Participant's gross income for the taxable year during
which the Pretax Deferrals were made. Income and investment earnings
allocable to the excess Pretax Deferrals are includible in the
Participant's gross income for the taxable year in which distributed.
17
(i) The distribution described in Plan section 4.2 may be made
notwithstanding any other Plan provision. The corrective distribution
of excess Pretax Deferrals and allocable income is not subject to the
early distribution tax of Code section 72(t) and is not treated as a
distribution for purposes of applying excise taxes under Code section
4980A, the direct rollover rules of Code section 401(a)(31), or the
mandatory withholding rules of Code section 3405(c).
4.3 Elections
Each Participant (or Employee expected to become a Participant by the time that
the election will take effect) shall make the election described in Plan section
4.1.
The election shall be made by completing and returning the election form made
available by the Committee in the time and manner prescribed by the Committee.
In addition, the election may be made using any system of telephonic or other
verbal or electronic communication (including computer data diskette) that has
been authorized and approved by the Committee for making certain elections under
the Plan. Elections shall remain in effect until a new election to begin, stop,
increase, or decrease the Participant's Pretax Deferrals is received by the
recordkeeper.
4.4 Compensation Reduction
Each Participant who makes an election to have the Employer contribute a
percentage of the Participant's Pay as Pretax Deferrals shall, by the act of
making such election, agree to have such Pay reduced by an equivalent amount for
so long as the election remains in effect. The Participant's Pay shall not be
reduced to the extent that the Employer does not contribute the Pretax Deferrals
to the Plan on behalf of the Participant.
4.5 Transfer and Crediting of Pretax Deferrals
Pretax Deferrals shall be transferred to the Trust Fund as soon as practicable
after each payroll payment date and in no event later than the fifteenth
business day after the end of the calendar month in which the corresponding
amount would have been paid to the Participant in the absence of the Pretax
Deferral election, unless an extension is available pursuant to relevant law.
Pretax Deferrals shall be credited to the Participant's Pretax Deferral Account
as of the payroll payment date on which the amount deferred would have been paid
in the absence of the Pretax Deferral election under Plan section 4.1. Such
amounts, however, shall not be eligible to share in investment results until
received by the Trust Fund.
4.6 Restrictions on Pretax Deferrals
The rules of this Plan section 4.6 shall be applied separately to each Employer
controlled group, as determined after any aggregation required pursuant to Code
subsections 414(b), (c), (m), (n), and (o).
As of the last day of each Plan Year and at such other times throughout the Plan
Year as the Committee may determine, the Committee shall require testing of
Pretax Deferrals, along with any other Employer contributions, such as Matching
or Profit Sharing Contributions,
18
that the Committee elects to include in this testing in accordance with
applicable conditions specified under Code section 401(k) and related Treasury
regulations (provided that such contributions have not been counted in the
contribution percentage test of Code section 401(m), as provided in Plan section
5.4, or, with respect to Profit Sharing Contributions, the general
nondiscrimination requirements of Code section 401(a)(4) and related Treasury
regulations), to assure that the "actual deferral percentage," as defined below,
for the Plan Year of Participants who are Highly Compensated Employees does not
exceed the limits specified herein. The actual deferral percentage for the Plan
Year of Participants who are Highly Compensated Employees shall not exceed the
greater of:
(a) The product of 1.25 and the actual deferral percentage for the current Plan
Year for the Eligible Employees who are Non-Highly Compensated Employees
for the current Plan Year; or
(b) The lesser of:
(1) The product of two and the actual deferral percentage for the current
Plan Year for the Eligible Employees who are Non-Highly Compensated
Employees for the current Plan Year, or
(2) The actual deferral percentage for the current Plan Year for the
Eligible Employees who are Non-Highly Compensated Employees for the
current Plan Year plus two percentage points.
By an amendment to the Plan, the Committee may elect to apply paragraphs (a) and
(b) by using the preceding Plan Year rather than the current Plan Year except
that such election may not be changed unless permitted by the Internal Revenue
Service.
The term "actual deferral percentage" for each group of Participants for any
period shall be the average of the ratios (calculated separately for each
Participant in such group, of the amount of Pretax Deferrals (and any other
Employer contributions that the Company elects to include in this testing in
accordance with applicable conditions specified under Code section 401(k) and
related Treasury regulations) made on behalf of the Participant for the Plan
Year to that Participant's Compensation earned while a Participant for the Plan
Year. Such ratios and the actual deferral percentage for each group shall be
calculated to the nearest one-hundredth of 1 percent of an Eligible Employee's
Compensation. To the extent required by Treasury regulations, excess Pretax
Deferrals under Plan section 4.2 shall be treated as a Pretax Deferral amount
elected under Plan section 4.1 and contributed to the Plan, whether or not such
excess Pretax Deferral is distributed under Plan section 4.2.
Advance testing done under Plan section 4.6 shall be based on a Participant's
annual rate of Compensation (not Pay) while a Participant in effect at the time
of the testing, and corrections made to reduce the amount in excess of the
maximum permissible deferral percentage shall be made from Compensation to be
earned for the remainder of the Plan
19
Year. Final Plan Year compliance with the restrictions of Plan section 4.6 shall
be based on the Participant's actual Compensation while a Participant and total
Pretax Deferrals for the Plan Year. The Committee is authorized to restrict the
Pretax Deferrals of Highly Compensated Employees in a uniform manner if it
determines, based on advance testing done during the Plan Year, that such
restriction is necessary or appropriate to assure final Plan Year compliance
wifth restrictions of Plan section 4.6.
If, for purposes of Code section 401(a)(4) or 410(b), this Plan is aggregated
with one or more other plans that include qualified cash or deferred
arrangements, then the cash or deferred arrangements of this Plan and such other
plans shall be treated as one arrangement for purposes of Plan section 4.6. If
any Highly Compensated Employee is a participant under two or more qualified
cash or deferred arrangements of the Company or an Affiliate, all such cash or
deferred arrangements shall be treated as one such arrangement for purposes of
determining the actual deferral percentage of the Highly Compensated Employee.
The family aggregation rules contained in the Code shall not apply.
(c) Change in Plan Coverage. If a Plan results from, or is otherwise affected
by, a Change in Plan Coverage (described below) that becomes effective
during a Plan Year, then the actual deferral percentage for the Non-Highly
Compensated Employees for the prior Plan Year is a weighted average
determined in accordance with IRS rules.
(1) The term "Change in Plan Coverage" means a change in the group or
groups of Eligible Employees under a Plan on account of:
(A) The establishment or amendment of a plan;
(B) A plan merger, consolidation, or spinoff under Code section
414(l);
(C) A change in the way plans within the meaning of Code section
414(l) are combined or separated for purposes of IRS regulation
1.401(k)-1(g)(11) (relating to permissive aggregation of plans);
or
(D) A combination of any of the foregoing.
(d) Reductions During Plan Year. If the Committee determines before the end of
the Plan Year that the limitation under Plan section 4.6 might not be
satisfied, the Committee may reduce the future Pretax Deferrals of the
Highly Compensated Employees such that the amount of a Highly Compensated
Employee's future Pretax Deferrals do not exceed such Contributions of any
other Highly Compensated Employee, or to the extent permitted by law, in
such other manner as the Committee may decide.
20
4.7 Refunds of Excess Pretax Deferrals
If, at the end of the Plan Year, the actual deferral percentage of Highly
Compensated Employees determined under Plan section 4.6 exceeds the maximum
deferral percentage permitted for the Plan Year under that section, then amounts
shall be refunded to such Highly Compensated Employees in accordance with this
Plan section 4.7.
Within 12 months after the end of the Plan Year, the excess amount of Pretax
Deferrals, along with income and investment gains and losses attributable
thereto, for the Highly Compensated Employees shall be distributed to such
Participants in the order of their actual deferral amounts, beginning with the
Highly Compensated Employees with the highest deferral amount, until the
limitations of Plan section 4.6 and Plan section 4.7 are met. When the
distributions required by this section are made, the limitation of section 4.6
is deemed satisfied even though the average deferral percentage of the Highly
Compensated Employees recomputed after the distributions may still exceed the
limitation of section 4.6.
The distribution described in Plan section 4.7 may be made notwithstanding any
other Plan provision. The corrective distribution of excess Pretax Deferrals and
allocable income is not subject to the early distribution tax of Code section
72(t) and is not treated as a distribution for purposes of applying excise taxes
under Code section 4980A, the direct rollover rules of Code section 401(a)(31),
or the mandatory withholding rules of Code section 3405(c).
Excess Pretax Deferrals distributed under Plan section 4.7 for any Plan Year
shall be reduced by the excess Pretax Deferrals previously distributed under
Plan section 4.2 for the taxable year of the Participant that ends in the same
Plan Year. Similarly, excess Pretax Deferrals distributed under Plan section 4.2
for the Participant's taxable year shall be reduced by the excess Pretax
Deferrals previously distributed under Plan section 4.7 for the Plan Year
beginning in the same taxable year of the Participant.
The income and investment gains and losses attributable to excess Pretax
Deferrals shall take into consideration income and investment gains and losses
on the Participant's Account for the Plan Year. Unless a different method is
selected by the Committee and used consistently for all Participants and all
corrective distributions for the Plan Year, the income and investment gains and
losses allocable to excess Pretax Deferrals for the Plan Year shall be that
portion of income and investment gains and losses on the Participant's Account
for the Plan Year that bears the same ratio to total income and investment gains
and losses for the Plan Year as the excess Pretax Deferrals bears to the total
Account balance determined as of the end of the Plan Year, before income and
investment gains and losses for the Plan Year are added to the Account.
The family aggregation rules contained in the Code shall not apply.
Notwithstanding any other provision of this Plan to the contrary, the Committee
shall take steps to ensure that Plan section 4.7 is interpreted and administered
so as to comply with applicable legal requirements for the determination of what
amounts constitute excess Code section 401(k) elective deferrals and for the
return of such excess amounts and any income and investment gains and losses
attributable thereto. All determinations under Plan section 4.7 shall comply
with Code
21
section 401(k) and the Treasury regulations thereunder. The Committee shall keep
adequate records to show compliance with these requirements. In the event of any
conflict between the provisions of Plan section 4.7 and the provisions of the
Code and the Treasury regulations thereunder, the provisions of the Code and
such regulations shall control.
4.8 Rights of Returning Servicemen
A person who leaves employment with an Employer for military service, and who
returns to employment with the Employer or an Affiliate, and within the time
prescribed by law for reinstatement of the Participant's employment rights, and
who thereby initially becomes a Participant or who resumes participation in the
Plan, shall have the right to make up Pretax Deferrals and/or Catch Up
Contributions in accordance with this section.
(a) Period for Make-Up Contributions. Such Participant's make-up period, that
shall begin on the date of reemployment, shall be equal to three times the
period of military service, up to a maximum of five years.
(b) Amount of Make-Up Contributions. For all or part of the Participant's
period of military service, such Participant may make Pretax Deferrals at
any of the rates permitted under section 4.1 that were in effect during
this period of military service. Such contributions shall be made by
payroll reduction over the interval specified by the Participant that is
consistent with (a) above. The basis for making such contributions shall be
such Participant's average Compensation during the 12-month period
immediately prior to entry into military service. Such contributions shall
be in addition to any Pretax Deferrals the Participant is making under Plan
section 4.1 for the current period of employment.
(c) Adjustment, Suspension, or Resumption. Such make-up contributions may be
adjusted, suspended, or resumed by such Participant as provided in Plan
section 4.3 during the make-up period specified in (a) above, but there
shall be no penalty for any discontinuance of such contributions.
(d) Employer Matching Contributions. The Employer shall make Matching
Contributions in accordance with Article 5 that match such make-up Pretax
Deferrals.
(e) Employer Profit Sharing Contributions. For each Plan Year during which a
Participant was in military service that a Discretionary Profit Sharing
Contribution was made by the Employer, the Employer shall make a
Discretionary Profit Sharing Contribution for the period of military
service at the rate of Compensation (determined under paragraph (b) above)
that applied, to other Participants for that
22
Plan Year, such contribution to be allocated to such Participant as
provided in Article 6.
(f) Limitations Not Applicable. The limitations and restrictions of Plan
section 4.6, and Code sections 415 and 414(a) shall not be applicable to
any Participant make-up Pretax Deferrals, Matching Contributions,
Discretionary Profit Sharing Contributions, or Catch Up Contributions with
respect to the year in which such contributions are made, and such
limitations shall apply for the year for which the contributions are made
only to the extent provided by rules prescribed by the Secretary of the
Treasury.
(g) Earnings, Gains, or Losses. Such make-up contributions, Matching
Contributions, and Discretionary Profit Sharing Contributions shall not be
credited with any earnings, gains, or losses on such contributions, nor
shall any forfeitures be credited to the Participant's Account, with
respect to the period during which the Participant was in military service.
4.9 Interim "Good Faith" Catch Up Provisions
Each Participant who will have attained age 50 before the close of the Plan Year
shall be eligible to make Catch Up Contributions in accordance with, and subject
to the limitations of Code section 414(v). Such Catch Up Contributions shall not
be taken into account for purposes of the provisions of the Plan implementing
the required limitations of Code sections 402(g) and 415. The Plan shall not be
treated as failing to satisfy the provisions of the Plan implementing the
requirements of Code section 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416,
as applicable, by reason of the making of such Catch Up Contributions. Elections
to make Catch Up Contributions must be made in accordance with uniform
procedures established by the Committee. The amount of Pretax Deferrals in
excess of an otherwise applicable limit shall be determined as of the end of
each Plan Year by comparing the total Pretax Deferrals for the Plan Year with
the otherwise applicable limits. If, at the end of each Plan Year, the Catch Up
Contributions fail to exceed otherwise applicable limits they shall be
re-characterized as Pretax Deferrals made by the Participant pursuant to section
4.1. "Otherwise applicable limits" shall include statutory limits (limits
contained in the Code on elective deferrals or annual additions permitted to be
made under the Plan), Employer-provided limits (limits imposed on elective
deferrals by the terms of this Plan), and the actual deferral percentage limit.
Catch Up Contributions elected under this section will not entitle the
Participant to an additional Employer matching contribution. In the event it is
later determined that the contribution is not a Catch Up Contribution because it
is less than the otherwise applicable limits the Catch Up Contribution will be
re-characterized as a Pretax Deferral and Employer matching contributions shall
be made in accordance with section 5.1.
23
Article 5. Matching Contributions
5.1 Matching Contributions
The Company may make discretionary Matching Contributions in such amounts, and
at such times, if any, as shall be determined in its sole discretion by the
Board of Directors or its delegate ("Discretionary Matching Contributions").
Discretionary Matching Contributions, if any, shall be allocated as a specified
percentage of the amount of Pretax Deferrals made during the Plan Year on behalf
of Participants who are employed by the Company or an Affiliate on the last day
of the Plan Year, or who have died, retired, or incurred a Disability during the
Plan Year.
For purposes of this section 5.1, a Participant will be treated as having
retired during the Plan Year if the Participant has a Separation from Service
upon attaining Normal Retirement Age or age 55 with three years of service with
the Company or an Affiliate, measured from the later of the Employee's Date of
Hire or attainment of age 18.
In computing service with the Company or an Affiliate, the Employee shall be
credited with one full year of service for each Plan Year in which the Employee
is credited with at least 1,000 Hours of Service and, if the Employee is
credited with Hours of Service for less than the full Plan Year, the Employee
shall be credited with a fractional year of service where the Hours of Service
credited during the Plan Year would, if annualized, equal or exceed 1,000. A
"fractional year" shall mean the quotient of the number of completed months for
which the Employee receives credit for Hours of Service, divided by 12.
For purposes of this section 5.1, if a Leased Employee later becomes an
Employee, the period of employment during which the individual was a Leased
Employee performing services for the Company or an Affiliate shall be recognized
as service, subject to the above rules.
5.2 Overall Conditions on Matching Contributions
Notwithstanding any Plan provision to the contrary, any Matching Contribution
(including any investment gain attributable thereto) that relates to an excess
Pretax Deferral under Plan section 4.2 shall be forfeited, any Matching
Contribution that relates to an excess Pretax Deferral under Plan section 4.6
shall be forfeited, and any excess Matching Contributions (including any
investment gain attributable thereto) under Plan sections 5.4 and 5.5 shall be
forfeited. These corrective steps shall be taken within 12 months after the end
of the Plan Year to which such Matching Contributions relate. The forfeited
amounts shall not be treated as a Matching Contribution with respect to the
Participant of the Plan Year. Calculation of investment gain attributable to
excess Matching Contributions shall conform to the requirements of Regulations
section 1.401(m)-1(e)(3)(ii).
24
5.3 Transfer and Crediting of Matching Contributions
Matching Contributions may be made in either cash, Company Stock, or a
combination of the two as determined by the Company in its sole discretion.
Matching Contributions shall be transferred to the Trust Fund in accordance with
procedures established by the Committee, but in no event later than the due date
(including extensions) for filing the Company's federal income tax return for
the taxable year in which ends the Plan Year to which the Matching Contribution
relates. Matching Contributions shall be credited to the Participant's Matching
Account as of the last day of the Plan Year for which they are made. However, no
Matching Contributions shall be eligible to share in investment results until
received by the Trust Fund.
5.4 Restrictions on Matching Contributions
The rules of this Plan section 5.4 shall be applied separately to each Employer
controlled group, as determined after any aggregation required pursuant to Code
subsections 401(b), (c), (m), (n), and (o).
As of the last day of each Plan Year and at such times throughout each Plan Year
as the Committee may determine, the Committee shall require testing of Matching
Contributions, along with any other Employer contributions, such as Pretax
Deferrals or Profit Sharing Contributions, that the Committee elects to include
in such testing in accordance with applicable conditions specified under Code
section 401(m) and related Treasury regulations (provided that such
contributions have not been counted in the actual deferral percentage test of
Code section 401(k), as provided in Plan section 4.6, or, with respect to Profit
Sharing Contributions, the general nondiscrimination requirements of Code
section 401(a)(4) and related Treasury regulations), to assure that the
"contribution percentage," as defined below, for the Plan Year of Participants
who are Highly Compensated Employees does not exceed the limits specified
herein. The contribution percentage for the Plan Year of Participants who are
Highly Compensated Employees shall not exceed the greater of:
(a) The product of 1.25 and the contribution percentage for the current Plan
Year for the Eligible Employees who are Non-Highly Compensated Employees
for the current Plan Year, or
(b) The lesser of:
(1) the product of two and the contribution percentage for the current
Plan Year for the Eligible Employees who are Non-Highly Compensated
Employees for the current Plan Year, or
(2) the contribution percentage for the current Plan Year for the Eligible
Employees who are Non-Highly Compensated Employees for the current
Plan Year plus two percentage points.
(c) The multiple use limitation contained in the Code shall not apply.
25
By an amendment to the Plan, the Committee may elect to apply paragraphs 4.6(a)
and 4.6(b) by using the preceding Plan Year rather than the current Plan Year
except that such election may not be changed unless permitted by the Internal
Revenue Service.
The term "contribution percentage" for each group of Participants shall be the
average of the ratios, calculated separately for each Participant in such group,
of all Matching Contributions (and any other Employer contributions that the
Company elects to include in this testing in accordance with applicable
conditions specified under Code section 401(m) and related Treasury regulations)
made by or on behalf of the Participant for the Plan Year to that Participant's
Compensation earned while a Participant during the Plan Year. Such ratios and
the contribution percentage for each group shall be calculated to the nearest
one-hundredth of one percent of an Eligible Employee's Compensation.
If, for purposes of Code section 401(a)(4) or 410(b), this Plan is aggregated
with one or more other plans that include employer matching or employee
after-tax contributions subject to contribution testing under Code section
401(m), then this Plan and such other plans shall be treated as one arrangement
when determining the contribution percentage for purposes of Plan section 5.4.
If a Highly Compensated Employee participates in this Plan and one or more other
plans of the Company or an Affiliate to which employer matching or employee
after-tax contributions required to be tested under Code section 401(m) are
made, all such contributions shall be aggregated for purposes of determining the
Highly Compensated Employee's contribution percentage.
The family aggregation rules contained in the Code shall not apply.
In addition to the limitation on Pretax Deferrals specified in Plan section 4.6
and the limitation on Matching Contributions specified in Plan section 5.4,
Pretax Deferrals and Matching Contributions with respect to Highly Compensated
Employees shall be subject to compliance with applicable Treasury regulations
that prevent the multiple use of the alternative percentage limitations in Code
sections 401(k)(3)(A)(ii)(II) and 401(m)(2)(A)(ii). If multiple use of the
alternative percentage limitations occurs, such multiple use shall be corrected,
in accordance with Treasury regulation section 1.401(m)-2(c), by reducing the
actual deferral percentages of Highly Compensated Employees.
Change in Plan Coverage. If a Plan results from, or is otherwise affected by, a
Change in Plan Coverage, as defined in Plan section 4.6(c)(1), that becomes
effective during a Plan Year, then the contribution percentage for the
Non-Highly Compensated Employees for the prior Plan Year is a weighted average
determined in accordance with IRS rules.
5.5 Correction of Excess Matching Contributions
If, at the end of the Plan Year, the contribution percentage of Highly
Compensated Employees determined under Plan section 5.4 exceeds the maximum
contribution percentage permitted for the Plan Year, then the following
corrective steps shall be taken within 12 months after the end of the Plan Year.
26
Within 12 months after the end of the Plan Year, the excess Matching
Contributions (along with income and investment gains and losses attributable
thereto) for Highly Compensated Employees shall be distributed to such
Participants in the order of each Highly Compensated Employee's matching
contributions amount, beginning with the Highly Compensated Employee with the
highest matching contributions amount, until the limitations of Plan section 5.4
and Plan section 5.5 are met. The income and investment gains and losses
attributable to excess Matching Contributions for the Plan Year shall be
determined by the same procedure as set forth in Plan section 4.7 for
determining income attributable to excess Pretax Deferrals. When the corrections
required by this section are made, the limitation of section 5.4 is deemed
satisfied even though the average deferral percentage of the Highly Compensated
Employees recomputed after the corrections required by this section may still
exceed the limitation of section 5.4.
The distributions described in Plan section 5.5 may be made notwithstanding any
other Plan provision. The corrective distribution of excess Matching
Contributions and allocable income is not subject to the early distribution tax
of Code section 72(t) and is not treated as a distribution for purposes of
applying excise taxes under Code section 4980A, the direct rollover rules of
Code section 401(a)(31), or the mandatory withholding rules of Code section
3405(c).
The family aggregation rules contained in the Code shall not apply.
Notwithstanding any other provision of Plan section 5.5 to the contrary, the
Committee shall take steps to ensure that this section is interpreted and
administered so as to comply with applicable legal requirements for the
determination of what amounts constitute excess contribution amounts under Code
section 401(m) and for the return of such excess amounts and any income and
investment gains and losses attributable thereto. All determinations under Plan
section 5.5 shall comply with Code section 401(m) and the Treasury regulations
thereunder. The Committee shall keep adequate records to show compliance with
these requirements. In the event of any conflict between the provisions of Plan
section 5.5 and the provisions of the Code and the Treasury regulations
thereunder, the provisions of the Code and such regulations shall control.
5.6 Multiple Use of Alternative Limitation; Aggregation Limitations.
(a) In General. If the actual deferral percentage (as defined under Code
section 401(k)(3)(B)) for the group of Highly Compensated Employees exceeds
the limitations of Code section 401(k)(3)(A)(ii)(II) ("alternative
limitation"), as described in Plan section 4.6(b) and the contribution
percentage for such group exceeds the amount in Plan section 5.4(b) then
the sum of:
(1) The actual deferral percentage for the group of Highly Compensated
Employees who are Eligible Employees, and
27
(2) The contribution percentage for the group of Highly Compensated
Employees who are Eligible Employees shall not exceed the aggregate
limitation described in paragraph (b).
(b) Aggregate Limitation. The aggregate limitation shall be the limit
prescribed by the IRS pursuant to Code section 401(m)(9) to prevent the
multiple use of the Alternative Limitation of Code section 401(k) and the
limitation of Plan section 5.4(b).
(c) Correction of Excess. If the aggregate limitation in paragraph (b) is
exceeded, then within 12 months after the end of the Plan Year, the
contribution percentages of the Highly Compensated Employees shall be
reduced by distributing excess Matching Contributions (as determined by the
Committee subject to Treasury regulations) until the excess is eliminated.
The income and investment gains and losses attributable to excess Matching
Contributions for the Plan Year shall be determined by the same procedure
as set forth in Plan section 4.7 for determining income attributable to
excess Pretax Deferrals.
28
Article 6. Profit Sharing, Rollover and Other Contributions
6.1 Discretionary Profit Sharing Contributions
(a) Amount and Timing. The Company may make Profit Sharing Contributions for a
Plan Year in such amount, if any, as shall be determined by the Board of
Directors or its delegate. Any such contributions, together with other
contributions made under the Plan for the Plan Year, shall not exceed the
amount currently deductible under Code section 404(a) (applied without
regard to Code section 404(a)(5) relating to nonqualified plans.) Employer
contributions, if any, for any Plan Year shall be deposited to the Trust
Fund no later than the time prescribed for filing the Company's federal
income tax return (including extensions thereof) for the taxable year in
which the Plan Year ends.
(b) Allocations. Any Employer contribution for the Plan Year shall be credited
as of the last day of the Plan Year for which it is contributed (even
though receipt of the Profit Sharing Contribution by the Trust Fund may
take place after the close of the Plan Year) among the Profit Sharing
Accounts of all Eligible Participants. Such contributions, however, shall
not be eligible to share in investment results until received by the Trust
Fund. The allocation shall be in the ratio that each Eligible Participant's
Compensation received while a Participant from that Employer during the
Plan Year bears to the total Compensation during such Plan Year received by
all Eligible Participants of the Employer. To the extent that any Eligible
Participant is not entitled to a full allocation as a result of the limits
specified in Article 7, the amount that cannot be allocated to such
Participant shall be reallocated to the other Eligible Participants as
provided in this subsection. Participants who did not receive Compensation
or did not qualify as Eligible Participants during the Plan Year shall not
be considered in determining the allocations.
(c) Nondiscrimination Requirement. It is the express intent of this Plan that
Profit Sharing Contributions, net of amounts counted as qualified
nonelective contributions in the actual deferral percentage test of Code
section 401(k), as described in Plan section 4.6, or in the contribution
percentage test of Code section 401(m), as provided in Plan section 5.4,
that are allocated to Participant's Account for a Plan Year shall satisfy
the nondiscrimination safe harbor of Treasury regulation section
1.401(a)(4)-2(b) for plans with a uniform allocation formula. Accordingly,
notwithstanding any Plan provision to the contrary, the Committee shall
take steps to ensure that Plan section 6.1 is interpreted and administered
so as to comply with such requirements.
6.2 Correcting Contributions
In addition to other contributions, the Company shall pay a special, correcting
contribution to the Trust Fund, as necessary, when directed to do so by the
Committee to restore an amount
29
to a missing person pursuant to Plan section 12.8 or to correct a mistake or
omission in the allocation of contributions hereunder that cannot, when
discovered, be practicably corrected by revising prior allocations.
6.3 Rollover Contributions
Amounts that a Participant has received from any other qualified employee
benefit plan may, subject to the Committee's approval and in accordance with
uniform, nondiscriminatory procedures designed to protect the qualification and
the integrity of this Plan, be transferred by the Participant to this Plan in
cash, provided the following conditions are satisfied:
(a) Amounts that have previously been distributed to the Participant from
another qualified plan and rolled over to this Plan shall be fully vested
and shall be credited to the Participant's Rollover Account.
(b) The amount tendered to the Committee must have previously been received by
the Participant as an eligible rollover distribution, as described in Code
section 402(c)(4), and must be transferred following a distribution from:
(1) A plan qualified under Code section 401(a); or
(2) A rollover or conduit individual retirement account or annuity that
has received a rollover contribution described in Code section
408(d)(3) and to which no other contributions have been made.
(c) The amounts tendered must not include nondeductible employee contributions
to a qualified plan by a Participant or amounts attributable to:
(1) Taxpayer contributions to an individual retirement account or annuity
under Code section 408, whether or not deductible under Code section
219;
(2) Accumulated deductible employee contributions described in Code
section 72(o)(5)(B); or
(3) Contributions or deferrals to an annuity described in Code section
403(b).
(d) The transfer to this Plan of amounts described in paragraph (b) shall only
be accepted if the Participant presents to the Committee the IRS Form 1099
or equivalent, the original distribution check or a copy thereof, or such
other evidence as the Committee may require to verify the nature of the
amount and ensure that its receipt will not adversely affect the qualified
status of this Plan.
(e) Amounts must be received by the Committee not later than 60 days after a
distribution was received by the Participant.
(f) A distribution or other amount received under Plan section 6.3 may include
a direct rollover of an eligible rollover distribution. The Committee may
establish additional
30
procedures, consistent with the provisions of the Code, regulatory guidance
and Plan section 6.3, concerning the acceptance of direct rollovers or
other eligible rollover distributions into this Plan.
Upon approval by the Committee, rollover amounts shall be transmitted to the
Trust Fund, to be invested in such Investment Funds as the Participant may
select in accordance with Article 9 and such rules and procedures as the
Committee may establish for this purpose.
31
Article 7. Maximum Contributions and Benefit Limitations
7.1 Limitation on Annual Addition
Notwithstanding anything to the contrary contained in this Plan, and except to
the extent permitted under Code section 414(v) and Plan section 4.9, if
applicable, the total Annual Additions under this Plan and any other defined
contribution plan, as defined in Code section 414(i), maintained by the Employer
or any other Affiliate, to a Participant's Account for any Plan Year, which
shall be the limitation year for purposes of Code section 415, shall not exceed
the lesser of:
(a) $40,000, as adjusted for increases in the cost-of-living under Code section
415(d); or
(b) One hundred percent (100%) of the Participant's taxable Compensation for
the limitation year.
7.2 "Annual Addition" Defined
The term "Annual Addition" means, with respect to each Participant for the Plan
Year, the aggregate of:
(a) The amount of Company or Affiliate contributions (including Pretax
Deferrals) and forfeitures (except as otherwise specified in Code section
415(c)(6) for an employee stock ownership plan that satisfies certain
nondiscrimination requirements) allocated to the Participant's Account
under this Plan and any other defined contribution plan, as defined in Code
section 414(i), maintained by the Company or an Affiliate for the Plan
Year;
(b) The amount of a Participant's after-tax contributions for such Plan Year
under any defined contribution plan, as defined in Code section 414(i),
maintained by the Company or an Affiliate for the Plan Year;
(c) For purposes of Plan section 7.1(a), the amount of contributions allocated
to an individual medical account, as defined in Code section 415(l)(2),
that is part of a pension or annuity plan; and
(d) For purposes of Plan section 7.1(a), the amount of contributions
attributable to post-retirement medical benefits that are allocated to the
separate account of a key employee, as defined in Code section 419A(d)(3),
under a welfare benefit fund, as defined in Code section 419(e).
7.3 Excess Annual Additions
If, as a result of the allocation of forfeitures or a reasonable error in
estimating a Participant's Compensation for the Plan Year (or any other
circumstance permitted under Code section 415 and applicable Treasury
regulations), the Annual Additions for a Participant is exceeded, such excess
amount shall be reduced in accordance with the provisions of this Plan
32
section 7.3. The Participant's excess Annual Additions shall first be reduced
under any other qualified defined contribution plan maintained by the Company or
an Affiliate, in accordance with the terms of such other plan. If, after
reductions have been made under such other plans, additional reductions are
required from this Plan, Pretax Deferrals made on behalf of the Participant for
the Plan Year (as well as income and investment gains and losses attributable
thereto) shall be refunded to the Participant. If further reductions are
required, Matching Contributions (as well as income and investment gains and
losses attributable thereto) for the Plan Year shall be reduced and held in a
suspense account to the extent necessary to eliminate the excess Annual
Additions. If even further reductions are required, Profit Sharing Contributions
(as well as income and investment gains and losses attributable thereto), if
any, for the Plan Year shall be reduced and held in a suspense account to the
extent necessary to eliminate the excess Annual Additions.
The excess amounts held in the suspense account shall be used to reduce Employer
contributions (including, for this purpose, Pretax Deferrals, Matching
Contributions and Profit Sharing Contributions) for that Participant for the
next Plan Year (and succeeding Plan Years, if necessary), provided that the
Participant is covered by the Plan during the Plan Year. If the Participant is
not covered by the Plan when excess amounts remain unallocated, the excess
amount shall be held in the suspense account and allocated and reallocated in
the next Plan Year to all remaining Participants before any Employer
contributions (again including, for this purpose, Pretax Deferrals, Matching
Contributions and Profit Sharing Contributions) for all remaining Participants
can be made to the Plan for that Plan Year.
33
Article 8. Vesting and Benefits
8.1 Vesting
Participants' interest in Pretax Deferral Accounts, Matching Accounts, Profit
Sharing Accounts, Rollover Accounts, and ESOP Accounts shall be fully vested at
all times.
8.2 Account Balance at Distribution
For purposes of determining an Account balance at any distribution event, the
Account shall be valued as of the Valuation Date immediately preceding the
distribution date. Generally, distributions from other than the ESOP Account
shall be made in cash. However, at the election of the Participant or
Beneficiary, distribution of the Account (other than an in-service distribution
under Plan sections 8.6, 8.7, or 8.8) may be made in whole shares of Company
Stock and cash for fractional shares to the extent that the Account is invested
in the Company Stock Fund as of the distribution date.
Except as otherwise elected by the Participant or Beneficiary, the distribution
of a Participant's vested interest in his or her ESOP Account shall be in the
form of whole shares of The First American Corporation Stock plus cash for any
fractional share. At the election of the Participant (or, in the event of death,
the Beneficiary) the Committee shall direct the Trustee to distribute all or any
portion of the balance of the ESOP Account in cash instead of The First American
Corporation Stock.
A "distribution event" shall include, but not be limited to, distributions upon
Separation from Service or death, in-service withdrawals on account of a
financial hardship or on or after attaining age 59-1/2, minimum distributions
required by Code section 401(a)(9) and related regulations, allocations of the
Account or distributions of all or a portion of the Account to an alternate
payee pursuant to a qualified domestic relations order, and any other payment
from the Account provided for under the terms of this Plan as amended from time
to time. The "distribution date" shall be the day that assets allocable to the
Account are segregated from the Trust Fund by means of a check issuance, wire
transfer or otherwise, such that those assets are no longer included in the
valuation of the Trust Fund.
8.3 Benefits Upon Separation From Service
Subject to the provisions of Plan sections 8.3 and 8.5, and, if applicable,
Appendix A, every Participant who incurs a Separation from Service for any
reason other than death shall have the value of the Participant's Account
balance distributed to him or her as soon as practicable in single sum payment.
ESOP Accounts shall be subject to the additional distribution rules and optional
payment forms described in Appendix A.
In the event the Participant's vested Account balance exceeds $5,000, a
distribution shall not be made to the Participant before the Participant attains
age 65 without the Participant's consent, following receipt of the notice
required by Treasury regulation section 1.411(a)-11(c) at least 30 days and no
more than 90 days prior to the anticipated
34
distribution date. Notwithstanding the foregoing, if the Participant, after
having received this notice, affirmatively elects a distribution commencing less
than 30 days after the notice was provided, the notice requirement will still be
deemed met, provided the notice clearly indicates to the Participant that the
Participant has a right to at least 30 days to consider whether to consent to
the distribution.
8.4 Death Benefits
Upon the death of a Participant who has not received a complete Account
distribution, the Plan shall pay the Participant's entire Account balance to the
Beneficiary in a single sum payment. Notwithstanding the foregoing, ESOP
Accounts shall be subject to the additional distribution rules and optional
payment forms described in Appendix A. The payment to the Beneficiary shall be
made as soon as practicable.
8.5 Minimum Distribution Requirements
(a) General Rules. This Plan section 8.5 provides for the latest time that the
Participant's vested Account may be distributed and it takes precedence
over any inconsistent Plan provision. All distributions required under Plan
section 8.5 shall be determined and made in accordance with Code section
401(a)(9) and the Treasury regulations thereunder, including the minimum
distribution incidental death benefit requirements.
TEFRA Section 242(b)(2) Elections. Notwithstanding the other provisions of
this section 8.5, distributions may be made under a designation made before
January 1, 1984, in accordance with section 242(b)(2) of the Tax Equity and
Fiscal Responsibility Act (TEFRA) and the provisions of the plan that
relate to section 242(b)(2) of TEFRA.
(b) Timing and Manner of Distribution.
(1) Required Beginning Date. The Participant's Account will be
distributed, or begin to be distributed, to the Participant no later
than the Participant's required beginning date. The "required
beginning date" means the following:
(A) April 1 of the calendar year following the later of--
(i) The calendar year in which the Participant attains age 70
1/2, or
(ii) The calendar year in which the Participant has a Separation
from Service.
(B) For a 5-percent owner, the required beginning date means April 1
of the calendar year following the calendar year in which the
Participant attains age 70 1/2. For purposes of this section and
Code section 401(a)(9), a 5-percent owner is an Employee who is a
5-percent owner (as defined in
35
Code section 416) with respect to the Plan Year ending in the
calendar year in which the employee attains age 70 1/2.
Where the Participant is still employed on the required beginning
date, benefit payments shall commence in the normal form
described in this Article 8.
(2) Death of Participant Before Distributions Begin. If the Participant
dies before distributions begin, the Participant's Account will be
distributed, or begin to be distributed, no later than as follows:
(A) If the Participant's surviving spouse is the Participant's sole
designated Beneficiary, then, distributions to the surviving
spouse will begin by December 31 of the calendar year immediately
following the calendar year in which the Participant died, or by
December 31 of the calendar year in which the Participant would
have attained age 70 1/2, if later.
(B) If the Participant's spouse is not the Participant's sole
designated Beneficiary or if there is no designated Beneficiary
as of September 30 of the year following the year of the
Participant's death, the Participant's Account will be
distributed by December 31 of the calendar year containing the
fifth anniversary of the Participant's death.
(C) If the Participant's surviving spouse is the Participant's sole
designated Beneficiary and the surviving spouse dies after the
Participant but before distributions to the surviving spouse
begin, this section 8.5(b)(2), other than section 8.5(b)(2)(A),
will apply as if the surviving spouse were the Participant.
For purposes of this section 8.5(b)(2) and section 8.5(c), unless
section 8.5(b)(2)(C) applies, distributions are considered to begin on
the Participant's required beginning date. If section 8.5(b)(2)(C)
applies, distributions are considered to begin on the date
distributions are required to begin to the surviving spouse under
section 8.5(b)(2)(A).
Application of the 5-Year Rule to Distributions to Designated
Beneficiaries. If the Participant dies before distributions begin and
there is a designated Beneficiary, distribution to the designated
Beneficiary is not required to begin by the date specified in this
section 8.5(b)(2), but the Participant's Account will be distributed
to the designated Beneficiary by December 31 of the calendar year
containing the fifth anniversary of the Participant's death. If the
Participant's surviving spouse is the Participant's sole designated
Beneficiary and the surviving spouse dies after the Participant but
36
before distributions to either the Participant or the surviving spouse
begin, this election will apply as if the surviving spouse were the
Participant.
(3) Forms of Distribution. Unless the Participant's interest is
distributed in the form of a single sum on or before the required
beginning date, as of the first distribution calendar year
distributions will be made in accordance with subsections (c) and (d)
of this section.
(c) Requirement Minimum Distributions During Participant's Lifetime
(1) Amount of Required Distribution Minimum For Each Distribution
Calendar Year. During the Participant's lifetime, the minimum
amount that will be distributed for each distribution calendar
year is the lesser of:
(A) The quotient obtained by dividing the Participant's account
balance by the distributions period in the Uniform Lifetime
Table set forth in section 1.401(a)(9)-9 of the Treasury
regulations, using the Participant's age as of the
Participant's birthday in the distribution calendar year; or
(B) If the Participant's sole designated Beneficiary for the
distribution calendar year is the Participant's spouse, the
quotient obtained by dividing the Participant's account
balance by the number in the Joint and Last Survivor Table
set forth in section 1.401(a)(9)-9 of the Treasury
regulations, using the Participant's and spouse's attained
ages as of the Participant's and spouse's birthdays in the
distribution calendar year.
(2) Lifetime Required Minimum Distributions Continue Through Year of
Participant's Death. Required minimum distributions will be
determined under this section 8.5(c) beginning with the first
distribution calendar year and up to and including the
distribution calendar year that includes the Participant's date
of death.
(d) Required Minimum Distributions After Participant's Death
(1) Death On or After Date Distributions Begin
(A) Participant Survived by Designated Beneficiary. If the
Participant dies on or after the date distributions begin
and there is a designated Beneficiary, the minimum amount
that will be distributed for each distribution calendar year
after the year of the Participant's death is the quotient
obtained by dividing the Participant's Account balance by
the longer of the remaining life expectancy of the
Participant or
37
the remaining life expectancy of the Participant's
designated Beneficiary, determined as follows:
(i) The Participant's remaining life expectancy is
calculated using the age of the Participant in the
year of death, reduced by one for each subsequent
year.
(ii) If the Participant's surviving spouse is the
Participant's sole designated Beneficiary, the
remaining life expectancy of the surviving spouse
is calculated for each distribution calendar year
after the year of the Participant's death using
the surviving spouse's age as of the spouse's
birthday in that year. For distribution calendar
years after the year of the surviving spouse's
death, the remaining life expectancy of the
surviving spouse is calculated using the age of
the surviving spouse as of the spouse's birthday
in the calendar year of the spouse's death,
reduced by one for each subsequent calendar year.
(iii) If the Participant's surviving spouse is not the
Participant's sole designated Beneficiary, the
designated Beneficiary's remaining life expectancy
is calculated using the age of the Beneficiary in
the year following the year of the Participant's
death, reduced by one for each subsequent year.
(B) No Designated Beneficiary. If the Participant dies on or
after the date distributions begin and there is no
designated Beneficiary as of September 30 of the year after
the year of the Participant's death, the minimum amount that
will be distributed for each distribution calendar year
after the year of the Participant's death is the quotient
obtained by dividing the Participant's Account balance by
the Participant's remaining life expectancy calculated using
the age of the Participant in the year of death, reduced by
one for each subsequent year.
(2) Death Before Date Distributions Begin
(A) Participant Survived by Designated Beneficiary. If the
Participant dies before the date distributions begin and
there is a designated Beneficiary, the minimum amount that
will be distributed for each distribution calendar year
after the year of the Participant's death, is the quotient
obtained by dividing the Participant's Account balance
38
by the remaining life expectancy of the Participant's
designated Beneficiary, determined as provided in section
8.5(d)(1).
(B) No Designated Beneficiary. If the Participant dies before
the date distributions begin and there is no designated
Beneficiary as of September 30 of the year following the
year of the Participant's death, distribution of the
Participant's Account will be completed by December 31 of
the calendar year containing the fifth anniversary of the
Participant's death.
(C) Death of Surviving Spouse Before Distributions to Surviving
Spouse Are Required to Begin. If the Participant dies before
the date distributions begin, the Participant's surviving
spouse is the Participant's sole designated Beneficiary, and
the surviving spouse dies before distributions are required
to begin to the surviving spouse under section 8.5(b)(2)(A),
this section 8.5(d)(2) will apply as if the surviving spouse
were the Participant.
(e) Definitions
(1) Designated Beneficiary. The individual who is designated as the
beneficiary under section 2.1(c) of the Plan and is the
designated Beneficiary under Code section 401(a)(9) and
Regulation section 1.401(a)(9)-1, Q&A-4.
(2) Distribution Calendar Year. A calendar year for which a minimum
distribution is required. For distributions beginning before the
Participant's death, the first distribution calendar year is the
calendar year immediately preceding the calendar year which
contains the Participant's required beginning date. For
distributions beginning after the Participant's death, the first
distribution calendar year is the calendar year in which
distributions are required to begin under section 8.5(b). The
required minimum distribution for the Participant's first
distribution calendar year will be made on or before the
Participant's required beginning date. The required minimum
distribution for other distribution calendar years, including the
required minimum distribution for the distribution calendar year
in which the Participant's required beginning date occurs, will
be made on or before December 31 of that distribution calendar
year.
(3) Life Expectancy. Life expectancy as computed by use of the Single
Life Table in section 1.401(a)(9)-9 of the Treasury regulations.
(4) Participant's Account Balance. The Account balance as of the last
Valuation Date in the calendar year immediately preceding the
distribution
39
calendar year (valuation calendar year) increased by the amount
of any contributions made and allocated or forfeitures allocated
to the account balance as of dates in the valuation calendar year
after the Valuation Date and decreased by distributions made in
the valuation calendar year after the Valuation Date. The Account
balance for the valuation calendar year includes any amounts
rolled over or transferred to the Plan either in the valuation
calendar year or in the distribution calendar year if distributed
or transferred to the valuation calendar year.
8.6 Hardship Withdrawal
(a) Upon application and demonstration to the satisfaction of the Committee
that the Participant is confronted with a financial hardship, and subject
to the requirements of Plan section 8.6, a Participant shall be permitted
to make a cash withdrawal of up to 100 percent of his or her Account.
Notwithstanding the foregoing, the following restrictions shall apply in
determining the distributable amount available for hardship withdrawal:
(1) Earnings in the Participant's Pretax Deferral, Matching and Profit
Sharing Account are not available for hardship withdrawal.
(2) Earnings in the Participant's Rollover Account, if any, are available
for hardship withdrawal.
(3) Matching Contributions and Profit Sharing Contributions actually used
as qualified matching or qualified nonelective contributions, as
defined in the Treasury regulations under Code section 401(k), in the
actual deferral percentage test set forth in Plan section 4.6 are not
available for hardship withdrawal.
(4) The ESOP Fund portion of ESOP Accounts and earnings thereon are not
available for hardship withdrawal. The Profit Sharing Fund portion of
ESOP Accounts and earnings thereon are available for hardship
withdrawal.
(b) In compliance with applicable regulations under Code section 401(k), the
Committee shall establish a hierarchy among the Accounts to determine the
order in which funds are withdrawn from Accounts and Investment Funds when
a less than total withdrawal occurs.
(c) Application for withdrawals shall be made in such manner as the Committee
prescribes and may be paid from the Trust Fund at any time effective
following satisfaction of the requirements in Plan section 8.6.
Distribution of withdrawals shall be made in a single sum in cash as soon
as is administratively practicable following such date.
40
(d) For purposes of Plan section 8.6, a distribution is on account of
"financial hardship" only if the Committee determines that the distribution
is both (i) on account of an immediate and heavy financial need of a
Participant and (ii) necessary to satisfy such a need.
(1) A distribution shall be deemed to be made on account of an immediate
and heavy financial need of the Participant if the distribution is on
account of:
(A) Expenses for medical care, as described in Code section 213(d),
previously incurred by the Participant, the Participant's spouse
or any dependent of the Participant (as defined in Code section
152), or necessary for those persons to obtain such medical care;
(B) Costs directly related to the purchase (excluding mortgage
payments) of a principal residence for the Participant;
(C) Payment of tuition and related educational fees for the next 12
months of post-secondary education for the Participant, the
Participant's spouse, children, or dependents (as defined in Code
section 152);
(D) Payments necessary to prevent the eviction of the Participant
from the Participant's principal residence, or foreclosure on the
mortgage on that residence; or
(E) Uninsured losses from natural disasters, including, but not
limited to, earthquakes, floods, hurricanes, tornadoes and
storms.
(2) A distribution shall be considered necessary to satisfy an immediate
and heavy financial need of a Participant if all of the following
requirements are satisfied:
(A) The distribution is not in excess of the amount of the immediate
and heavy financial need of the Participant, but this amount may
include amounts necessary to pay any federal, state or local
income taxes or penalties reasonably anticipated to result from
the distribution.
(B) The Participant has obtained all in-service withdrawals and
distributions, other than hardship distributions, and all
non-taxable loans currently available under all plans maintained
by the Company and Affiliates;
(C) The Participant's Pretax Deferrals, and similar contributions and
after-tax contributions elected by the Participant under all
other qualified plans maintained by the Company or an Affiliate,
shall be suspended for six months after receipt of the hardship
distributions; and
41
(D) The Participant's Pretax Deferrals for the calendar year
immediately following the year of the hardship withdrawal shall
not exceed the amount prescribed under Code section 402(g)(5) for
that Plan Year, less the amount of the Participant's Pretax
Deferrals for the year of the hardship withdrawal.
The Committee may, without further investigation, accept the written
statement of the Participant as to the amount necessary to meet the
immediate and heavy financial need of the Participant and as to the lack of
other funds available to meet this need unless the Committee has reason to
believe that the statement is in error.
(e) Amounts that are withdrawn pursuant to Plan section 8.6 may not be
subsequently repaid to the Plan.
8.7 Withdrawal After Attaining Age 59-1/2
A Participant who has attained age 59-1/2 may make in-service withdrawals from
the all of a Participant's Account, excluding amounts held in the ESOP Fund
portion of ESOP Accounts. Application for a withdrawal under Plan section 8.7
shall be made in such manner as the Committee may prescribe. Distribution of the
withdrawal shall be paid in a single sum in cash as soon as administratively
practicable following the date that the Committee receives the properly
completed application. A Participant may not make more than one withdrawal under
Plan section 8.7 in any twelve-month period. Amounts that are withdrawn pursuant
to Plan section 8.7 may not be subsequently repaid to the Plan.
8.8 Withdrawals From Rollover Accounts
A Participant will be permitted to make an in-service withdrawal from the
Participant's Rollover Account by filing a request for an in-service withdrawal
in the manner prescribed by the Committee. The Committee shall establish rules
and procedures for such in-service withdrawals of Rollover Accounts, including
uniformly applicable rules regarding the frequency and amounts of such
withdrawals.
8.9 Mandatory Tax Withholding and Direct Rollover
(a) General Rules. Notwithstanding any Plan provision to the contrary, all
withdrawals and other distributions under this Plan are subject to
applicable tax withholding requirements of Code section 3405 and related
Treasury regulations. In addition, all Plan distributions shall comply with
the requirements of Plan section 8.9, Code section 401(a)(31), related
Treasury regulations and other rulings or guidance of general
applicability. Under Plan section 8.9, a distributee entitled to a current
distribution (including an in-service or hardship withdrawal) from the Plan
may elect, at the time and in the manner prescribed by the Committee, to
have any portion of an eligible rollover distribution paid directly to an
eligible retirement plan. In prescribing the manner of making elections
with respect to eligible rollover distributions, the Committee may provide
for a uniform, nondiscriminatory
42
application of any restrictions permitted under applicable sections of the
Code, related Treasury regulations and other rulings or guidance of general
applicability, including a requirement that a distributee may not elect a
partial direct rollover in an amount less than $500 and a requirement that
a distributee may not elect to make a direct rollover from a single
eligible rollover distribution to more than one eligible retirement plan.
Moreover, because the Plan does not permit distributions to which Code
sections 401(a)(11) and 417 do not apply, the distribution may commence
less than 30 days after the notice required under Treasury regulations
section 1.411(a)-11(c) is given, provided that:
(1) The Committee or its authorized delegate clearly notifies the
Participant that the Participant has a right to a period of at least
30 days after receiving the notice within which to decide whether or
not to elect a distribution; and
(2) The Participant, after receiving the notice, affirmatively elects a
distribution.
(b) Special Definitions. For purposes of this section, the following
definitions apply:
(1) A "direct rollover" is an eligible rollover distribution that is paid
directly to an eligible retirement plan at the direction and for the
benefit of the distributee.
(2) A "distributee" includes a Participant, a Participant's surviving
spouse or a Participant's spouse who is the alternate payee.
(3) An "eligible retirement plan" is 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 the distributee's eligible rollover distribution.
Effective for distributions made after December 31, 2001, an "eligible
retirement plan" shall also include an annuity contract described in
section 403(b) of the Code and an eligible plan under section 457(b)
of the Code which is maintained by a state, political subdivision of a
state, or any agency or instrumentality of a state or political
subdivision of a state and which agrees to separately account for
amounts transferred into such plan from this plan.
(4) An "eligible rollover distribution" is any distribution of all or any
portion of the balance to the credit of the distributee, except that
an eligible rollover distribution does not include:
(A) Any 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 the distributee and the
distributee's designated Beneficiary, or for a specified period
of ten years or more;
43
(B) Any distribution to the extent the distribution is required under
Code section 401(a)(9) and related regulations;
(C) Any loan that is treated as a deemed distribution pursuant to
Code section 72(p);
(D) Any hardship distribution described in Code section
401(k)(2)(B)(I)(IV); and
(E) Any amount that is paid as a hardship withdrawal, pursuant to
section 8.6, regardless of the account from which the hardship
withdrawal is paid.
(c) Consistent Construction. Determinations of what constitutes an eligible
rollover distribution shall at all times be made in accordance with the
current rules under Code section 402(c), which shall be controlling for
this purpose.
8.10 Loans to Participants
(a) A Participant may obtain a loan, under the terms of Plan section 8.10, from
all of his or her Account balances, excluding amounts held in the ESOP Fund
portion of the ESOP Account. A Participant shall apply for a loan in such
manner as the Committee shall prescribe.
(b) The minimum amount that a Participant may borrow is $1,000. The maximum
amount that a Participant may borrow is the lesser of:
(1) 50 percent of the value of the Participant's Account balance, as of
the most recent Valuation Date for which the Committee has received a
valuation report (as adjusted for any amounts subsequently withdrawn
or distributed from or contributed to such Account); or
(2) $50,000, reduced by the sum of (A) and (B) where:
(A) Is the outstanding balance of all loans from the Plan (and any
controlled group qualified plan) on the date the loan is made;
and
(B) Is the excess (if any) of (i) over (ii), where:
(i) is the highest outstanding balance of all loans from the
Plan (and any controlled group qualified Plan), during the
one-year period ending on the day before the date the loan
is made;
(ii) is the amount described in Plan section 8.10(b)(2)(A).
(c) At any time, a Participant may have only one outstanding loan from this
Plan, either:
44
(1) One general purpose loan (that is, a loan the maximum term of which is
prescribed in Plan section 8.10(d)(1); or
(2) One home loan (that is, a loan the maximum term of which is prescribed
in Plan section 8.10(d)(2).
(d) The Participant shall select the term of the loan pursuant to options
prescribed by the Committee, subject to the maximum term limits in Plan
section 8.10(d).
(1) Unless the limit in Plan section 8.10(d)(2) applies, the maximum term
of the loan shall be five years.
(2) If the loan proceeds will be used within a reasonable time to acquire
a dwelling unit that will be the principal residence of the
Participant, then the maximum term of the loan shall be ten years.
(e) A definite repayment schedule shall be established for each loan that shall
require level and periodic payments of both principal and interest. The
repayment schedule shall not require that the periodic loan repayment
exceed the Participant's regular payroll check, net of other deductions.
The Committee shall determine in its discretion the period for loan
repayments, provided, however, that repayment shall be made at least
monthly. A Participant may fully prepay a loan at any time without penalty,
but partial prepayments are not permitted.
(f) Each loan shall bear a rate of interest that is reasonable at the time the
loan is made, as determined by the Committee. The Committee shall establish
a procedure for determining the rate of interest of each loan. A rate of
interest shall be reasonable if it provides a rate of return commensurate
with the interest rates charged by persons in the business of lending money
for loans that would be made under similar circumstances. If a loan is
renegotiated, renewed, or revised in any way, then the Committee may
determine a new rate of interest that is reasonable at that time.
(g) To the extent required by The Servicemembers Civil Relief Act ("SCRA")
(formerly, the Soldiers' and Sailors' Civil Relief Act, as amended), if the
loan from this Plan was received before a period of military service as
defined by the SCRA, then during any period of military service, the rate
of interest charged shall not exceed a rate of six percent per year. The
Committee shall establish procedures consistent with the SCRA.
(h) Except as provided below, no loan shall be made to a Participant unless the
Participant agrees that all loan repayments shall be deducted from any
compensation paid to the Participant by his or her Employer (or any
controlled group member).
(1) If, at the time the loan is made or at any later time, the
Participant's Employer determines that compensation will not be paid
regularly to the Participant in an
45
amount sufficient to permit loan repayments to be deducted from this
compensation, then the Committee may require that the Participant make
all loan repayments by sending a personal check to the location
specified by the Committee or by such other means as the committee may
specify. If, after establishing such a method of loan repayment, the
Participant's Employer (or any controlled group member) determines
that compensation will be paid regularly to the Participant in an
amount sufficient to permit loan repayments to be deducted from this
compensation, then the Committee may require that all future loan
repayments be deducted from such compensation.
(2) If a Participant goes on a paid leave of absence, and before the leave
loan repayments were deducted from compensation paid by the
Participant's Employer (or any controlled group member), then, unless
the Committee requires another form of loan repayment, any loan
payments due during the leave of absence shall continue to be deducted
from any compensation paid to the Participant by the Employer (or any
controlled group member).
(3) If a Participant goes on an unpaid leave of absence, then the
Participant shall make any loan payments due during the leave of
absence. The Participant shall make the loan payments to such location
and in such manner as the Committee shall require.
(4) If the Committee has determined that loan repayments shall be made by
deductions from compensation paid by the Participant's Employer (or
any controlled group member), and the Participant takes any action
attempting to prevent such deductions of Participant's loan repayments
from any compensation paid by his or her Employer (or any controlled
group member), then the entire outstanding balance of the loan
(including any accrued interest) shall become immediately due and
payable.
(5) A Beneficiary shall make loan repayments by cashier's check to such
location as the Committee shall require, or in any other manner as the
Committee shall require.
(i) Each loan shall be secured by the Participant providing a security interest
in the Participant's entire Account balance.
(j) The Participant shall request a loan in such manner as the Committee shall
prescribe. The Committee shall send to each Participant who requests a loan
a written loan agreement specifying the terms of the loan. By accepting the
loan proceeds, the Participant shall agree to the terms specified in the
loan agreement. (If the Participant refuses to agree to the terms of the
loan agreement by accepting the loan proceeds, then the loan request shall
be cancelled and the loan proceeds shall be reinvested in the Participant's
Account in accordance with Participant's investment election.) By
46
requesting a loan, a Participant shall be deemed to consent to the
distribution, pursuant to Plan section 8.10(m)-(m), of the outstanding
balance of his or her loan in a single payment (as opposed to some other
form of payment) and at the time specified in Plan section 8.10(m)-(m),
even if the remaining balance of the Participant's Accounts is not yet
distributable without the Participant's consent on account of Plan section
8.3 (relating to consent to distributions if the Participant's Account
balance exceeds $5,000).
(k) Upon a Participant's consent to the terms of a written loan agreement, the
proceeds shall be withdrawn from a Participant's subaccounts in the order
specified in the rules adopted by the Committee. Amounts shall be withdrawn
from the Investment Funds in which the applicable subaccount is invested in
the order specified in ruled adopted by the Committee. The Committee shall
establish a recordkeeping Loan Account for the Participant, and the
principal amount owed by the Participant, pursuant to the loan agreement,
entered into by the Participant, shall be credited to the Participant's
Loan Account. The principal and interest portion of each loan repayment
shall be credited to all subaccounts from which the loan proceeds were
withdrawn, allocating such principal and interest in proportion to the
amount withdrawn for the loan proceeds from each subaccount.
(l) The Committee may charge to the Participant's Account any reasonable
expenses incurred in connection with the loan to the Participant,
including, but not limited to, a one-time loan fee upon the establishment
of the loan.
(m) If a Participant who has not had a Separation from Service fails to make
any loan repayments at the time and in the full amount required under the
promissory note, the Participant is in default as of the last day of the
calendar quarter following the calendar quarter in which the first missed
loan payment occurred.
(1) When the Committee declares that the loan is in default, then the
entire outstanding principal and any accrued interest under the loan
shall become immediately due and payable. The Participant shall make a
cash payment of the entire outstanding principal and any accrued
interest by the deadline established by the Committee.
(2) If the Participation fails to make this lump-sum cash payment by the
deadline established by the Committee, then the Committee shall report
a "deemed distribution," with respect to the Participant, in the
manner that the Committee determines to be appropriate pursuant to
Code section 72(p).
(n) If a Former Participant (that is, a Participant who has had a Separation
from Service) fails to make any loan repayments at the time and in the full
amount required under the promissory note and Committee loan procedures,
then the Committee may declare that the Former Participant is in default.
47
(1) When the Committee declares that the loan is in default, then the
entire outstanding principal and any accrued interest under the loan
shall become immediately due and payable. The Former Participant shall
immediately make a cash payment of the entire outstanding principal
and any accrued interest.
(2) If the Former Participant does not fully repay the entire outstanding
principal and any accrued interest by the deadline established by the
Committee, then the Committee shall cause the remaining outstanding
principal and any accrued interest to be distributed to the Former
Participant. The distribution shall be made at this time even if the
Former Participant's Account balance exceeds $5,000, and the Former
Participant and his or her spouse have not consented to a distribution
at that time and in that form. The distribution shall be made by
deducting the remaining outstanding principal from the Participant's
Loan Account and canceling the promissory note. No cash payment shall
be made to the Former Participant. This distribution shall discharge
any liability to the Former Participant under this Plan to the same
extent as a payment in cash.
(o) The Committee shall establish such rules and procedures as it deems
necessary and appropriate with respect to loans pursuant to Plan section
8.10.
(p) Notwithstanding the provisions of Plan section 8.10, loan repayments may be
suspended under the Plan during active military service to the extent
permitted by Code section 414(u)(4).
48
Article 9. Investment Elections
9.1 Investment of New Contributions
Subject to the requirements of this Article and any limitations or restrictions
imposed by the Investment Funds, all contributions made by and on behalf of a
Participant each Plan Year shall be invested as the Participant shall designate
in Investment Funds, in one percentage point increments of the aggregate amount
of such contributions. If the Participant fails to make a valid election,
contributions made by and on behalf of the Participant shall be invested in a
money market fund. Each Participant may also elect to change the designation of
Investment Funds in which future contributions are invested, provided that the
election is made in the time and manner prescribed by the Committee or its
authorized delegate pursuant to Plan section 9.3.
9.2 Investment Transfers
Subject to the requirements of this Article and any limitations or restrictions
imposed by the Investment Funds, each Participant, including inactive and former
Participants, may elect to transfer any amounts invested in an Investment Fund
to one or more other Investment Funds, in one percentage point increments of the
Participant's Account, provided that the election is made in the time and manner
prescribed by the Committee or its authorized delegate pursuant to Plan section
9.3.
9.3 Investment Elections
Each Participant must make the election described in Plan section 9.1 by making
an election with the Committee or its authorized delegate before or at the same
time as Pretax Deferrals, Profit Sharing Contributions, Catch Up Contributions
or Rollover Contributions are first to be made to the Participant's Account.
Thereafter, the elections described in Plan sections 9.1 and 9.2 may be changed
together or separately by making an election in the manner prescribed by the
Committee. The Committee shall prescribe such procedures, including deadlines
for making elections under Article 9 and the timing for when investment
elections take effect to implement such investment election procedures.
The election may be made using any system of telephonic or other verbal or
electronic communication (including computer data diskette) that has been
authorized and approved by the Committee for making certain elections under the
Plan. Elections shall remain in effect until a new election is received by the
Committee or its authorized delegate.
Subject to such rules as the Committee may prescribe, alternate payees for whom
a separate Account has been established pursuant to the terms of a valid
qualified domestic relations order, and Beneficiaries, shall have the same
investment election rights as do Participants under this Plan.
49
9.4 Transfer of Assets
The Committee shall direct the Trustee to transfer assets, as soon as is
practical after the end of each valuation period, between and among the
appropriate Investment Funds as may be necessary to carry out the aggregate
transfer elections. The Committee shall cause the necessary entries to be made
in Participants' Accounts to reflect Investment Fund allocations and to
reconcile offsetting transfer elections, in accordance with uniform rules
established by the Committee.
9.5 Company Stock Fund Rights
For purposes of this Plan section 9.5, references to Participants include
alternate payees for whom a separate Account has been established pursuant to
the terms of a valid qualified domestic relations order, and Beneficiaries.
References to the Trustee shall include any independent fiduciary appointed by
the Committee pursuant to Department of Labor regulation section 2550.404c-1 to
safeguard the confidentiality of Participants' exercise of rights under Plan
section 9.5, where the Committee has determined that potential for undue
Employer influence exists.
(a) Voting Rights. Before each annual or special meeting of the shareholders of
the Company, and at such other times when shareholder action is required,
the Trustee shall send to each Participant having an investment in Company
Stock the proxy or consent solicitation materials that are sent to the
Company's shareholders of record. Each such Participant shall have the
right to instruct the Trustee confidentially as to the method of voting the
shares of Company Stock allocated to the Participant's Account as of the
record date for determining the shares that are entitled to vote at the
meeting of shareholders or that are entitled to give or withhold consent to
corporate action. Full and fractional shares of Company Stock allocated to
the Participant's Account shall be voted by the Trustee in accordance with
the instructions received from the Participant. The Committee shall
instruct the Trustee as to the method, in the Committee's discretion, of
voting shares of Company Stock for which timely voting instructions are not
received from Participants. The Trustee shall vote such shares of Company
Stock in accordance with such instructions received by the Trustee from the
Committee. The Trustee shall not vote shares of Company Stock for which it
does not receive voting instructions from Participants or the Committee.
The Company shall ensure that the requisite voting forms, together with all
information distributed to shareholders in general regarding the exercise
of voting rights, are furnished to the Trustee and by the Trustee to such
Participants within a reasonable time before such voting rights are to be
exercised with respect to Company Stock held in the Trust Fund.
(b) Tender Offers. In the event that a tender offer is made generally to
shareholders of the Company to purchase Company Stock, the following
procedures shall apply and the following actions shall be taken:
50
(1) The Trustee or its authorized delegate shall, in a timely manner, give
to each Participant having, at that time, an investment in Company
Stock notice of the terms and conditions of such offer.
(2) Each Participant shall instruct the Trustee, in accordance with
procedures established by the Committee or Trustee and designed to
protect the confidentiality of the Participants' exercise of tender
offer rights under this subsection in accordance with Department of
Labor regulation section 2550.404(c)-1, to accept or decline such
offer with respect to all or any portion of the shares of Company
Stock allocated to the Participant's Account.
(3) The response of the Trustee to a tender offer, as to whether the
tender offer is accepted or rejected, shall be made in accordance with
the instructions of the Participants given to the Trustee on forms
provided for that purpose by the Trustee. The Trustee shall reject the
tender offer with respect to shares for which the Trustee does not
receive instructions from a Participant.
(4) In the event the Trustee is instructed to sell less than all of the
shares of Company Stock allocated to a Participant's Account, or if
the Trustee is instructed to sell all of such shares but less than all
of such shares are purchased pursuant to the terms of the tender
offer, the Trustee shall sell a proportionate number of shares from
each Participant's Account. The proceeds of any sale pursuant to this
subsection shall be allocated to the Accounts from which the shares
were sold. If any tender offer is accepted (in whole or in part)
pursuant to this subsection, the Trustee shall have the power to
transfer Company Stock in order to effect such acceptance with no
further direction from the Participant or the Committee.
(5) For purposes of this subsection, "tender offer" means any offer to
acquire Company Stock that is subject to either Section 13(e) or 14(d)
of the Securities Exchange Act of 1934 and that under applicable rules
and regulations is required to be the subject of a filing with the
Securities and Exchange Commission on either Schedule 13E-4 or
Schedule 14D-9.
(c) Other Rights. Each Participant shall have the right to instruct the Trustee
confidentially as to whether and how stock options, warrants or other
similar rights relating to shares of Company Stock allocated to the
Participant's Account should be exercised. The Committee or Trustee shall
establish procedures to notify timely each such Participant regarding such
rights and the terms and conditions for exercising such rights. If the
Trustee fails to receive timely instructions from the Participant, such
rights shall not be exercised.
51
9.6 Restrictions on Transfer of Stock
All transactions involving Company Stock, including distributions, purchases and
sales, shall be made only in compliance with applicable federal and state laws,
regulations and rules. All such transactions shall also be subject to all
restrictions and limitations imposed on all Company Stock by the Company's
articles of incorporation and bylaws as amended from time to time, as well as
any restrictions or limitations imposed by the New York Stock Exchange, Inc.,
with respect to Company Stock.
9.7 ERISA Rules Regarding Participant-Directed Investment
(a) Intent to Meet ERISA Section 404(c). The Plan provisions pertaining to
Participant-directed investments are intended to permit the Plan and
Participant-directed transactions under it to comply with requirements in
ERISA section 404(c) and related regulations, so that a Participant will
not be deemed to be a fiduciary by reason of exercising control over assets
in the Participant's Account, and no person who is otherwise a fiduciary
shall be liable, either for any loss or by reason of any breach, that
results from the exercise of such control. For purposes of carrying out
this intent, any Plan reference to a Participant who exercises control over
Account assets shall be deemed to include a Beneficiary or an alternate
payee who exercises such control, and any reference to a specific
Department of Labor regulation shall be deemed to include a reference to
any other currently applicable rule or regulation pertaining to the same
subject.
(b) Fiduciary for Disclosures and Instructions. To comply with ERISA section
404(c) and Department of Labor regulation section 2550.404(c)-1 thereunder,
the Committee is designated as the Plan fiduciary responsible for giving
Participants, Beneficiaries and alternate payees (together referred to as
"eligible investors") all required information, receiving and carrying out
investment directions from eligible investors and giving eligible investors
written confirmation of instructions received from them. Accordingly, the
Committee (or a person or persons designated by it to act on its behalf)
shall provide information to eligible investors in accordance with
subsection 1(b)(2)(B) of the above Department of Labor regulation, shall
receive investment instructions provided by such eligible investors in
accordance with this article of the Plan, and shall provide eligible
investors with written confirmation of such instructions. The Committee and
any person or persons it has designated to act on its behalf shall comply
with all such investment instructions from eligible investors except in
cases where the Committee is permitted to decline to implement such
instructions in accordance with subsections 1(b)(2)(ii)(B) and 1(d)(2)(ii)
of the above Department of Labor regulation.
(c) Confidentiality Concerning Company Stock Transactions. The Committee shall
establish procedures to safeguard the confidentiality of information
relating to the purchase, sale and holding of, and the exercise of voting,
tender and similar rights with respect to, Company Stock. If the Committee
determines, in its discretion, that
52
the potential for undue Employer influence exists over eligible investors'
exercise of such rights, it shall appoint an "independent fiduciary" as
described in Department of Labor regulation section 2550.404c-1(d)(4)(ix)
to monitor compliance with such procedures.
9.8 Article Not Applicable to ESOP Fund.
Notwithstanding any provision of this Plan to the contrary, this Article 9 shall
not apply to the ESOP Funds of ESOP Accounts. Instead, the provisions of
Appendix A shall apply to such Stock Accounts. This Article is applicable to the
ESOP Profit Sharing Account and the Voluntary Contribution Account portions of
ESOP Accounts.
53
Article 10. Participant Accounts and Records
10.1 Accounts and Records
The accounts and records of the Plan shall be maintained at the direction of the
Committee and shall accurately disclose the value of the Account of each
Participant or Beneficiary in the Plan. Such accounts and records may be kept in
dollars or in units or both, as determined in accordance with generally accepted
principles of trust accounting approved by the Committee.
Each subaccount of a Participant's Account shall be assigned a share of each
Investment Fund in which the Participant's Account is invested in the proportion
that the balance of such subaccount bears to the aggregate balance of all
subaccounts composing the Participant's Account. The Committee shall cause
records to be maintained relative to a Participant's Account so that there may
be determined as of any Valuation Date the current value of the Participant's
Account in the Trust Fund.
10.2 Valuation Adjustments
As of each Valuation Date, the Trustee or other recordkeeper, in accordance with
the accounting principles approved by the Committee, shall credit the Accounts
of Participants and Beneficiaries with contributions made during the accounting
period, if any, and debit such Accounts with withdrawals and distributions for
such period, if any, and shall also adjust the net credit balances of such
Accounts in the respective Investment Funds of the Trust Fund, upward or
downward, pro rata (using reasonable assumptions about the availability of
current period contributions, withdrawals, and distributions for purposes of
sharing in current period earnings and investment gains or losses), so that such
net credit balances will equal the net worth of each Investment Fund of the
Trust Fund as of that Valuation Date.
The net worth of an Investment Fund shall be determined by the Trustee or
Investment Fund manager and reported to the recordkeeper under procedures
approved by the Committee. All determinations made by the Trustee or Investment
Fund manager with respect to fair market values and net worth shall be made in
accordance with generally accepted principles of trust accounting. The
accounting made under Plan section 10.2 in accordance with procedures approved
by the Committee shall be conclusive and binding upon all persons having an
interest under the Plan.
10.3 Company Stock Fund Accounting and Valuation
The Company Stock Fund shall consist of shares of Company Stock and such other
interim investment (awaiting investment in Company Stock) as the Trustee or
investment manager may deem advisable. Cash dividends and cash proceeds from any
other distribution received on Company Stock shall be invested in Company Stock.
54
Investment in Company Stock shall be made from time to time by the Trustee or
investment manager by purchases in the open market or from the Company, if the
Company has made available Treasury stock or newly-issued stock that is
authorized by the New York Stock Exchange, Inc., for listing on the N.Y.S.E.(the
"Exchange"). If the Company makes a contribution of Company Stock to the Plan,
the contributed shares shall be valued at the closing price of such stock as
reported on the consolidated tape for stocks listed on the Exchange on the date
of contribution or, if no sales of Company Stock were made on such day, on the
next preceding day on which Company Stock was traded on the Exchange. The
Company may, in its discretion, limit the daily volume of purchases or sales of
Company Stock to the extent that such action is deemed by it to be in the best
interests of the Participants and Beneficiaries or to comply with securities
laws or the requirements of the New York Stock Exchange, Inc.
The balance of each Account invested in the Company Stock Fund shall be
maintained in terms of both dollar values and whole and fractional shares. As of
each Valuation Date, all Company Stock acquired by the Company Stock Fund since
the last Valuation Date shall be allocated to Accounts pursuant to Plan section
10.2. The total value of an Account's interest in the Company Stock Fund as of
any Valuation Date shall equal the number of whole and fractional shares of
Company Stock allocated to the Account times the Plan's aggregate closing price
per share minus any commissions paid on the purchase of shares (determined in
the manner prescribed in the preceding paragraph) as of the Valuation Date, plus
the value of the Participant's allocable share of non-Company Stock assets held
in the Company Stock Fund as of the same Valuation Date.
In addition, the Committee shall maintain or cause to be maintained a record in
the name of each Participant (or alternate payee or Beneficiary) disclosing the
cost basis for tax purposes of the Company Stock allocated to the Account.
Whenever Company Stock is allocated to Accounts, each share of Company Stock
shall be assigned a cost equal to the average cost per share of all Company
Stock allocated on the same Valuation Date, and the cost basis record for each
Account shall be increased by such average cost times the number of shares of
Company Stock allocated to the Account. In addition, a similarly determined
downward adjustment in the cost basis record shall be made when Company Stock is
removed from a Participant's Account.
55
Article 11. Financing
11.1 Funding of the Plan
The Company shall maintain or cause to be maintained a Trust Fund to finance the
benefits under the Plan by entering into one or more Trust Agreements with one
or more Trustees who shall have such powers as are provided in the Trust
Agreement(s). Any Trust Agreement is designated as, and shall constitute, a part
of this Plan. All rights that may accrue to any person under this Plan shall be
subject to all the terms and provisions of such Trust Agreement.
The Company may modify any Trust Agreement from time to time to accomplish the
purposes of the Plan. If insurance or bank investment contracts are held under
the Trust Agreement, the Company may amend, terminate or replace such contracts
to accomplish the purposes of the Plan. The Company may replace any Trustee and
appoint a successor Trustee for any reason.
By entering into such Trust Agreements or insurance or bank investment
contracts, the Company shall vest in the Trustee, or in one or more investment
managers, as defined in ERISA section 3(38), appointed under the terms of the
Trust Agreement from time to time, responsibility for the management and control
of the Trust Fund. In the event any such investment manager is appointed, the
Trustee shall not be liable for the acts or omissions of the investment manager
or have any responsibility to invest or otherwise manage any portion of the
Trust Fund subject to the management and control of the investment manager.
If so empowered by the Company, the Committee may take any action on behalf of
the Company that the Company is authorized to take under Plan section 11.1.
Nothing in Plan section 11.1 shall reduce or eliminate the responsibility of
Participants for the results of investment elections that are within their
control, as provided in Article 9.
11.2 Company Contributions
The Company shall make or cause to be made by Employers such contributions to
the Trust Fund as are required by this Plan, subject to the right of the Company
to discontinue the Plan.
11.3 Non-Reversion
Anything in this Plan to the contrary notwithstanding, it shall be impossible at
any time for the contributions of the Company (or any Employer) or any part of
the Trust Fund to revert to the Company or an Affiliate or to be used for or
diverted to any purpose other than the exclusive benefit of Participants or
their Beneficiaries, except that:
(a) In the event that the Internal Revenue Service determines that the Plan is
not initially qualified under Code section 401(a) with respect to any
Employer, then any contributions made by that Employer incident to that
initial qualification shall be
56
returned to the Employer within one year after the date the initial
qualification is denied, but only if the application for qualification is
made within the time prescribed by law for filing the Employer's return for
the taxable year for which the Plan is adopted, or such later date as the
Secretary of the Treasury may prescribe.
(b) If all or a portion of any contribution is made by an Employer by a mistake
of fact, such contribution or such portion (less any investment losses
attributable thereto) and any increment thereon shall, upon written request
to the Trustee, be returned to the Employer within one year after the date
on which such contribution was made;
(c) In the event that a deduction for any contributions made by the Employer is
disallowed by the Internal Revenue Service in any Plan Year, then that
portion of the Employer contribution (less any investment losses
attributable thereto) that is not deductible shall be returned to the
Employer within one year from the date of receipt of notice by the Internal
Revenue Service of the disallowance of the deduction; and
(d) Upon a complete termination of the Plan, any assets remaining in the Trust
Fund after the satisfaction of all fixed liabilities under the Plan,
including the payment of expenses incurred by the Plan, shall revert to the
Company.
11.4 Custody of Assets
All cash, certificates for shares of Company Stock and other assets of the Plan
shall be held in the possession of the Trustee. Transferable securities,
including Company Stock, may be registered in the name of the Trustee or in the
name of its nominee and need not be evidenced by a certificate if the transfer
agent does not customarily issue such certificates. In the sole discretion of
the Trustee, investments in securities may be represented by a single
certificate.
11.5 Payment of Expenses
All expenses of establishing and maintaining the Plan and the Trust that are not
paid out of the Trust Fund, as directed by the Committee in accordance with the
requirements of ERISA, shall be paid by the Company (and by other Employers to
the extent required by the Company).
11.6 Absence of Guaranty
Each Participant (or alternate payee or Beneficiary) assumes all risk connected
with any decrease in the market value of any assets held under the Plan. Neither
the Company nor any Employer in any way guarantees the Trust Fund against loss
or depreciation, or the payment of any amount that may be or become due to any
person from the Trust Fund. The Trust Fund shall be the sole source of
distributions to be made under this Plan.
57
Article 12. Administration
12.1 Committee
The Board shall appoint a Committee of three or more members, who may but need
not be Employees. The members of the Committee shall serve without compensation
for their services, but shall receive reimbursement from the Trust Fund for
expenses properly incurred to the extent not paid by the Company or other
Employers. All members of the Committee shall serve at the pleasure of the Board
and may resign by giving ten-day advance written notice to the Board. Vacancies
shall be filled by the Board.
12.2 Activities, Duties and Responsibilities of the Committee
(a) The Company is the "named fiduciary" and "plan administrator" in accordance
with the provisions of ERISA and, except as otherwise provided herein,
shall have the authority to control and manage the operation and
administration of the Plan and to take such actions as are necessary or
appropriate to facilitate the management and control of the Trust Fund. The
Company may allocate to the Committee responsibility for the proper
administration of the Plan.
(b) The Committee may take any action with or without a meeting upon the vote
of a majority of its members qualified to vote with respect to such action.
In the event the Committee members qualified to vote on any question are
unable to reach a decision of the majority, the question shall be
determined by the Board or its authorized delegate. A member of the
Committee who is a Participant shall not vote on any question relating
specifically to himself or herself.
(c) The Committee shall appoint from its members a Chairperson and a Secretary.
The Chairperson and Secretary are each authorized to execute or deliver any
instrument or instruments on behalf of the Committee. All resolutions,
proceedings, acts and determinations of the Committee shall be recorded by
the Secretary or the Secretary's agent, and all such records, with such
documents and instruments as may be necessary for the administration of the
Plan, shall be preserved in the custody of the Secretary or the Secretary's
agent.
(d) The Committee or any one of its members shall have such powers and duties
as may be necessary or appropriate to discharge its functions, including,
but not limited to, the discretionary authority to do the following:
(1) To construe and interpret the Plan and resolve all ambiguities
thereunder, to receive certification by the Employer of any Employee's
satisfaction of the eligibility requirements of the Plan, to decide
all questions of eligibility and to determine the amount, manner and
time of payment of any benefit;
(2) To make a determination as to the right of any person to a benefit;
58
(3) To provide for and receive forms necessary or appropriate for
administration of the Plan and to obtain from Employees such
information as may be necessary or appropriate for the proper
administration of the Plan and, when appropriate, to furnish such
information promptly to the Trustee or other persons entitled thereto;
(4) To prepare and distribute to Participants and Beneficiaries, in such
manner as the Company determines to be appropriate, information
explaining the Plan;
(5) To keep such records and accounts as the Committee deems necessary to
administer the Plan, using such books and methods of accounting as the
Committee shall determine;
(6) To instruct the Trustee with respect to the payment of benefits and
expenses;
(7) To prepare and file any reports or other documents required by the
Code or ERISA;
(8) To engage an independent public accountant to conduct such
examinations and to render such opinions as may be required by ERISA;
(9) To allocate contributions and Trust Fund gains or losses to the
Accounts of Participants;
(10) To appoint one or more investment managers in accordance with the
terms of the Trust Agreement;
(11) To provide for any required bonding of fiduciaries and other persons
who may from time to time handle Plan assets;
(12) To instruct the Trustee with respect to voting and transactions
involving Company Stock in accordance with the terms of the Plan; and
(13) To take all reasonable steps to correct any errors or omissions that
may arise in the operation of the Plan.
(e) The Committee may utilize and rely on the services of agents and such
clerical, legal, accounting and other means of assistance (including
services of persons employed by or rendering services to the Employers) as
it shall from time to time deem necessary or desirable. An opinion of legal
counsel, independent public accountant or other expert or advisor, shall be
full and complete authorization and protection with respect to any action
taken, omitted or suffered by the Committee in good faith and in accordance
with such opinion. Payment for such services or assistance may be made from
the Trust Fund or by the Company.
59
(f) The Committee may from time to time establish rules and procedures for
administration of the Plan not inconsistent with its provisions, and
administer the Plan in accordance with its provisions and such rules and
procedures. The Committee shall have the exclusive right to interpret the
terms and provisions of the Plan and to resolve all questions arising
thereunder, including without limitation the right to resolve and remedy
ambiguities, inconsistencies or omissions in such Plan. The Committee shall
endeavor to act in such a way as not to discriminate in favor of any class
of Employees, Participants or other persons. All interpretations,
determinations and decisions of the Committee in respect of any matter or
question arising under the Plan shall be final, conclusive, and binding
upon all persons, including without limitation Employees, Participants and
any and all other persons having or claiming to have any interest in or
under the Plan.
(g) The Plan shall be interpreted by the Committee in accordance with its terms
and their intended meaning. If, due to errors in drafting, a provision does
not accurately reflect its intended meaning, as demonstrated by consistent
interpretations by the Committee or other evidence of intention, the
provision shall be considered ambiguous and shall be interpreted by the
Committee in a fashion consistent with its intent. The Committee, without
the need for Board approval, shall amend the Plan retroactively to cure any
such ambiguity. This subsection may not be invoked by a Participant,
Beneficiary or any other person to require the Plan to be interpreted in a
manner that is inconsistent with its interpretation by the Committee.
(h) The Committee may authorize, approve, and undertake any and all actions
that the Committee deems necessary and desirable to merge any other
employee benefit plan with and into this Plan.
12.3 Committee's Decisions Conclusive
Benefits under this Plan shall be paid only if the Committee decides in its
discretion that the applicant is entitled to them. The Committee shall have the
exclusive right and discretionary authority to interpret the terms and
provisions of the Plan and to resolve all questions arising thereunder,
including, without limitation, the right to resolve and remedy ambiguities,
inconsistencies, or omissions in the Plan, provided, however, that the
construction necessary for the Plan to conform to the Code shall in all cases
control. The Committee shall endeavor to act in such a way as not to
discriminate in favor of any class of Employees, Participants, or other persons.
Any and all disputes with respect to the Plan that may arise involving
Participants, Beneficiaries, or alternate payees shall be referred to the
Committee, and its decisions shall be final, conclusive, and binding. All
findings of fact, interpretations, determinations, and decisions of the
Committee in respect of any matter or question arising under the Plan shall be
final, conclusive, and binding upon all persons, including, without limitation,
Employees, Participants, Beneficiaries, alternate payees, and any and all other
persons having, or claiming to have, any interest in or under the Plan and shall
be given the maximum possible deference allowed by law.
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12.4 Allocation of Fiduciary Responsibility
The Committee may allocate its fiduciary responsibilities among its members and
may delegate to other persons or organizations any of its rights, powers,
responsibilities and duties to the fullest extent permitted by ERISA. Any such
allocation or delegation shall be made in writing and shall be terminable upon
such notice as the Committee deems reasonable under the circumstances.
12.5 Indemnity
(a) The Employers shall indemnify and hold harmless each of the following
persons ("Indemnified Persons") under the terms and conditions of section
12.5(b):
(1) The Committee.
(2) Each member of the Committee.
(3) Each Employee or member of the board of directors of an Employer who
has responsibility (whether by delegation from another person, an
allocation of responsibilities under the terms of this Plan document,
or otherwise) for a fiduciary duty, a nonfiduciary settlor function
(such as deciding whether to approve a plan amendment), or a
nonfiduciary administrative task relating to the Plan.
(b) The Employers shall indemnify and hold harmless each Indemnified Person
against any and all claims, losses, damages, and expenses, including
reasonable attorneys fees and court costs, incurred by that person on
account of his or her good faith actions or failures to act with respect to
his or her responsibilities relating to the Plan. The Employers'
indemnification shall include payment of any amounts due under a settlement
of any lawsuit or investigation, but only if the Company agrees to the
settlement.
(1) An Indemnified Person shall be indemnified under this section only if
he or she notifies an Appropriate Person at the Company or another
Employer of any claim asserted against or any investigation of the
Indemnified Person that relates to the Indemnified Person's
responsibilities with respect to the Plan.
(A) A person is an "Appropriate Person" to receive notice of the
claim or investigation if a reasonable person would believe that
the person notified would initiate action to protect the
interests of the Employers in response to the Indemnified
Person's notice.
(B) The notice may be provided orally or in writing. The notice must
be provided to the Appropriate Person promptly after the
Indemnified Person becomes aware of the claim or investigation.
No indemnification shall be provided under this section to the
extent that
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any Employer is materially prejudiced by the unreasonable delay
of the Indemnified Person in notifying an Appropriate Person of
the claim or investigation.
(2) An Indemnified Person shall be indemnified under this section with
respect to attorneys fees, court costs or other litigation expenses or
any settlement of such litigation only if the Indemnified Person
agrees to permit the Company or another Employer to select counsel and
to conduct the defense of the lawsuit and agrees not to take any
action in the lawsuit that the Company or other Employer believes
would be prejudicial to the interests of the Company or other
Employer.
(3) No Indemnified Person, including an Indemnified Person who had a
Separation from Service, shall be indemnified under this section
unless he or she makes himself or herself reasonably available to
assist the Employers with respect to the matters in issue and agrees
to provide whatever documents, testimony, information, materials, or
other forms of assistance that the Employers shall reasonably request.
(4) No Indemnified Person shall be indemnified under this section with
respect to any action or failure to act that is judicially determined
to constitute or be attributable to the gross negligence or willful
misconduct of the Indemnified Person.
(5) Payments of any indemnity under this section shall be made only from
the assets of the Employers and shall not be made directly or
indirectly from assets of the Plan. The provisions of this section
shall not preclude such further indemnities as may be available under
insurance purchased by the Employers or as may be provided by an
Employer under any by-law, agreement or otherwise, provided that no
expense shall be indemnified under this section that is otherwise
indemnified by an Employer or by an insurance contract purchased by an
Employer.
12.6 Fidelity Bonds
Every person who handles funds or other property of the Plan shall be bonded in
amounts at least meeting the minimum requirements of ERISA section 412. Trust
Funds may be used to purchase such fidelity bonds.
12.7 Data
All persons entitled to benefits from the Plan must furnish to the Committee
such documents, evidence or information as the Committee considers necessary or
appropriate for the purpose of administering the Plan, including information
concerning marital status. It shall be an express condition of the Plan that
each such person must furnish such information and sign such documents as the
Committee may reasonably require before any benefits become
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payable from the Plan. The Committee shall be entitled to pay benefits to a
nonspouse Beneficiary in reliance upon the signed statement of a Participant
that he or she is not married without any further liability to a spouse if such
statement is false.
12.8 Missing Persons
If the Committee shall be unable within two years after any amount becomes due
and payable from the Plan to a Participant, spouse or Beneficiary to make
payment because the identity or whereabouts of such person cannot be
ascertained, the Committee may mail a notice by registered mail to the last
known address of such person stating that unless such person makes written reply
to the Committee within 60 days from the mailing of such notice, the Committee
will direct that such amount shall be forfeited, that all further benefits with
respect to such person shall be discontinued, and that all liability for the
payment thereof shall terminate; provided, however, that in the event of the
subsequent reappearance of the Participant, spouse or beneficiary prior to
termination of the Plan, the benefits that were due and payable and which such
person missed shall be paid, without interest, in a single sum, and any future
benefits due such person shall be reinstated in full.
12.9 Claims and Appeals Procedures
(a) Claims for benefits shall be made in writing to the Committee.
(b) If a Participant, Beneficiary or alternate payee (each of which may be a
"Claimant") believes he or she is entitled to a benefit, or a benefit
different from the one received, then the Claimant may file a claim for the
benefit by writing a letter to the Committee or its authorized delegate. If
any claim for benefits under the Plan is wholly or partially denied, the
Claimant shall be given notice in writing of such denial within 90 days
after receipt of the claim or within an additional 90 days if special
circumstances require an extension of time, and written notice of the
extension shall be furnished to the Claimant. If special circumstances
justify extending the claim period up to an additional 90 days, the
Claimant shall be given written notice of this extension within the
original 90-day period, and such notice shall set forth the special
circumstances and the date a decision is expected.
(c) A notice of the denial, written in a manner calculated to be understood by
the Claimant, shall set forth the following information:
(1) The specific reason or reasons for the denial;
(2) Specific reference to pertinent Plan provisions on which denial is
based;
(3) A description of any additional material or information necessary for
the Claimant to perfect the claim and explanation of why such material
or information is necessary;
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(4) An explanation that a full and fair review by the Committee or its
delegate of the decision denying the claim may be requested by the
Claimant or the Claimant's authorized representative by filing with
the Committee or its delegate, within 60 days after such notice has
been received, a written request for such a review;
(5) The right of the Claimant or the Claimant's authorized representative
to review, free of charge, pertinent documents, records, and other
relevant information and to submit issues and comments in writing
within the same 60-day period specified in paragraph (4) above; and
(6) A notice that following an adverse determination on review, the
Claimant may bring an action for resolution of the claim under ERISA
section 502(a).
(d) If such a request for review is filed with the Committee or its delegate,
the decision of the Committee or its delegate upon review shall be made
promptly, and not later than 60 days after the Committee or its delegate's
receipt of the request for review, unless special circumstances require an
extension of time for processing, in which case the Claimant shall be so
notified and a decision shall be rendered as soon as possible, but not
later than one hundred and twenty days after receipt of the request for
review. If the claim is denied, wholly or in part, the Claimant shall be
given a copy of the decision promptly. The decision shall be in writing and
shall include specific reasons for the denial, specific references to the
pertinent Plan provisions on which the denial is based and a notice that
the Claimant may review the documents, as described above, and may bring an
action for resolution of the claim under ERISA section 502(a). The decision
shall be written in a manner calculated to be understood by the Claimant.
(e) All decisions made under the procedure set out in this section shall be
final, and there shall be no further right of appeal. No person may
initiate a lawsuit before fully exhausting the claims procedures set out in
this section, including appeal. In order to provide for an expeditious
resolution of any dispute concerning a claim for benefits that has been
denied and to ensure that all evidence pertinent to such claim is
available, no lawsuit may be brought contesting a denial of benefits more
than 12 months after the final denial of that claim under the Plan. For
this purpose, the final denial shall be determined in light of the steps
taken by the individual to use the claims procedure available with respect
to a particular claim.
12.10 Effect of a Mistake
In the event of a mistake or misstatement as to the eligibility, participation
or service of any Participant, or the amount of payments made or to be made to a
Participant, spouse or Beneficiary, the Committee shall, if possible, cause such
withholding, acceleration or other adjustment of payments to be made as will, in
the sole judgment of the Committee, result in
64
the Participant, spouse or Beneficiary receiving the proper amount of payments
under the Plan.
65
Article 13. Amendment and Termination
13.1 Authority to Amend or Terminate
The Plan may be amended, modified or terminated at any time by the Board. In
addition, the Committee may, in its discretion, amend the Plan, prospectively or
retroactively, if it finds that the amendment will not significantly increase or
decrease costs or benefits, or if the amendment is required by law. Amendments
that may be made by the Committee include those that the Committee deems
necessary or appropriate to permit the Plan and Trust Fund to meet the
requirements for qualification and tax exemption under the Code or to comply
with ERISA, as now in effect or hereafter amended or superseded, and the
regulations thereunder. No amendment shall cause any part of the Trust Fund to
be used for, or diverted to, purposes other than for the exclusive benefit of
Participants, and their spouses and Beneficiaries. Retroactive Plan amendments
may not decrease the Account balance of any Participant or eliminate any other
valuable rights of a Participant in contravention of Code section 411(d)(6), as
determined as of the time the amendment is adopted.
13.2 Discontinuance of Participation by an Employer
Each Employer expects the Plan to be permanent and to continue indefinitely, but
since future conditions affecting the Employers cannot be anticipated or
foreseen, an Employer may terminate its obligations under the Plan either fully
or in part, including its obligation to make future contributions under this
Plan, provided that the Board or the Committee gives its written consent.
13.3 Permanent Cessation of Contributions or Plan Termination
(a) If the Board or the Committee determines in its sole discretion that the
Plan has been terminated partially or completely, or that there has been a
complete discontinuance of Employer contributions, within the meaning of
the Treasury regulations under Code section 411, the Board or the Committee
shall determine the date of such termination or discontinuance and the
Participants affected by the termination. Accounts shall remain fully
vested as provided under Plan section 8.1.
(b) Upon the complete or partial termination of the Plan, or upon a complete
discontinuance of Employer contributions to the Plan, the Account balances
of all affected Participants shall thereafter be paid out as soon as
practicable in accordance with the terms of the Plan (treating the Plan
termination, partial termination, or discontinuance of contributions as a
distribution event that, except as otherwise required by law, supersedes
the need for a Separation from Service in order to initiate payment). A
discontinuance of contributions by any Employer shall not, in the absence
of formal action by the Board or the Committee, terminate the Plan or
operate to accelerate any payments or distributions to or for the benefit
of Participants. If a complete termination of the Plan occurs while there
are any amounts remaining unallocated to Participants' Accounts, such
amounts shall be
66
allocated to Participants to the extent possible under Code section 415 for
the Plan Year of the termination. Any amounts remaining unallocated, after
all Plan liabilities have been satisfied, shall be
withdrawn from the Plan by the Company or its successor in interest.
13.4 Plan Merger or Transfer
This Plan shall not merge or consolidate with, or transfer assets and
liabilities to, or accept a transfer from, any other employee benefit plan
unless each Participant in this Plan will (if the plan had then terminated)
immediately after the merger, consolidation or transfer, receive a benefit and
retain other rights that are protected by Code section 411(d)(6), that are not
less than the benefit and the rights to which the Participant would have been
entitled immediately before the merger, consolidation or transfer of assets (if
this Plan had then terminated).
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Article 14. Top-Heavy Provisions
14.1 Application
The provisions of this Article shall be interpreted and administered in
accordance with the requirements of Code section 416 and related Treasury
regulations. If the Plan is ever a multiple employer plan, as described in Code
section 413(c), the top heavy requirements of Code section 416 and related
Treasury regulations apply to each controlled group Employer separately to the
extent that benefits under the Plan are provided to Employees with respect to
service for that controlled group Employer. For purposes of this Article, the
term "Employer" includes the business entity which sponsors the Plan and only
those Affiliates of such entity that must be aggregated and treated as a single
employer for purposes of Code section 414 and related Treasury regulations.
If, as of the Determination Date in any Plan Year, the sum of the Account
balances of Employees who are "Key Employees" of a controlled group Employer for
such Plan Year exceeds 60 percent of the sum of the Account balances of all
Employees of the controlled group Employer and their Beneficiaries, or the Plan
is part of a Top-Heavy Group, then the following provisions under this Article
shall apply for such Plan Year. The foregoing notwithstanding, the provisions of
this Article shall not apply to the Plan in any Plan Year during which it is
part of an Aggregation Group (as defined in Plan section (a) with respect to a
controlled group Employer, whether or not it is top-heavy as a single plan,
unless the Aggregation Group of which it is a part is top-heavy with respect to
the controlled group Employer in such Plan Year.
The "Determination Date", that is the date for determining the applicability of
this Article, is:
(a) For the first Plan Year, the last day of the Plan Year; and
(b) For any other Plan Year, the last day of the preceding Plan Year.
14.2 Key Employee
(a) For purposes of this Article, the term "Key Employee" means any Employee or
former Employee (including any deceased Employee) who at any time during
the Plan Year that includes the determination date was:
(1) An officer of the controlled group Employer having section 415
Compensation greater than $130,000 (as adjusted under Code section
416(i)(1) for Plan Years beginning after December 31, 2002), provided
that no more than the lesser of:
(A) 50 Employees, or
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(B) the greater of three Employees or 10 percent of the Employees of
the controlled group Employer shall be treated as officers.
(2) A 5-percent owner of the controlled group Employer, or
(3) A 1-percent owner of the controlled group Employer having section 415
Compensation of more than $150,000.
The determination of who is a Key Employee will be made in accordance with
Code section 416(i)(1) and the applicable regulations and other guidance of
general applicability issued thereunder.
(b) A five-percent owner is any Employee who owns (or is considered as owning
within the meaning of Code section 318, as modified by Code section
416(i)(1)(B)) more than five percent of the value of the outstanding stock
of the Employer or stock possessing more than five percent of the total
combined voting power of all stock of the Employer. Similarly, a
one-percent owner is any Employee who owns (or is considered as owning
within the meaning of Code section 318, as modified by Code section
416(i)(1)(B)) more than one percent of the value of the outstanding stock
of the Employer, or stock possessing more than one percent of the total
combined voting power of all stock of the Employer. For purposes of
determining five-percent and one-percent owners, the aggregation and other
rules of subsections (b), (c) and (m) of Code section 414 do not apply.
A "non-Key Employee" means any Participant who is not a Key Employee, but who is
an Employee on the last day of the Plan Year.
14.3 Top-Heavy Group
For purposes of determining whether the Plan is a part of a Top-Heavy Group, the
following rules shall apply:
(a) Aggregation Group. The Aggregation Group shall include any qualified plan
that covers at least one Key Employee and any other qualified plan that
enables the first plan described above covering a Key Employee to meet the
requirements of Code section 401(a)(4) or 410.
(b) Permissive Aggregation Group. The Permissive Aggregation Group shall
include one or more qualified plans that are not required to be aggregated
but which may be aggregated with a required aggregation group. The Plan may
be permissively aggregated only if the resulting aggregation group
satisfies the requirements of Code sections 401(a)(4) and 410.
(c) Top-Heavy Group. An Aggregation Group is a Top-Heavy Group if, with respect
to the controlled group Employer, the sum of the account balances of Key
Employees under all defined contribution plans included in the group and
the present value of the
69
accumulated accrued benefits for Key Employees under all defined benefit
plans in the group exceeds 60 percent of a similar sum determined for all
Employees and their Beneficiaries under all such plans in the group. The
present value of accrued benefits under defined benefit plans and the
account balances under defined contribution plans shall be determined
separately as of each plan's determination date. For purposes of
determining whether an Aggregation Group is a Top-Heavy Group, the present
value of accrued benefits under all defined benefit plans in the
Aggregation Group shall be determined using a single set of actuarial
assumptions, as defined in such defined benefit plans. The determination of
whether the Aggregation Group is a Top-Heavy Group shall be made using each
plan's results as of that plan's determination date that falls within the
calendar year. In any Plan Year, in testing for top-heaviness under this
Article, the controlled group Employer may, in its discretion, take into
account accumulated accrued benefits and account balances in any other plan
maintained by it, so long as such expanded Aggregation Group continues to
meet the requirements of Code sections 401(a)(4) and 410.
14.4 Additional Rules
In determining the present value of the accrued benefits under a defined benefit
plan and the sum of the account balances under a defined contribution plan,
controlled group Employer contributions and voluntary Employee contributions as
of the determination date for the Plan Year shall be taken into account. The
present values of accrued benefits and the amounts of account balances of an
Employee as of the determination date shall be increased by the distributions
made with respect to the Employee under the Plan and any plan aggregated with
the Plan under Code section 416(g)(2) during the one-year period ending on the
determination date. The preceding sentence shall also apply to distributions
under a terminated plan which, had it not been terminated, would have been
aggregated with the Plan under Code section 416(g)(2)(A)(i). In the case of a
distribution made for a reason other than Separation from Service, death, or
Disability, this provision shall be applied by substituting "five-year period"
for "one-year period". The accrued benefits and accounts of any individual who
has not performed services for any member of the controlled group that includes
the individual's Employer during the one-year period ending on the determination
date shall not be taken into account. For the purpose of determining the sum of
the account balances under a defined contribution plan, the rules set forth in
Code sections 416(g)(3) and (4) will be taken into account. Matching
Contributions shall be taken into account for purposes of satisfying the minimum
contribution requirements of this section and Code section 416(c)(2). Matching
Contributions that are used to satisfy the minimum contribution requirements
shall be treated as Matching Contributions under Code section 401(m).
The present value of any Employee's accrued benefit under any defined benefit
plan as of any determination date shall be calculated:
(a) As of the most recent Actuarial Valuation Date that is within a 12-month
period ending on the Determination Date;
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(b) As if employment terminated as of such Actuarial Valuation Date; and
(c) Without regard to the automatic preretirement survivor annuity benefit or
any other nonproportional subsidy.
The term "Actuarial Valuation Date" shall mean the valuation date used for
computing plan costs for purposes of determining minimum funding requirements.
If an Employee who has not had a Separation from Service ceases to be a Key
Employee, such Employee's Account balance or accrued benefit shall be
disregarded under the top-heavy plan computation for any Plan Year following the
last Plan Year for which the individual was treated as a Key Employee. The
Account balance or accrued benefit of any Employee or former Employee who has
not performed any services for the controlled group Employer at any time during
the five-year period ending on the Determination Date, shall not be taken into
account to determine whether the Plan or Aggregation Group is top-heavy. The
accrued benefit of a Participant under any defined benefit plan shall be
determined under the method, if any, that uniformly applies for accrual purposes
under all defined benefit plans maintained by the Company and Affiliates or, if
there is no such method, as if the benefit accrued not more rapidly than the
slowest accrual rate permitted under the fractional rule of Code section
411(b)(1)(C).
14.5 Minimum Contribution Requirement
(a) General Rules. If this Plan is part of a Top-Heavy Group in any Plan Year,
then Employees covered only by defined contribution plans of an Employer
shall receive the basic defined contribution minimum described below in
subsection (b), and Employees covered by both a defined benefit plan and a
defined contribution plan of a controlled group Employer shall receive the
enhanced defined contribution minimum described below in subsection (c).
(b) Basic Defined Contribution Minimum. The basic defined contribution minimum
is a sum of controlled group Employer contributions plus forfeitures for
each non-Key Employee, determined as a percentage of his or her
Compensation for the Plan Year, that is the equal to the lesser of 3
percent, or the highest percentage of Compensation contributed by the
controlled group Employer on behalf of any Key Employee for the Plan Year,
as determined under Code section 416(c).
(c) Enhanced Defined Contribution Minimum. The enhanced defined contribution
minimum is a sum of controlled group Employer contributions plus
forfeitures that is determined as described in subsection (b) above, but
substituting 5 percent for 3 percent for the percentage of Compensation to
be provided.
(d) Additional Rules. If a top-heavy defined contribution minimum is required
under Plan section 14.5 for a Top-Heavy Group in which this Plan is
included, all defined contribution plans in the Top-Heavy Group shall be
combined to provide, in the
71
aggregate, total contributions plus forfeitures for each non-Key Employee
that equal the defined contribution minimum that is required under Plan
section 14.5. Pretax Deferrals (and other elective deferrals within the
meaning of Code section 402(g)(3)) made on behalf of Key Employees shall be
taken into account in determining any defined contribution minimum that is
required for non-Key Employees under Plan section 14.5, and such minimum
will be determined without regard to any Social Security contribution or
permitted disparity.
(e) Entitlement to Minimum Contribution. If the Plan is top-heavy and a minimum
contribution is required for non-Key Employees, each non-Key Employee will
receive the minimum contribution if he or she has not had a Separation from
Service prior to the end of the Plan Year, regardless of his or her level
of Compensation and regardless of whether he or she has less than 1,000
Hours of Service (or the equivalent) during the Plan Year. However, the
requirement to provide a defined contribution minimum shall not apply to
any non-Key Employee who is not employed by the Employer on the last day of
the Plan Year.
14.6 Top-Heavy Vesting
If this Plan is determined to be top-heavy in any Plan Year, the vesting
schedule specified in Plan section 8.1 shall continue to apply.
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Article 15. Miscellaneous Provisions
15.1 Employment Rights
This Plan is strictly a voluntary undertaking on the part of the Employers and
shall not be deemed to constitute a contract between the Employer and any
Employee or Participant, or to be considered for, or an inducement to, or a
condition of, the employment of any Employee. Nothing contained in this Plan or
any modification of the Plan or act done in pursuance hereof shall be construed
as giving any person any legal or equitable right against the Company or any
Affiliate, the Trustee or the Trust Fund, unless specifically provided herein,
or as giving any person a right to be retained in the employ of the Company or
Affiliates. All Participants shall remain subject to assignment, reassignment,
promotion, transfer, layoff, reduction, suspension and discharge to the same
extent as if this Plan had never been established. No one shall have any right
to Plan benefits, except to the extent provided herein.
15.2 Notice of Address
Each person entitled to benefits from the Trust Fund must file with the
Committee, in writing, notice of his or her post office address and each change
of post office address. Any communication, statement or notice addressed to such
a person at the last reported post office address will be binding upon such
person for all purposes of the Plan, and the Employer, the Committee and the
Trustee shall not be obliged to search for or ascertain the person's
whereabouts.
15.3 Incompetency
Every person receiving or claiming benefits under the Plan shall be conclusively
presumed to be mentally competent and of age until the date on which the
Committee receives a written notice, in a form and manner acceptable to the
Committee, that such person is an incompetent, or a minor, for whom a guardian
or other person legally vested with the care of the person or estate has been
appointed; provided, however, that if the Committee shall find that any person
to whom a benefit is payable under the Plan is unable to care for his or her
affairs because of incompetency, or is a minor, any payment due (unless a prior
claim therefor shall have been made by a duly appointed legal representative)
may be paid to the spouse, a child, a parent or a brother or sister, or to any
person or institution deemed by the Committee to have incurred expense for such
person otherwise entitled to payment. To the extent permitted by law, any such
payment so made shall be a complete discharge of liability therefor under the
Plan.
In the event a guardian of the estate of any person receiving or claiming
benefits under the Plan shall be appointed by a court of competent jurisdiction,
benefit payments may be made to such guardian provided that proper proof of
appointment and continuing qualification is furnished in a form and manner
acceptable to the Committee. To the extent permitted by law,
73
any such payment so made shall be a complete discharge of any liability therefor
under the Plan.
15.4 Nonalienation
(a) Except as permitted by the Plan in accordance with Code section 401(a)(13)
and ERISA section 206(d) with respect to assignments to alternate payees
under qualified domestic relations orders, no benefit payable at any time
under the Plan shall be subject to the debts or liabilities of a
Participant or Beneficiary, and any attempt to alienate, sell, transfer,
assign, pledge or otherwise encumber any such benefit, whether presently or
thereafter payable, shall be void. Subject to the foregoing exception, no
benefit under the Plan shall be subject in any manner to attachment,
garnishment or encumbrance of any kind.
(b) In accordance with procedures consistent with Code section 414(p) that are
established by the Committee (including procedures requiring notification
of the affected Participant and each alternate payee of the Plan's receipt
of a domestic relations order and its procedures for determining the
qualified status of such order), judicial orders for purposes of enforcing
family support obligations or pertaining to domestic relations (that orders
do not alter the amount, timing or form of benefit other than to have it
commence at the earliest permissible date) shall be honored by the Plan if
the Committee determines that they constitute qualified domestic relations
orders.
(c) Except as may otherwise be required by Department of Labor regulations,
such orders may not require a retroactive transfer of all or part of a
Participant's Account to or from the benefit of an alternate payee without
permitting an appropriate adjustment for earnings and investment gains or
losses that have occurred in the interim, nor shall such orders require the
Plan to provide loans, self-directed investment elections, or other rights
to alternate payees that are not available to Beneficiaries generally.
(d) To the full extent permitted by Code section 414(p)(10) and by the terms of
a qualified domestic relations order, amounts assigned to an alternate
payee may be paid as soon as possible in a lump sum, notwithstanding the
age, financial hardship, employment status or other factors affecting the
ability of the Participant to make a withdrawal or otherwise receive a
distribution of balances from the Participant's Account under the Plan. In
cases where such full and prompt payment of amounts assigned to an
alternate payee will not be made, the assigned amounts shall be transferred
within a reasonable time to the Investment Funds selected by the alternate
payee, or to a money market fund if the alternate payee does not make a
valid election within a reasonable time as determined by the Committee.
74
(e) The Plan may offset payments described in a judgment, order, decree, or
settlement agreement relating to a breach of fiduciary duty or criminal act
against the Plan, as further described in Code section 401(a)(13).
15.5 No Examination or Accounting
Neither this Plan nor any action taken thereunder shall be construed as giving
any person the right to an accounting or to examine the books or affairs of the
Company or Affiliates.
15.6 Severability
In the event any provision of this Plan shall be held illegal or invalid for any
reason, such illegality or invalidity shall not affect the remaining parts of
this Plan, and it shall be construed and enforced as if such illegal or invalid
provision had never been inserted herein.
15.7 Counterparts
This Plan may be executed in any number of counterparts, each of which shall be
deemed to be an original. All the counterparts shall constitute but one and the
same instrument and may be sufficiently evidenced by any one counterpart.
15.8 Service of Legal Process
The Secretary of the Company is hereby designated agent of the Plan for the
purpose of receiving service of summons, subpoena or other legal process.
15.9 Headings of Articles and Sections
The headings of sections and subsections are included solely for convenience of
reference. If there is any conflict between such headings and the text of the
Plan, the text shall control.
15.10 Applicable Law
Except to the extent superseded or preempted by ERISA, the Plan and all rights
hereunder shall be governed, construed and administered in accordance with the
laws of the State of California, with the exception that any Trust Agreement
constituting a part of the Plan may provide that such Trust Agreement will be
construed and enforced in all respects under the laws of the state in which the
Trustee thereunder is located.
In Witness Whereof, First Advantage Corporation has caused its duly authorized
officers to execute this Plan on the day of , 2003.
First Advantage Corporation
By ________________________
Its _______________________
75
Appendix A. Special Benefit Structure for the First Advantage Employee Stock
Ownership Plan
A.1 Applicability
This Appendix supplements the Plan and provides special rules applicable to
Participants who, as of December 31, 2003, had an ESOP Account in The First
American Corporation 401(k) Savings Plan.
A.2 Background of ESOP
The ESOP that was merged into The First American Corporation 401(k) Savings Plan
and subsequently spun off with this Plan constitutes an employee stock ownership
plan having its assets invested primarily in common stock of The First American
Corporation and paying benefits in the form of such First American Corporation
Stock (except for cash distributions elected by Participants or paid in lieu of
fractional shares of Company Stock). This portion includes The First American
Corporation Stock acquired as a direct result of Employer contributions. The
other portion of the ESOP constitutes a profit sharing plan permitting both
Employer contributions and Employee after-tax contributions that are invested in
the diversified investment fund so as to provide benefits in the form of cash
rather than The First American Corporation Stock. As permitted under Code
section 401(a)(27), Employer contributions to the profit sharing plan are
entirely discretionary and may be made without regard to current or accumulated
profits of the Employer and Affiliates. For tax purposes the ESOP is intended to
qualify under sections 401(a) and 4975(e)(7) of the Code, as well as other
related Code sections.
Except as provided under Appendix A.9, Employees who are not already
Participants in the ESOP may not become Participants with respect to the ESOP
and no new contributions may be made to the ESOP. All ESOP Accounts are fully
vested.
A.3 Definitions
These definitions are in addition to the definitions of any other terms that
appear elsewhere in the Plan. Whenever used in this Appendix A the following
terms shall have the respective meanings set forth below unless otherwise
required by the context in which they are used:
(a) "Beneficiary" means, with respect to the ESOP Account, the persons or
persons properly designated by the Participant as the Beneficiary under the
terms of the ESOP in effect immediately before its merger into The First
American Corporation 401(k) Savings Plan. If the Participant has not
designated a Beneficiary for the ESOP Account or chooses to change his or
her Beneficiary designation, the Beneficiary designation shall be made in
accordance with Plan section 2.1(c).
(b) "ESOP Account" means the separate recordkeeping account that represents the
sum of the following subaccount, if any:
76
(1) "ESOP Profit Sharing Account" means the subaccount that evidences the
value of of Employer contributions to the ESOP Profit Sharing Fund
made on behalf of the Participant to the ESOP through December 31,
1994 and thereafter under this Appendix, including related investment
gains and losses of the Trust Fund.
(2) "Stock Account" means the subaccount that evidences the value of The
First American Corporation Stock and other assets held in the ESOP
Fund, including related investment gains and losses of the Trust Fund.
(3) "Transfer Account" means the subaccount that evidences the value of
any amounts transferred directly from another qualified plan to the
ESOP before it was merged into The First American Corporation 401(k)
Savings Plan, as permitted under the Code and the rules of the ESOP in
existence at that time, including related investment gains and losses
of the Trust Fund.
(4) "Voluntary Contribution Account" means a subaccount that evidences the
value of the Participant's voluntary, after-tax contributions to the
ESOP, as merged into The First American Corporation 401(k) Savings
Plan, including investment gains and losses of the Trust Fund.
Unless a Plan provision explicitly provides otherwise, ESOP Accounts shall
be maintained and administered separately from other Accounts under the
Plan.
(c) "ESOP Trust Fund" means the assets of every kind and description held under
any Trust Agreement forming a part of the ESOP as merged into the Plan,
including the following and any other subfunds that may be established
thereunder:
(1) The "Profit Sharing Fund" consisting of a diversified portfolio of
assets attributable to Employer contributions and Employee
contributions (including after-tax, rollover, and direct transfer
contributions) that have been received pursuant to the ESOP; and
(2) The "ESOP Fund" consisting of The First American Corporation Stock and
other assets that fund the employee stock ownership portion of the
ESOP.
(d) "Interested Party" means a party in interest as defined in ERISA section
3(14) or a disqualified person as defined in Code section 4975(e)(2).
(e) "Valuation Period" means a period beginning on the day immediately
following a Valuation Date and ending on the next subsequent Valuation
Date.
77
A.4 ESOP Fund Frozen
Contributions to the ESOP Fund by Participants are not permitted. Moreover, no
Employer contributions to the ESOP Fund have been made for any Plan Year
beginning on or after January 1, 1995.
A.5 Profit Sharing Fund
(a) Employee After-Tax Contributions. No Employee after-tax contributions to
the Profit Sharing Fund have been made for any Plan Year beginning on or
after January 1, 1995.
(b) Withdrawal of Participant Contributions. Upon direction to the Trustee, a
Participant may withdraw an amount from his or her Voluntary Contribution
Account. Distribution of the amount requested and permitted to be
distributed hereunder shall be made to the Participant as soon as it is
administratively feasible to do so after a properly completed application
for withdrawal has been received by the Committee or its delegate.
(c) Employer Contributions to the Profit Sharing Fund. Each Employer listed in
Appendix A.9 shall make a cash contribution to the Profit Sharing Fund for
each Plan Year in the amount specified therein. In accordance with Code
section 401(a)(27), such contributions shall be considered to be
contributions to a profit sharing plan without regard to whether they are
made from the current or accumulated profits of any Employer. In addition,
such contributions shall not exceed the amount currently deductible under
Code section 404(a) (applied without regard to section 404(a)(5) relating
to nonqualified plans) and shall be paid to the Trustee not later than the
due date (including extensions thereof) for filing the federal income tax
return of the Employer for its fiscal year ending with or within the Plan
Year for which the contributions are made. The Employer contributions to
the Profit Sharing Fund under this Appendix A.5(c) shall be allocated as of
the Valuation Date corresponding to the last day of the Plan Year in
accordance with Appendix A.9, subject to the limitations of Article 7 of
the Plan.
Effective December 1, 2001, upon application to the Committee, a
Participant may withdraw an amount from his or her Profit Sharing Fund
Account pursuant to the rules for hardship withdrawals in section 8.6.
(d) No Loans. Participants shall not have the right to take loans from the ESOP
Trust Fund.
(e) Cessation of Allowing Transfer Contributions. Effective January 1, 1995,
the ESOP stopped accepting allocations to Transfer Accounts.
78
A.6 Distributions
(a) General Rule. Following a Participant's Separation from Service and except
as otherwise provided in Plan section 8.3, distribution of the ESOP Account
(determined as of the Valuation Date for which the distribution is made)
shall be made to the Participant (or, in the event of his death, to his
Beneficiary) in one of the following ways, as elected by the Participant or
Beneficiary:
(1) In substantially equal, annual installments over a period not in
excess of 10 years;
(2) In a single lump sum payment; or
(3) In a combination of the foregoing.
(b) Other Distribution Rules. Notwithstanding other Plan provisions,
distributions from the Participant's ESOP Account shall comply with Code
section 409(o). Moreover, unless the Participant elects otherwise, the
distribution from the Participant's ESOP Account balance will be in
substantially equal periodic payments (not less frequently than annually)
over a period not longer than the greater of (i) five years, or (ii) in the
case of a Participant with an ESOP Account balance in excess of $500,000,
five years plus one additional year (but not more than five additional
years) for each $100,000 or fraction thereof by which such balance exceeds
$500,000 (subject to cost-of-living adjustments of the foregoing $500,000
figure by the Secretary of the Treasury).
(c) Diversification. To satisfy the diversification requirements of Code
section 401(a)(28), any Participant who has attained age 55 with 10 years
of ESOP participation shall have the right to make in-service withdrawals
from all or any portion of his or her ESOP account. Application for a
withdrawal under this Appendix A section shall be made on such form as the
Committee may prescribe. Withdrawals shall be paid in a single sum in cash
as soon as administratively practicable following the date that the
Committee receives the properly completed application. A Participant may
not make more than one withdrawal under this Appendix A section in any
twelve-month period. Amounts that are withdrawn pursuant to this Appendix A
section may not be subsequently repaid to the Plan.
Alternatively, any Participant who has attained age 55 with 10 years of
ESOP participation shall have the right to invest all or any portion of his
or her ESOP Account in any of the investments provided under the terms of
this Plan pursuant to the rules of Article 9.
(d) Put Options and Rights of First Refusal. If The First American Corporation
Stock is distributed from the ESOP Account at a time when it is not readily
tradable on an established public market, then the provisions of this
Appendix A section shall apply
79
in the case of a Participant or any other distributee of The First American
Corporation Stock who may be legally subject to the following rules.
The distributee shall have the right to require that The First American
Corporation repurchase such First American Corporation Stock under
reasonable payment terms and at a price per share determined in accordance
with Appendix A.8. This put option shall continue during a period of at
least 60 days following the date of distribution of The First American
Corporation Stock and, if not exercised within such period of 60 days,
during the first 60 days in the following Plan year. If the distribution
received by the Participant or Beneficiary is a distribution within one
taxable year of the Participant's entire ESOP Account balance, The First
American Corporation shall pay the option price in substantially equal
periodic payments (not less frequently than annually) over a period
beginning not later than 30 days after the exercise of the put option and
not exceeding the total of 5 years in duration. The First American
Corporation shall provide adequate security for the payment of the option
price, and shall pay a reasonable interest rate (as determined by the
Committee) on unpaid amounts. If the distribution received by the
Participant or Beneficiary is an installment distribution, the option price
shall be paid by The First American Corporation not later than 30 days
after the Participant or Beneficiary exercises the put with respect to such
installment. This right shall be granted in accordance with Code section
409(h) and all applicable Treasury regulations.
Except as otherwise permitted by the Code or other applicable law, the put
option required by this Appendix A.6 section shall not be modified or
deleted from the Plan.
A.7 Investment and Voting Rights
(a) Investment Policy. The ESOP Fund shall be invested primarily in The First
American Corporation Stock. Participants shall have the right to direct the
investment of their Profit Sharing Fund pursuant to section 9.3. Except as
provided in accordance with Appendix A.6(c), Participants shall not have
any right to direct the investment of their ESOP Fund.
(b) Stock Transactions. The Trustee may buy or sell The First American
Corporation Stock in a transaction on the open market or with The First
American Corporation or any other person, including an Interested Party,
provided that no commission shall be paid in connection with a transaction
with The First American Corporation or any other Interested Party, and the
value of The First American Corporation Stock shall be determined in
accordance with Appendix A.8 in the case of a transaction with an
Interested Party. No more than the price per share that prevails in the
public trading of The First American Corporation Stock shall be paid in a
transaction involving an acquisition from a Party in Interest. Neither The
First American Corporation, nor the Employer, nor the Committee, nor any
Trustee shall have any responsibility or duty to time any transaction
involving The First American Corporation Stock in order to
80
anticipate market conditions or changes in The First American Corporation
Stock value, nor shall any such person have any responsibility or duty to
sell The First American Corporation Stock held in the Trust Fund in order
to maximize return or minimize loss.
(c) Stock Rights, Warrants, or Options. Stock rights (including warrants and
options) issued with respect to The First American Corporation Stock shall,
in the discretion of the Trustee, be exercised by the Trustee on behalf of
Participants to the extent that cash is available, or shall be sold or
exchanged. Cash obtained in this manner with respect to rights attributable
to ESOP Fund Stock shall be subject to the requirement that the ESOP Fund
remain primarily invested in The First American Corporation Stock and,
therefore, shall normally be used to purchase The First American
Corporation Stock as soon as practicable.
(d) Voting, Tender Offers, and Related Rights.
(1) All The First American Corporation Stock shall be voted as follows.
Each Participant and each Beneficiary having shares of The First
American Corporation Stock allocated to his Account shall have the
right to direct the Trustee as to the manner in which such allocated
shares are to be voted and also as to the manner in which a
corresponding number (as determined below) of the unallocated shares
of The First American Corporation Stock in the ESOP Fund are to be
voted on each matter brought before an annual or special stockholders'
meeting of The First American Corporation. Each Participant and each
Beneficiary shall be a named fiduciary (within the meaning of ERISA
sections 402(a)(2) and 403(a)(1)) with respect to his exercise of such
voting rights. Before each meeting of The First American Corporation's
stockholders, the Committee shall cause to be furnished to each
Participant (or Beneficiary) a copy of the proxy solicitation
material, together with a form requesting confidential directions on
how the shares of The First American Corporation Stock subject to his
voting direction shall be voted on each matter being put to a vote.
All voting directions received by the Trustee from Participants and
Beneficiaries shall be held by the Trustee in confidence and shall not
be divulged or released to any other person, including officers or
Employees of The First American Corporation or any Affiliate. Upon
timely receipt of such directions, the Trustee shall vote on each such
matter, as directed, the number of shares (including fractional
shares) allocated to the Account of the Participant or Beneficiary
providing the directions, and a corresponding number of unallocated
shares (including fractional shares) that is determined as follows.
The Trustee shall vote all unallocated shares in the same proportion
as the allocated shares for which Participants and Beneficiaries have
provided voting directions (disregarding, for this purpose, any
allocated shares for which no voting directions have been provided),
and each Participant or Beneficiary
81
who directs the voting of his allocated shares shall also direct the
voting of a corresponding number of such unallocated shares that shall
represent the portion of total number of the unallocated shares being
voted that is the same as the portion represented by the number of
allocated shares voted by the Participant or Beneficiary in relation
to the total of all the allocated shares voted by Participants and
Beneficiaries. The Trustee shall vote all allocated shares of The
First American Corporation Stock for which no timely voting directions
are received from Participants or Beneficiaries in the same proportion
as the allocated shares for which Participants and Beneficiaries have
provided voting directions, and each Participant or Beneficiary who
directs the voting of his allocated shares shall also direct the
voting of a corresponding number of such allocated shares for which no
timely voting directions are received that shall represent the portion
of total number of the allocated shares for which no timely voting
directions are received being voted that is the same as the portion
represented by the number of allocated shares voted by the Participant
or Beneficiary in relation to the total of all the allocated shares
voted by Participants and Beneficiaries.
(2) Shareholder investment rights, or other rights besides voting rights,
shall be exercised, sold, or otherwise acted upon by the Trustee in
accordance with specific legal requirements, if any are applicable;
and, if no such requirements exist, in a manner that the Trustee deems
prudent under the circumstances and otherwise consistent with the
fiduciary standards of ERISA. In the event that a tender offer is made
to shareholders of The First American Corporation generally to
purchase shares of The First American Corporation Stock, the Committee
shall notify in a timely manner each Participant (or Beneficiary) of
the terms and conditions of such offer, and each Participant (or
Beneficiary) shall instruct the Trustee, in accordance with procedures
established by the Committee, to accept or decline such offer with
respect to all or any portion of the shares of The First American
Corporation Stock allocated to the Participant's (or Beneficiary's)
ESOP Account. If a Participant (or Beneficiary) fails to instruct the
Trustee, the Committee shall instruct the Trustee to accept or decline
the offer with respect to all or any portion of such shares. In the
event that the Trustee is instructed to sell less than all of the
shares of Stock allocated to a Participant's (or Beneficiary's)
Account, or if the Trustee is instructed to sell all of such shares
but less than all of such shares are purchased pursuant to the terms
of the tender offer, the Trustee shall sell a proportionate number of
shares from each Account of each Participant (or Beneficiary). The
proceeds of any sale pursuant to this Appendix A subsection shall be
allocated to the Accounts from which the shares were sold.
(e) Transfer of Interest to Separate Account. The Committee shall
determine the amounts in the ESOP Trust Fund that represent a
Participant's distributable interest
82
in a form other than The First American Corporation Stock and may, in
the case of a deferred payout, instruct the Trustee to deposit any
such amounts in a savings account, in a bank that is insured by the
Federal Deposit Insurance Corporation, or in a savings and loan
association that is insured by the Federal Savings and Loan Insurance
Corporation. Interest earned upon such transferred amounts shall be
added to principal, and, subject to the provisions of Appendix A.6,
such interest earned shall not increase any installment distributions
but shall be paid as an additional installment or installments after
exhaustion of principal.
If a Participant whose interest under the ESOP has been so transferred
is reemployed by the Company or an Affiliate, such transferred
interest shall be either returned to the ESOP Trust Fund or retained
in the separate trust account in the Committee's discretion.
(f) Restrictions on Transfer of Stock. All transactions involving shares of The
First American Corporation Stock in the ESOP Account, including
distributions, purchases and sales, shall be made only in compliance with
applicable federal and state laws, regulations and rules. All such
transactions shall also be subject to all restrictions and limitations
imposed on all shares of The First American Corporation Stock provided for
in The First American Corporation's Articles of Incorporation and bylaws as
amended from time to time. The First American Corporation presently does
not intend to register under the Securities Act of 1933 (the "1933 Act")
the shares of The First American Corporation Stock to be distributed to
Participants or their Beneficiaries. As a result, shares of The First
American Corporation Stock distributed under the Plan may be "restricted
securities." Restricted securities may not be sold unless they are
registered under the 1933 Act by The First American Corporation, or unless
an exemption from registration is available. If The First American
Corporation does not register the shares of The First American Corporation
Stock for resale by Participants or their Beneficiaries, and if such
persons desire to sell the shares of The First American Corporation Stock
distributed to them, they will be required to sell the shares of The First
American Corporation Stock in transactions exempt from registration under
the 1933 Act. The First American Corporation will not permit shares of The
First American Corporation Stock to be transferred unless it is satisfied
that any proposed transfer of The First American Corporation Stock is
exempt from the registration requirements of the 1933 Act. The First
American Corporation reserves the right to cause appropriate legends to be
imprinted on the certificates representing shares of The First American
Corporation Stock distributed under this Plan to reflect all restrictions
and limitations referred to in this Appendix A section.
A.8 Accounting and Valuation of Assets
(a) Accounts. A system of accounting satisfactory to the Committee and
consistent with generally acceptable trust accounting principles shall be
maintained so as to reflect in
83
a separate ESOP Account (with appropriate subaccounts, as needed) for each
Participant his beneficial interest in the ESOP Trust Fund (and in the ESOP
Fund, the Profit Sharing Fund, and any other subfund thereunder).
Allocations to ESOP Accounts shall be made in accordance with this Appendix
A, as applicable.
(b) Valuation of Assets. All assets of the ESOP Trust Fund shall be valued at
their fair market value as of each Valuation Date for purposes of this
Appendix A, and any such asset that is involved in a transaction between
the Plan and an Interested Party shall be valued as of the date of such
transaction. A Valuation Date requiring the determination of the fair
market value of The First American Corporation Stock and other ESOP Trust
Fund assets for purposes of accounting pursuant to this Appendix A shall
occur at least annually. The fair market value of The First American
Corporation Stock shall be the closing price of such The First American
Corporation Stock in public trading on the most recent date on which The
First American Corporation Stock was traded, as reported in The Wall Street
Journal or another publication of general circulation providing information
about the public trading prices of The First American Corporation Stock
that is selected by the Committee; provided, however, that if The First
American Corporation Stock ceases to be publicly traded or if it is being
valued in connection with a transaction between the Plan and an Interested
Party, its fair market value shall be determined in good faith by the
Committee based on all relevant factors for determining the fair market
value of securities in accordance with Treasury regulations section
54.4975-11(d)(5) and the fiduciary requirements of ERISA. An independent
appraiser meeting requirements similar to those prescribed in Treasury
regulations under Code section 170(a)(1) shall be used in making valuations
of The First American Corporation Stock if it is not readily tradable on an
established securities market. The Employers, the Committee, and the
Trustee do not guarantee the Participants or their Beneficiaries against
loss or depreciation or fluctuation of the value of assets comprising the
ESOP Trust Fund.
(c) Accounting for Changes in Value.
(1) Except as otherwise provided in this Appendix A, the income, profit,
gain and other increments to the ESOP Trust Fund for a Valuation
Period reduced by the expenses, losses and other decreases in the
Trust Fund for a Valuation Period shall be allocated to ESOP Accounts
on the Valuation Date on which that Valuation Period ends in the
proportion that each individual ESOP Account value as of the next
preceding Valuation Date reduced by any disbursements from that ESOP
Account during the Valuation Period bears to the total value of all
ESOP Accounts as of that date reduced by such disbursements.
(2) Any change in value of The First American Corporation Stock that has
been allocated to an ESOP Account of a Participant and any income
attributable to
84
that The First American Corporation Stock shall be allocated directly
to the ESOP Account.
(d) Allocations of The First American Corporation Stock Dividends and Splits.
The First American Corporation Stock received by the Trust with respect to
the ESOP as a result of a stock split or stock dividend shall be allocated
as of the Valuation Date coinciding with or next following the date of such
split or dividend, to each ESOP Account on such date in an amount that
shall bear substantially the same proportion to the total number of shares
received as the number of shares in the ESOP Account immediately before
such date bears to the total number of shares allocated to all ESOP
Accounts immediately before such date. As determined by the Committee, cash
dividends allocated to the ESOP Accounts of Participants may be passed
through to Participants in a manner that satisfies the Code section 404(k)
requirements for a tax deduction with respect to such dividends.
Participants may elect to either receive cash dividends allocated to their
ESOP Accounts or have the dividends reinvested in The First American
Corporation Stock. These dividends, passed through to Participants
dependent upon their election, are intended to be passed through to
Participants in a manner that satisfies the Code section 404(k)
requirements for a tax deduction.
(e) Other Matters of Allocation and Accounting.
(1) In the event an Employer contribution, dividend, amount of sale
proceeds, or other amount is received before the Valuation Date as of
which it is to be allocated to ESOP Accounts under the Plan, the
Committee may direct the Trustee to hold such amount in a separate
investment fund. In such event, any change in value of that separate
investment fund shall be allocated with and in the same manner as the
amount itself.
(2) Notwithstanding the preceding provisions of this Appendix A, the
Committee may determine to allocate the portion of the net increase or
decrease in value of the ESOP Trust Fund allocable to ESOP Accounts
under the Plan based on a modified allocation procedure, provided that
any such modified allocation procedure shall result in equitable and
nondiscriminatory allocation.
(3) The Committee shall maintain or cause to be maintained adequate
records of the cost basis of The First American Corporation Stock
acquired by the Trustee (including The First American Corporation
Stock acquired by the ESOP prior to its merger with The First American
Corporation 401(k) Savings Plan), the number of shares of The First
American Corporation Stock in each ESOP Account as of each Valuation
Date for which ESOP Account balances are determined, the dollar value
of ESOP Account balances as of each such Valuation Date, and any other
information that the Committee deems important.
85
(4) The Committee shall also maintain or cause to be maintained adequate
records to determine the cumulative amount of Employee after-tax
contributions (net of withdrawals) in each Participant's Voluntary
Contribution Account and the separate contracts and the Participant's
investment therein for purposes of applying the basis recovery rules
of Code section 72 with respect to distributions.
86
EXHIBIT 5.1
-----------
[LETTERHEAD OF WHITE & CASE LLP]
January 7, 2004
First Advantage Corporation
One Progress Plaza, Suite 2400
St. Petersburg, Florida 33701
Re: Registration Statement on Form S-8
- --------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to First Advantage Corporation, a Delaware
corporation (the "Company"), and are familiar with the proceedings and documents
relating to the proposed registration by First Advantage, through a Registration
Statement on Form S-8 (the "Registration Statement"), to be filed by First
Advantage with the Securities and Exchange Commission, of (a) up to an aggregate
total of 2,000,000 shares of First Advantage's Class A Common Stock, $.001 par
value (the "Stock"), issuable under the First Advantage Corporation 401(k)
Savings Plan (the "Plan"), and (b) the interests in the Plan to be issued to
those employees of the Company and its subsidiaries who are eligible and elect
to participate in the Plan (the "Plan Interests").
For the purposes of rendering this opinion, we have examined originals or
photostatic copies of the Plan and such corporate records, agreements and other
documents of First Advantage as we have deemed relevant and necessary as a basis
for the opinion hereinafter set forth. In connection with our examination of
such documents, we have assumed the genuineness of all signatures on, and the
authenticity of, all documents submitted to us as originals and the conformity
to the original documents of all documents submitted to us as copies. With
respect to instruments executed by natural persons, we have assumed the legal
competency and authority of such persons. As to facts material to the opinions
expressed herein which were not independently established or verified, we have
relied upon oral or written statements and representations of First Advantage.
Based on the foregoing, in reliance thereon and subject to compliance with
applicable state securities laws and the assumptions and qualifications set
forth herein, we are of the opinion that the Stock, when issued and delivered in
accordance with the terms and conditions set forth in the Registration
Statement, the Plans and any related documents, will be validly issued, fully
paid and nonassessable and that the Plan Interests, when issued in accordance
with the terms and conditions set forth in the Plan, will be validly issued.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not thereby concede that
we are within the category of persons whose consent is required under Section 7
of the Securities Act or the Rules and Regulations of the SEC thereunder. This
opinion is furnished by us, as special counsel to the Company, in accordance
with the requirements of Item 601(b)(5) of Regulation S-K under the Securities
Act and, except as provided in the immediately preceding sentence, is not to be
used, circulated or quoted for any other purpose or otherwise referred to or
relied upon by any other person without the express written permission of the
undersigned.
Very truly yours,
/s/ White & Case LLP
NWR:JSR
EXHIBIT 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of First Advantage Corporation of our report dated April
3, 2003 relating to the combined financial statements of the FAST Division as of
December 31, 2002 and 2001 and for each of the three years in the period ended
December 31, 2002, and our reports dated December 6, 2002 relating to the
financial statements of Employee Health Programs, Inc. as of December 31, 2001
and 2000 and for each of the years then ended, the financial statements of
Substance Abuse Management, Inc. as of December 31, 2000 and for the year then
ended and the financial statements of American Driving Records, Inc. as of
December 31, 2001 and 2000 and for each of the years then ended, which appear in
First Advantage's Pre-Effective Amendment No. 5 to Registration Statement on
Form S-4 (Registration No. 333-102565) filed May 14, 2003.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
January 5, 2004
EXHIBIT 23.2
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of First Advantage Corporation of our report dated March
24, 2003, except for the subsequent events described in Note 16 to the financial
statements as to which the date is April 1, 2003, relating to the consolidated
financial statements of US SEARCH.com Inc., which appears in First Advantage's
Pre-Effective Amendment No. 5 to Registration Statement on Form S-4
(Registration No. 333-102565) filed May 14, 2003.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
January 5, 2004
EXHIBIT 24.1
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POWER OF ATTORNEY
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KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors of First
Advantage Corporation, a Delaware corporation (the "Corporation"), hereby
constitute and appoint Parker S. Kennedy and Kenneth D. DeGiorgio, and each of
them, the true and lawful agents and attorneys-in-fact of the undersigned, with
full power and authority in said agents and attorneys-in-fact, and in either or
both of them, to sign for the undersigned and in their respective names as
directors of the Corporation the Registration Statement on Form S-8 to be filed
with the United States Securities and Exchange Commission, Washington, D.C.,
under the Securities Act of 1933, as amended, and any amendment or amendments to
such Registration Statement, relating to the Class A Common Stock, par value
$.001 per share, of the Corporation to be offered thereunder, and the
undersigned ratify and confirm all acts taken by such agents and
attorneys-in-fact, or either or both of them, as herein authorized. This Power
of Attorney may be executed in one or more counterparts.
Date: January 7, 2004 By: /s/ Parker S. Kennedy
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Parker S. Kennedy, Chairman
Date: January 7, 2004 By: /s/ John Long
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John Long, Director
Date: January 7, 2004 By: /s/ J. David Chatham
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J. David Chatham, Director
Date: January 7, 2004 By: /s/ Barry Connelly
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Barry Connelly, Director
Date: January 7, 2004 By: /s/ Lawrence D. Lenihan, Jr.
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Lawrence D. Lenihan, Jr., Director
Date: January 7, 2004 By: /s/ Donald Nickelson
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Donald Nickelson, Director
Date: January 7, 2004 By: /s/ Donald Robert
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Donald Robert, Director
Date: January 7, 2004 By: /s/ Alex Sink
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Alex Sink, Director
Date: January 7, 2004 By: /s/ David Walker
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David Walker, Director