As filed with the Securities and Exchange Commission on April 28, 1998
Registration Nos. 333-45675 and 811-08631
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 2 [X]
Post-Effective Amendment No. ___ [ ]
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 2 [X]
EUCLID MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)
900 Third Avenue - 31st Floor
New York, New York 10022
(Address of Principal Executive Offices) (Zip code)
Registrant's Telephone Number, including Area Code: (212) 451-1100
EUGENE J. GLASER, President
Euclid Advisors LLC
900 Third Avenue - 31st Floor
New York, New York 10022
(Name and Address of Agent for Service)
Copy to:
PAUL S. SCHREIBER, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
Title of Securities Being Registered: Shares of Beneficial Interest of the
Euclid Market Neutral Fund.
The Registrant hereby amends this Registration Statement under the
Securities Act of 1933 on such date or dates as may be necessary to delay its
effective date until the Registrant
<PAGE>
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
DECLARATION PURSUANT TO RULE 24f-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended, the Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933, as amended.
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EUCLID MUTUAL FUNDS
CONTENTS
This Registration Statement on Form N-1A consists of the following:
1. Facing Sheet
2. Contents
3. Cross-Reference Sheet
4. Part A - Prospectus for all shares of Euclid Market Neutral Fund
5. Part B - Statement of Additional Information for all shares of Euclid Market
Neutral Fund
6. Part C - Other Information
7. Signature Sheet
8. Exhibits
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EUCLID MUTUAL FUNDS
Cross-Reference Sheet pursuant to Rule 495(a) for all shares of
Euclid Market Neutral Fund
Form N-1A
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Item No. Location
- ------------------------------------------------------------------------------
Part A Prospectus
- ------------------------------------------------------------------------------
1. Cover Page Cover
- ------------------------------------------------------------------------------
2. Synopsis Cover
Fee Table
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3. Condensed Financial
Information Not Applicable
- ------------------------------------------------------------------------------
4. General Description of Cover
Registrant Our General Investment Philosophy and
Strategy;
Investment Objective;
Organization of the Fund;
Other Investment Policies;
Risk Factors
- ------------------------------------------------------------------------------
5. Management of the Organization of the Fund
Registrant The Manager and Management Fee;
Cover;
The Portfolio Manager;
How to Invest in the Fund;
How to Sell Your Fund Shares
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5A. Management's Discussion
of Fund Performance Advisor's Prior Performance
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6. Capital Stock and Other Some Things You Should Know Above Euclid
Securities Market Neutral Fund;
Organization of the Fund;
Choosing Among Classes When Purchasing
Shares;
Cover;
Distributions and Taxes
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Item No. Location
- ------------------------------------------------------------------------------
7. Purchase of Securities Fee Table;
Being Offered Cover;
Net Asset Value;
Choosing Among Classes When Purchasing
Shares;
How to Invest in the Fund;
The Distributor;
Exchange Privilege;
Operating Expenses
- ------------------------------------------------------------------------------
8. Redemption or Repurchase How to Sell Your Fund Shares;
Exchange Privilege;
Choosing Among Classes When Purchasing
Shares;
Fee Table
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9. Legal Proceedings Not Applicable
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Part B - Statement of Additional Information
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10. Cover Page Cover
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11. Table of Contents Table of Contents
- ------------------------------------------------------------------------------
12. General Information and
History Not Applicable
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13. Investment Objectives and Investment Objectives and Policies;
Policies Investment Restrictions;
Other Investment Policies
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14. Management of the Fund Trustees and Officers of the Trust
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15. Control Persons and Control Persons and Principal Holders
Principal Holders of of Securities
Securities
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16. Investment Advisory and Investment Management and Other Services;
Other Services Trustees and Officers of the Trust
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17. Brokerage Allocation and
Other Practices Portfolio Transactions and Brokerage
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18. Capital Stock and Other
Securities Purchase and Redemption of Shares
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<PAGE>
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Item No. Location
- ------------------------------------------------------------------------------
19. Purchase, Redemption and Purchase and Redemption of Shares;
Pricing of Securities Reinstatement Privilege;
Being Offered Involuntary Redemptions;
Exchange Privilege;
Retirement Plans;
Net Asset Value and Taxes
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20. Tax Status Net Asset Value and Taxes
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21. Underwriters Investment Management and Other Services
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22. Calculation of
Performance Data Yield and Performance Information
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23. Financial Statements Financial Statements
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Part C - Information required to be included in Part C is set forth under
the appropriate item, so numbered, in Part C to this Registration
Statement on Form N-1A.
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<PAGE>
EUCLID MUTUAL FUNDS (logo)
Euclid Market Neutral Fund April 28, 1998
PROSPECTUS
Euclid Market Neutral Fund (the "fund") seeks to increase the value of your
investment (capital appreciation) in bull markets and in bear markets while
maintaining minimal exposure to general market risk by always having both long
and short positions in equity securities.
The fund utilizes proprietary stock selection models that are designed to
predict relative performance of stocks. The Euclid Market Neutral Fund strives
to profit by buying stocks that are ranked favorably (and therefore deemed
likely to outperform) and by selling short stocks that are ranked poorly (and
therefore deemed likely to underperform).
It is expected that the fund's performance will have little correlation with the
direction of the stock market. The fund's performance benchmark is the return on
3-month U.S. Treasury Bills. For a description of the risks of an investment in
the fund and the differences between an investment in the fund and in 3-month
Treasury Bills, see "Investment Objective" and "Risk Factors."
Shares of the fund are not deposits or obligations of, or guaranteed, endorsed
or insured by, any entity or person, including the U.S. Government and the
Federal Deposit Insurance Corporation.
The fund is the first of a series of Euclid Mutual Funds, a Delaware business
trust (the "Trust). The Trust is an open-end, diversified management investment
company.
Call your financial advisor or write us at 900 Third Avenue, New York, NY
10022-4728, or call 1-800-272-2700 for more information.
This prospectus will help you learn more about the fund. Please read it
carefully before you invest, and keep it for future reference.
Our Statement of Additional Information (SAI) dated April 28, 1998, as may be
amended from time to time, includes more information about the fund's policies
and procedures. You can obtain a free copy by calling 1-800-272-2700. It has
been filed with the Securities and Exchange Commission and is incorporated by
reference into this Prospectus. The Commission maintains a World Wide Web site
at http://www.sec.gov that contains the SAI and other information regarding the
Trust.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
SOME THINGS YOU SHOULD KNOW ABOUT EUCLID MARKET NEUTRAL FUND
The fund is designed for investors who intend to invest for the long term, not
for investors who intend to liquidate their investment after a short period of
time.
There are risks associated with investing in the fund, including the possible
loss of capital. See "Risk Factors."
The fund offers four classes of shares. Before purchasing, you should determine
which class is right for you. More information about the classes of shares
appears under the heading "Choosing Among Classes When Purchasing Shares."
Euclid Advisors LLC (the "Manager") is the investment manager of the fund. The
Manager is a subsidiary of Zweig/Glaser Advisers. Zweig Securities Corp. is the
principal distributor of the fund's shares.
TABLE OF CONTENTS
About the Fund
Fee Table ........................................................... 3
Investment Objective ................................................ 4
Our General Investment Philosophy and Strategy ...................... 4
Other Investment Policies ........................................... 5
The Portfolio Manager ............................................... 5
Risk Factors ........................................................ 6
Year 2000 Preparedness .............................................. 7
Advisor's Prior Performance ......................................... 7
About Your Account
Choosing Among Classes When Purchasing Shares ....................... 7
How to Invest in the Fund ........................................... 12
How To Sell Your Fund Shares ........................................ 13
Exchange Privilege .................................................. 14
Net Asset Value ..................................................... 14
Distributions and Taxes ............................................. 14
Other Information
The Distributor ..................................................... 15
The Manager and Management Fee ...................................... 15
Organization of the Fund ............................................ 15
2
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FEE TABLE
Mutual fund investors bear two types of expenses: transaction expenses and
operating expenses. You pay transaction expenses when you buy shares in the
fund. The fund as a whole pays operating expenses, which reduce the fund's
annual return to you.
The table below is designed to assist you in understanding the various costs and
expenses you will bear. The examples do not represent past or future expense
levels, which may be greater or less than those shown. Because the fund has not
yet commenced operations, the amount for "Other Expenses" is based on estimated
expenses for the first year. Federal regulations require the examples to assume
a 5% annual return, but actual annual returns may vary.
<TABLE>
<CAPTION>
Class A Class B Class C Class I
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Initial Sales Charge on purchases
(as % of Offering Price)........................... 5.50% None None None
Maximum Contingent Deferred Sales Charge (CDSC)........ None* 5.00%** 1.25%*** None
(as % of redemption proceeds)
</TABLE>
- ----------
* A 1% CDSC is imposed on redemptions within 18 months of purchases of $1
million or more originally purchased without an initial sales charge as
described under "Quantity Discounts on Class A Shares."
** The maximum CDSC is imposed on Class B Shares redeemed in the first year;
thereafter, the CDSC declines (See "Class B Shares").
*** The CDSC on Class C Shares applies only if redemption occurs in the first
year.
<TABLE>
<CAPTION>
Example: You would pay Example: You would pay
the following expenses on the following expenses on
a $1,000 investment a $1,000 assuming (a) 5%
assuming (a) 5% annual annual return and
Annual Fund return and (b) redemption investment and (b) no
Operating Expenses at the end of each time redemption:
(As a percentage of average net assets) period:
Total Fund
Euclid Market Neutral Management 12b-1 Other Operating 1 3 1 3
Fund Fees(2) Fees(1) Expenses Expenses(2) Year Years Year Years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares.............. 1.35%* 0.30% 0.65% 2.30%* 77 123 77 123
Class B Shares.............. 1.35%* 1.00% 0.65% 3.00%* 80 123 30 93
Class C Shares.............. 1.35%* 1.00% 0.65% 3.00%* 43 93 30 93
Class I Shares.............. 1.35%* - 0.65% 2.00%* 20 63 20 63
</TABLE>
* After expense reimbursement
- ----------
(1) The 12b-1 Fees include a 0.25% Service Fee, which is paid to financial
services firms, including National Association of Securities Dealers, Inc.
("NASD") member firms (commencing one year after purchase with respect to
Class B and Class C Shares) for continuous personal service by such firms to
investors in the fund, such as responding to shareholder inquiries, quoting
net asset values, providing current marketing materials and attending to
other shareholder matters. The distributor retains all or a portion of the
asset-based sales charge also included in the 12b-1 Fees; the remainder is
paid to brokers for promoting sales of the fund's shares. The NASD limits
asset based sales charges to 6.25% of new sales, plus interest. Long-term
shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by the NASD.
(2) The Manager has voluntarily undertaken to limit the expenses of the fund
(exclusive of taxes, interest, dividends and interest paid on securities
sold short, brokerage commissions, 12b-1 fees and extraordinary expenses)
until April 30, 1999 to 2.00% of its average net assets effective upon its
commencement of operations. The Management Fees noted above, without
reimbursement, would be 1.50% for each Class, and Total Fund Operating
Expenses would be 2.45% for Class A Shares, 3.15% for Class B and Class C
Shares, and 2.15% for Class I Shares.
3
<PAGE>
INVESTMENT OBJECTIVE
Euclid Market Neutral Fund (the "fund") seeks to increase the value of your
investment over the long-term (capital appreciation) in bull markets and in bear
markets while maintaining minimal portfolio exposure to general equity market
risk by always having both long and short positions in equity securities.
By taking long and short positions in different stocks, the fund attempts to
neutralize the effect of general stock market movements on the fund's
performance. Although the fund's investment strategy seeks to minimize the risk
associated with investing in the equity market, an investment in the fund will
be subject to the risk of poor stock selection by the Manager. In other words,
the Manager may not be successful in executing its strategy of taking long
positions in stocks that outperform the market and short positions in stocks
that underperform the market (see "Risk Factors").
The fund's performance benchmark is the return on 3-month U.S. Treasury Bills.
An investment in 3-month U.S. Treasury Bills is different from an investment in
the fund because Treasury Bills are backed by the full faith and credit of the
United States, have a fixed rate of return and a short duration, and have no
risk of losing capital.
Except as explicitly set forth in this prospectus or in the SAI, the investment
objective and policies of the fund may be changed without shareholder approval.
OUR GENERAL INVESTMENT PHILOSOPHY AND STRATEGY
We believe that stocks of companies with improving fundamentals will, over time,
outperform stocks of companies with deteriorating fundamentals, though this
relationship may not hold over the short term for various reasons. We also
believe that stocks with low valuations relative to their historical norm will
outperform stocks with high valuations relative to their historical norm. We
seek to identify stocks at the extremes using a variety of proprietary stock
selection models. These models analyze fundamental trends and data on companies,
as well as the price histories of their stocks. Fundamental data includes
earnings, dividends, cash flow, revenues, and book value. Some examples of
valuation measures are price-to-earnings ratio, price-to-cash flow ratio,
price-to-book value ratio, and dividend yield.
Certain stock selection models used are designed to predict relative performance
of stocks comprising broad universes of stocks. Others are designed to perform
favorably within more specific areas of the market, such as growth stocks or
value stocks. Though different models may emphasize different variables, the
models have certain similarities. Generally speaking, they all rank stocks on
the underlying company's fundamentals and how the trend in such fundamentals
compares to the stock's current valuation. A model's output is a best-to-worst
ranking of stocks in the particular universe being examined. Stocks with the
highest scores tend to outperform the average stock in the universe; stocks with
the lowest scores tend to underperform the average stock in the universe.
The fund strives to profit from the models' predictive power by buying stocks
that are ranked favorably (and therefore deemed likely to outperform) and by
selling short stocks that are ranked poorly (and therefore deemed likely to
underperform). Under normal circumstances, certain of the fund's investments
will be profitable during a general rise in stock prices and certain of the
fund's investments will be profitable during a general stock market decline. The
fund will, under normal circumstances, strive to maintain a balance between
investments that are expected to be profitable during a general rise in stock
prices and investments that are expected to be profitable during a general stock
market decline. If the stocks held long outperform the stocks sold short, the
fund will profit, regardless of whether the stocks held long appreciate in value
or whether the stocks sold short depreciate in value. Conversely, if the stocks
held long underperform the stocks sold short, the fund will incur a loss. The
fund may also invest in equity derivatives, such as futures and options, when it
deems appropriate. Please read the "Other Investment Policies" and "Risk
Factors" sections of this prospectus for more detailed information about the
investment practices of the fund. The SAI has further details.
We designed Euclid Market Neutral Fund for investors who seek to balance the
need for a total return greater than the return on 3-month U.S. Treasury Bills
in bull markets and in bear markets with the need to limit the risks associated
with investing in stocks. As with any mutual fund, there is no assurance that
the fund's objective will be achieved. An investor desiring capital appreciation
with minimal exposure to general equity market risk may wish to consider the
fund.
4
<PAGE>
OTHER INVESTMENT POLICIES
Money market instruments. To meet margin requirements, redemptions or for
investment purposes, the fund will hold a portion of its assets in full faith
and credit obligations of the United States (e.g., U.S. Treasury Bills), high
quality short-term notes, commercial paper or other money market instruments. To
be considered "high quality" such obligations must be rated at least "A-2" or
"AA" by Standard & Poor's ("S&P") or Prime 2 or "Aa" by Moody's Investors
Service, Inc. ("Moody's"), issued by companies having an outstanding debt issue
rated at least "AA" by S&P or at least "Aa" by Moody's, or determined by the
Manager to be of comparable quality to any of the foregoing.
Repurchase agreements. The fund may buy a security issued by the U. S.
Government (including its agencies) at one price and at the same time agree to
sell the security back to the seller at a higher price, usually on the next
business day (a "repurchase agreement"). Repurchase agreements offer a means of
generating income from excess cash that the fund might otherwise hold
uninvested. Delays in payment or losses could result if the other party to the
agreement defaults or becomes bankrupt. The fund's repurchase agreements must be
fully backed by collateral that is marked to market, or priced, each day; and it
will enter into repurchase agreements only with member banks of the Federal
Reserve System or primary dealers in U.S. Government securities.
Securities of foreign issuers. The fund's long and short positions may include
equity securities of foreign issuers if they are principally traded in the
markets of the United States and may also include up to 5% of its assets in
securities that are principally traded outside the United States. Such foreign
issuers may be subject to different, and often less comprehensive, accounting,
reporting and disclosure standards than comparable U.S. companies and may be
subject to risks related to economic and political conditions in foreign
countries, including possible nationalization or expropriation of their assets.
Securities of foreign issuers may be less liquid and at times more volatile than
securities of comparable U.S. companies.
Illiquid securities Illiquid securities may be difficult to sell promptly at an
acceptable price, or may be sold only pursuant to certain legal restrictions.
Difficulty in selling securities may result in a loss or entail expenses not
normally associated with the sale of a portfolio security. No more than 15% of
the fund's net assets may be invested in illiquid securities.
Portfolio turnover rate We do not usually consider the length of time the fund
has held a position when making investment decisions. The fund's turnover rate
may be higher than that of other mutual funds (a portfolio turnover rate in
excess of 100% may be deemed to be high) and may vary significantly from time to
time depending on the volatility of economic and market conditions. Although the
rate of portfolio turnover is difficult to predict, it is not anticipated that
the annual portfolio turnover rate of the fund will exceed 200% under normal
circumstances (short sales and associated closing transactions are not included
in portfolio turnover because there is no intention to maintain the short
position for more than one year). It is, however, impossible to predict
portfolio turnover in future years. High portfolio turnover (100% or more) may
result in realization of taxable capital gains, and generally involves some
expense, including brokerage costs. To the extent portfolio turnover results in
the realization of net short-term capital gains, such gains ordinarily are taxed
to shareholders at ordinary income tax rates. (The SAI contains a detailed
explanation of certain relevant tax considerations).
Lending securities The fund may lend securities to broker/dealers and
institutions as a means of earning income. Delays or losses could result if a
borrower becomes bankrupt or defaults on its obligation to return the loaned
security. The fund will lend securities only (a) pursuant to agreements
requiring that the loan be fully backed by collateral at all times, and (b) if
the value of all loaned securities is less than one-third of the fund's total
assets.
Borrowing The fund may make temporary borrowings from banks to cover
redemptions. Although the fund does not anticipate the need to borrow, if it
should and the performance of the fund's investments failed to cover interest
and other costs of borrowing, the net asset value of its shares would decrease
faster than if the fund had no borrowings outstanding.
THE PORTFOLIO MANAGER
David Katzen is the fund's portfolio manager. He has been with the Manager since
its inception and has worked for affiliates of the Manager since 1986. Mr.
Katzen is also the portfolio manager, and has been since their inceptions, for
three funds in the Zweig Series Trust, a registered investment company managed
by an affiliate. Mr. Katzen received his B.A. in Mathematics from City
University of New York and an M.A. in Mathematics from Dartmouth College, where
he was admitted to the Ph.D. program.
5
<PAGE>
RISK FACTORS
INVESTMENT RISK There is a trade-off that successful investors are keenly aware
of -- the stock market's long-term upward trend comes at the price of volatility
(share prices go up and down) and the risk of losing your money (your investment
may be worth less when you sell). The chart below illustrates how often the Dow
Jones Industrial Average (DJIA) has suffered double-digit declines from one
year's high to the next year's low from January 1, 1900, through December 31,
1997. Some declines end relatively quickly. For example, the major market
declines of 1987 (the DJIA declined 36.1% in 55 days, excluding dividends) and
1990 (the DJIA declined 21.2% in 87 days) were among the shortest bear markets
on record; and the 13.2% correction in 1997 lasted only 62 days.
DJIA Number of times in Average Time since last
LOSS the past 97 years occurrence occurrence
- ---- ----------------- ---------- ----------
- -10% 66 every 1.5 years last year
- -20% 39 every 2.5 years 7 years
- -30% 21 every 4.6 years 10 years
- -40% 11 every 8.7 years 23 years
Source: InvesTech Research
Other market declines have been more prolonged. In the bear market of 1973-1974,
the DJIA declined 45.1% over 23 months. In 1981-1982, the DJIA declined 24.1%
over a period of nearly 16 months.
Once you've incurred a loss, it can take many months (and sometimes years) to
return to break-even. For example, if you exclude dividends it took about 10
months to break-even from the market top in July 1990. In 1987, it took about 18
months to get back to the prior market top. By comparison, it took almost 10
years to return to break-even from the market top in 1973, and 24 years from the
1929 market top to break-even!
It is impossible to predict the timing and extent of corrections and bear
markets, but it should be noted that periods of unusually high returns have
historically increased the risk of stock investing for subsequent periods. The
current bull market, which began in 1982, has been the best 16 year period ever
for the DJIA, producing an average annual return of 13.8%, excluding dividends.
Successful investors recognize the risks associated with investing in stocks and
stock mutual funds. It is important that you try to understand your "financial
personality". What is your tolerance for loss? How patient will you be during
the break-even period? What is your financial staying power?
It is also important to note that the impact of a bear market depends not only
upon the extent of the decline, but also when in your investing lifecycle it
happens. For many people, the closer they are to retirement - or the deeper they
are into retirement - the harder it is to calmly view a bear market as a
temporary decline.
Since the fund will have both a long equity portfolio and a short equity
portfolio, it will involve different risks from those normally associated with a
mutual fund. While we seek to minimize the fund's exposure to general market
risk with a short portfolio to offset the fund's long portfolio, we cannot
eliminate risk.
MANAGEMENT RISK Despite the intent to reduce risk, it is possible that the
fund's long positions will decline in value at the same time that the value of
the securities sold short increases, thereby increasing the potential for loss.
It is also possible that we will misjudge the effect a particular security will
have on exposure to market risk or that the particular combination of securities
held long and those sold short will fail to insulate the fund from general
equity market risk as anticipated. Though our models have been used successfully
in the past (see "Advisor's Prior Performance" below), there is no guarantee
that they will continue to accurately predict relative stock performance, assess
risk, or contribute to performance in any way in the future. It is also possible
that the fund will not be able to implement the strategy dictated by the models
for reasons set forth below under "Risks of Short Sales".
RISKS OF SHORT SALES Under normal circumstances, the short positions of the
fund will be substantial so as to neutralize the long positions and thereby
minimize the fund's exposure to general equity market risk. The short positions
will be in securities we judge to be relatively overvalued. In order to
establish a short position, the fund must first borrow the security from a
broker or other institution to complete the sale. The fund may not always be
able to borrow a security, in which event it will lose the opportunity to
benefit from that short sale even if our models correctly identify an overvalued
security. The fund will incur a loss as a result of a short sale if the price of
the borrowed security increases between the date of the short sale and the date
on which the fund replaces such security. The fund will realize a gain if the
security declines in price between those dates. There is also a risk that the
fund will be unable to close out a short position at any particular time or at
an acceptable price. During the time the fund is short a security it is subject
to the risk that the lender will terminate the loan at a time when the fund is
unable to borrow the same security from another lender, in which event the fund
may be "bought in" at the price required to purchase the security to close out
the short position. Although the fund's gain is limited to the amount at which
it sold a security short, its potential loss is limited only by the maximum
6
<PAGE>
attainable price of the security less the price at which the security was sold
short. Until the fund replaces a borrowed security, it will maintain daily a
segregated account containing cash, U.S. Government securities, or other liquid
securities such that the amount deposited in the account plus any amount
deposited with the broker or other custodian as collateral will at least equal
the current market value of the security sold short. The fund also is required
to repay the lender any dividends or interest that accrue during the period of
the loan. Depending on arrangements made with such broker or custodian, the fund
may not receive any payments (including interest) on collateral deposited with
the broker or custodian. The fund will not make a short sale if the market value
of all short positions would exceed 100% of the value of the fund's net assets
after giving effect to such sale.
RISKS OF FUTURES AND OPTIONS In addition to purchasing or selling short
individual securities, the fund may purchase or sell short any type of future or
option related to its investments. These may include options not traded on
exchanges and futures or options tied to individual securities or to stock
indexes or averages. Futures and options also may be used or combined with each
other in order to adjust the risk and return characteristics of an overall
strategy. Some futures and option contracts are customized financial contracts
between two parties. Such contracts are subject to the additional risk that the
counterparty will not meet its obligations under the contract. They also may be
less liquid and more difficult to value than standardized contracts traded on a
regulated exchange
Futures and options tied to a securities index utilizing standardized contracts
that are traded on an exchange have been used by mutual funds for many years to
manage their portfolios more efficiently. Although the value of futures and
options depends on the price of the security, index or other asset to which it
is tied, futures and options involve market risk in excess of their value. For
example, futures on securities indexes currently require a margin deposit of
only 2% to 5% of the position size represented by the futures contract. An
advantage of using futures and options is that transaction costs normally will
be lower than purchasing or selling a related security or index. However, the
use of futures may result in larger losses or smaller gains than would otherwise
be the case. The prices of options or futures and the price movements of the
securities that the future or option is intended to simulate may not correlate
well. The liquidity of the market in futures contracts also could be adversely
affected by "daily price fluctuation limits." These limits, established by the
relevant futures exchange, limit the price fluctuation of an index future during
a single trading day. Once the contract's daily limit has been reached, no
trades may be entered into at a price beyond that limit. In such event, it may
not be possible for the fund to close out its futures position. This may compel
the fund to continue to make daily cash payments to the broker to meet margin
requirements. The futures markets also may attract more speculators than do the
securities markets, because deposit requirements in the futures markets are less
onerous than margin requirements in the securities markets. Increased
participation by speculators in the futures markets may cause price distortions.
RISKS OF EQUITY SWAP CONTRACTS In an equity swap contract, one party generally
agrees to pay the other party: (i) the theoretical amount by which a stock or
basket of stocks comprising an agreed upon securities index or average (the
"notional amount") increases in value during the time the contract is in effect,
plus (ii) the dividends that would have been received on those stocks over that
period. The other party agrees to pay to the first party (i) a floating rate of
interest (typically tied to the London Inter Bank Offered Rate) on the notional
amount plus (ii) the amount by which the notional amount would have decreased in
value had it been invested in such stocks. Accordingly, if the fund is long an
equity swap contract it will generally realize a loss if the value of the agreed
upon stock or stocks declines and will generally realize a gain if the value of
the stock or stocks rises. Conversely, if the fund is short an equity swap
contract it will generally realize a loss if the stock or stocks rises and will
generally realize a gain if the value of the stock or stocks declines. The fund
only will enter into equity swap contracts that require each party's obligations
to be netted out daily, with the fund paying or receiving each day the net
amount necessary to mark the contract to market.
Equity swap contracts may provide a less costly alternative for implementing our
strategy than maintaining long and short positions. If there is a default by the
counterparty to an equity swap contract, however, the fund will be limited to
contractual remedies pursuant to the agreements related to the transaction. In
the event of default, there can be no assurance that the fund will succeed in
pursuing its contractual remedies. The fund thus assumes the risk that it may be
delayed in or prevented from obtaining payments owed to it pursuant to the
contract. Pursuing its contractual remedies may also entail expense. The fund
will not enter into an equity swap contract unless the unsecured senior debt of
the counterparty is rated at least A by Moody's or S&P at the time of entering
into such transaction, and will monitor the credit of equity swap contract
counterparties in order to minimize these risks.
The staff of the Securities and Exchange Commission considers equity swap
contracts to be illiquid securities. Consequently, while the staff maintains
this position, the fund will not invest in equity swap contracts if, as a result
of the investment, the total value of such investments together with that of all
other illiquid securities which the fund owns would exceed 15% of the fund's net
assets. The net amount of the excess, if any, of the fund's obligations over its
entitlement with respect to each equity swap contract will be accrued on a daily
basis, and an amount of cash, U.S. Government Securities or other liquid
securities having an aggregate market value at least equal to the accrued excess
will be maintained in a segregated account by the fund's Custodian. The fund
does not believe that its obligations under equity swap contracts are senior
securities, so long as such a segregated account is maintained, and accordingly,
the fund will not treat them as being subject to its borrowing restrictions.
7
<PAGE>
YEAR 2000 PREPAREDNESS Because computer programs were designed using only two
fields to indicate the year, at midnight December 31, 1999, computers will be
unable to recognize that January 1 is the year 2000. The major systems that
would impact the fund with respect to the year 2000 are those of the transfer
agent and custodian. The fund has been advised in writing by both the transfer
agent and the custodian that they are working to fix, and expect to have fixed
in time, all of the issues relating to the year 2000. While management of the
fund will continue to monitor the progress of the transfer agent and the
custodian in solving the year 2000 problem, no assurance can be given that their
systems will be fixed on time, or what the magnitude of the problems would be if
such systems are not fixed.
ADVISOR'S PRIOR PERFORMANCE
Euclid Advisors LLC also serves as the manager of other accounts. The
performance information shown below is based on a composite of all accounts with
investment objective, policies and strategies that are substantially similar to
those of the fund managed by Euclid Advisors LLC or by Euclid Advisors, Inc.,
the Manager's predecessor, and Zweig/Katzen Investors, L.P. (collectively, the
"Accounts"). David Katzen was the portfolio manager for each of the Accounts
since inception. The performance information shown in the table below has been
adjusted to give effect to the estimated annualized expenses (without giving
effect to any expense waivers or reimbursements) of the different classes of
shares during the fund's first year of operations. Quarterly performance data is
set forth in the SAI. The information below should not be considered a
prediction of future performance of the fund. The Accounts were not registered
under the 1940 Act and therefore were not subject to the diversification and
other requirements of the 1940 Act and the Internal Revenue Code. If the
Accounts had been subject to these requirements, their performance might have
been adversely affected. The performance of the Accounts was computed using a
method based on the standards developed by the Association of Investment
Management & Research ("AIMR"), which differs from the performance standards
required by the Securities and Exchange Commission for mutual funds. Mutual
funds compute net asset values every day, while the AIMR method does not.
Therefore, while mutual funds account for cash flow on a daily basis, they are
accounted for on a monthly basis under the AIMR method. As a result, the
performance of the fund may be higher or lower than the performance of the
Accounts. The following table also shows the average annual total return on
3-month U.S. Treasury bills for the same periods.
<TABLE>
<CAPTION>
Performance of Accounts adjusted for the One-Year Period Three-Year Period Five-Year Period Eight-Year Period
fees and expenses of the different classes of Ended Ended Ended From inception on
Shares of the Fund: January 1, 1990
Dec. 31, 1997 Dec. 31, 1997 Dec. 31, 1997 to Dec. 31, 1997
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Class A with maximum sales charge 3.34% 9.02% 7.43% 11.11%
Class A with no sales charge 9.36% 11.10% 8.66% 11.90%
Class B with CDSC 3.17% 9.21% 7.47% 11.22%
Class B with no CDSC 8.60% 10.33% 7.90% 11.22%
Class C with CDSC 7.24% 10.33% 7.90% 11.12%
Class C with no CDSC 8.60% 10.33% 7.90% 11.12%
Class I 9.68% 11.43% 8.98% 12.23%
Performance of 3-month U.S. Treasury Bills* 5.31% 5.45% 4.78% 5.14%
</TABLE>
* Source: Morningstar, Inc.
The above table is not the performance of the fund. Giving effect to the
expense limitation set forth in the "Fee Table" section, the average annual
total return of the Accounts for the one-year, three-year, five-year and
eight-year (since-inception) periods ended December 31, 1997 would have been
approximately 0.16% higher for all classes of shares.
An investment in 3-month U.S. Treasury Bills is different from an investment in
the fund or in the Accounts because Treasury Bills are backed by the full faith
and credit of the United States, have a fixed rate of return and a short
duration, and investors in Treasury Bills do not risk losing capital. The return
of 3-month Treasury bills has historically been the benchmark for market neutral
accounts in the institutional market. One source of the fund's return will be
interest income earned on the proceeds from short sales, which should
approximate the return on 3-month Treasury bills. The fund's total return will
exceed this amount only if the Manager's security selections results in a net
gain to the fund. Therefore, the 3-month Treasury bill benchmark serves to
measure the Manager's contribution to performance.
CHOOSING AMONG CLASSES WHEN PURCHASING SHARES
The fund offers investors four classes of shares which are described below. All
except Class I Shares bear sales charges in different forms and amounts and all
bear different levels of expenses (see Fee Table). You should choose the class
of shares that is most beneficial given the amount of your purchase, the length
of time you expect to hold the shares and other relevant circumstances.
Class A shares are sold with an initial sales charge that varies based upon the
amount invested as shown in the table below. Class B Shares have no initial
sales charge, but are subject to a declining contingent deferred sales charge
(CDSC) if sold within six years of purchase. Class C Shares have no initial
sales charge, but are subject to a CDSC if sold within one year of purchase.
Class B and Class C Shares have higher annual expenses than Class A Shares.
Class B Shares convert to Class A Shares after a holding period of seven years
from the initial purchase. Class C Shares have a shorter CDSC
8
<PAGE>
period than Class B Shares, but they do not convert to Class A Shares. Class I
Shares are offered at net asset value without an initial sales charge and are
not subject to a contingent deferred sales charge or a Rule 12b-1 distribution
fee. Class I Shares are only available to existing clients of Euclid Advisors
LLC, to persons subject to the Manager's Code of Ethics relating to securities
transactions and to tax-exempt retirement plans of Zweig Securities Corp. and
its affiliates, and certain institutional investors that invest at least $1
million directly with Zweig Securities Corp., the distributor. Institutional
investors include: (1) unaffiliated benefit plans, such as qualified retirement
plans (other than individual retirement accounts and certain other self-directed
retirement plans); (2) unaffiliated banks and insurance companies purchasing for
their own accounts; and (3) endowment funds of unaffiliated non-profit
organizations.
Contingent Deferred Sales Charge (CDSC) The applicable CDSC rate for each class
of shares is set forth in the Fee Table and under "Class B Shares." The CDSC is
imposed on the lesser of the current market value or the initial cost of the
shares being redeemed. No CDSC is imposed upon shares acquired by reinvesting
distributions. In determining whether a CDSC applies, the order of redemption is
first of shares purchased through reinvestment and then of shares held the
longest. Any CDSC imposed on a redemption is paid to the distributor or directly
to a third party at the direction of the distributor.
We may waive the CDSC on redemption(s): (a) following the death of a
shareholder; (b) if a shareholder becomes unable to engage in any substantial
gainful activity because of a medically determinable physical or mental
impairment which can be expected to result in death or be of long-continued and
indefinite duration; (c) when a total or partial redemption is made in
connection with a distribution from retirement plans after reaching age 59 1/2,
except that if, immediately prior to the redemption, the aggregate amount
invested by the retirement plan in Class B Shares of the fund (excluding the
reinvestment of distributions) during the prior four year period equals 50% or
more of the total value of the retirement plan's assets in the fund or any other
fund distributed by Zweig Securities Corp., then the CDSC will not be waived;
(d) from certain retirement plans; (e) under the systematic withdrawal program
if the amount being withdrawn per month is no more than 1% of the value of the
account at the time the program was established; and (f) effected pursuant to
the fund's right to liquidate a shareholder's account if it is less than the
then effective minimum account size.
The Distributor has sold, and expects to sell in the future, the right to
receive all or substantially all of the 12b-1 distribution fees on Class B
Shares together with the related CDSC in the event the Shares are redeemed
within six (6) years of purchase. The holder of the right to receive such
payments, in its sole discretion, may elect to establish its own waiver
criteria, which may differ from those set forth above.
CLASS A SHARES Class A Shares are sold at net asset value plus the applicable
sales charge. The offering price applies to purchases made by a single purchaser
or by a single trust account. An individual, his or her spouse, and children
under 21 are considered to be a single purchaser. The sales charge on Class A
Shares is allocated between your investment dealer and Zweig Securities Corp.,
the distributor, as shown below.
Quantity discounts on Class A Shares. When you invest in Class A Shares, you may
receive quantity discounts at certain dollar levels, or breakpoints. The more
you invest, the smaller percentage you pay in sales charges, as shown below.
Sales Charge As a Percentage of
-------------------------------
Offering Net Asset
Price of Value of Dealer's
the Shares the Shares Sales
Amount Invested Purchased Purchased Concession *
- --------------- --------- --------- ----------
Less than $50,000 5.50% 5.82% 4.75%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.25%
$250,000 but less than $500,000 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000 1.75% 1.78% 1.50%
$1,000,000 or more 0.00% 0.00% (see below)
* From the date of this Prospectus through June 30, 1998, the dealer's sales
concession will be 100% of the sales charge.
- ---------------
Commissions (as set forth below) will be paid to dealers who initiate and are
responsible for purchases of $1 million or more and for purchases at net asset
value made by unallocated accounts held by third party administrators,
registered investment advisers, trust companies, and bank trust departments
which exercise discretionary authority or hold accounts in fiduciary, agency,
custodial or similar capacity if in the aggregate such accounts equal or exceed
$1 million and by retirement plans with assets of $1 million or more or at least
50 eligible employees.
Dealer's Commission
Amount Purchased (as % of purchase)
- ---------------- ------------------
$1,000,000 to $2,000,000 0.75%
$2,000,000 to $5,000,000 0.50%
Amount over $5,000,000 0.25%
No initial sales charge applies on these investments; however, a 1% CDSC will
apply on redemptions within 18 months of purchase, except for redemptions of
shares purchased by an investor in amounts of $1 million or more where such
investor's dealer of record, due to the nature of the investor's account,
notifies the distributor prior to the time of the investment that the dealer
waives the commission otherwise payable to the dealer as described above, or
agrees to receive such commissions ratably over an 18 month period.
9
<PAGE>
Class A Shares of the fund are made available to 401(k) participants in the
Merrill Lynch Daily K Plan (the "Plan") at net asset value ("NAV") without an
initial sales charge if the Plan has at least $3 million in assets or 500 or
more eligible employees. Class B Shares of the fund are made available to Plan
participants at NAV without a CDSC if the Plan has less than $3 million in
assets or fewer than 500 eligible employees. On such sales, the distributor does
not make the dealer payment described under Class B Shares. For further
information see "Retirement Plans" in the fund's SAI.
Class A Shares also may be purchased at net asset value by current or retired,
trustees, directors, officers or employees, and their families, of the fund,
Zweig Mutual Funds, Euclid Advisors LLC, Zweig Securities Corp. and any company
affiliated with these companies, or by current or retired registered
representatives or full-time employees, and their families, of securities
dealers that are members of the NASD. Class A Shares also may be sold at net
asset value through certain investment dealers registered under the Investment
Advisers Act of 1940 and other financial services firms that adhere to certain
standards established by the principal distributor, including a requirement that
such shares be sold for the benefit of their clients participating in a "wrap
account" or similar program under which such clients pay an ongoing fee to the
investment adviser or other firm and to retirement plans and deferred
compensation plans and trusts used to fund those plans (including, for example,
plans qualified or created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code) and "rabbi trusts" that buy shares for their own accounts, in each
case if those purchases are made through a broker or agent or other financial
intermediary that has made special arrangements with the Distributor for those
purchases. Such shares are sold for investment purposes and on the condition
that they will not be resold except through redemption or repurchase by the
fund. Class A Shares also may be purchased at net asset value for shareholders
by dealers where the amount invested represents redemption proceeds from funds
distributed other than by the distributor and where the shareholder has paid a
sales charge in connection with the purchase of such other fund's shares;
provided that (i) such Class A Shares are purchased within 30 days after
redemption of such other fund's shares, and (ii) sufficient documentation of
such redemption as the distributor may require shall be provided at the time the
Class A Shares are purchased. This provision is not available where the shares
of a fund being redeemed were subject to a deferred sales load or redemption
fee.
Cumulative quantity discounts on Class A Shares A new purchase may be combined
with Class A Shares you already own of the fund and any other mutual fund that
is distributed by Zweig Securities Corp. to qualify for a discount. The sales
charge on the shares being purchased will be at the rate shown in the table
above applicable to the net asset value of the shares then owned plus the amount
of the new purchase. To receive this discount, you or your investment dealer
must request it when placing the order and give the transfer agent or
distributor sufficient information to confirm that your purchase qualifies for
the discount. We reserve the right to change or terminate quantity discounts at
any time.
Quantity discounts through a Letter of Intention You may pay a reduced sales
charge on Class A Shares if you sign a Letter of Intention at the time of your
purchase. The Letter also may be back-dated to include purchases made within 90
days prior to signing the Letter of Intention. The Letter, included on the
application form in this Prospectus, states your intention to purchase a
sufficient quantity of Class A Shares of the fund and any other mutual fund
distributed by Zweig Securities Corp. indicated within the 13-month period
specified to qualify for a reduced sales charge. Purchases under the Letter are
made at the sales charge applicable to the entire amount to be purchased under
the Letter, as if purchased in a single transaction. A Letter of Intention can
be amended during the 13-month period by filing an amended Letter with the same
expiration date as the original.
The Letter of Intention is not binding. During the period covered by the Letter,
the transfer agent will hold shares in escrow representing 5% of the intended
purchase. After the end of the period, a price adjustment based upon the actual
amount invested will be made (by redeeming escrowed shares if the purchase is
not completed or by investing the difference in sales charges if the total
purchases under the Letter qualify for a lower sales charge).
CLASS B SHARES Class B Shares are sold without an initial sales charge. For
sales of Class B Shares, your dealer will receive 4% of the purchase amount from
the distributor. The distributor, or its assignee, is reimbursed over time by
the 12b-1 fees paid by Class B Shares and, if Class B shares are redeemed within
six years, by a declining CDSC paid by the redeeming shareholder as follows:
The CDSC
Year Since Purchase Was Made is equal to
- ---------------------------- -----------
Year One 5%
Year Two 4%
Year Three 3%
Year Four 3%
Year Five 2%
Year Six 1%
Year Seven None*
- ---------------
* Class B Shares convert to Class A Shares after seven (7) years as described
below.
10
<PAGE>
Class B Share Conversion Feature After a holding period of seven years from the
initial date of purchase, Class B Shares automatically convert to Class A Shares
of the fund at respective net asset values on the 10th business day of the month
following the anniversary date. At the time of conversion, Class B Shares of the
fund acquired through reinvestment of distributions will convert to the
corresponding Class A Shares of the fund pro-rata with Class B Shares of the
fund not acquired through reinvestment. Conversion of Class B Shares to Class A
Shares will not be deemed a purchase or sale of the shares for federal income
tax purposes. The conversion of Class B Shares will relieve the Class B Shares
that have been held for at least seven years from the higher ongoing
distribution fees. Only Class B Shares have this conversion feature.
CLASS C SHARES Class C Shares are sold without an initial sales charge. For
sales of Class C Shares, your dealer will receive up to 1% of the purchase
amount in a manner agreed in advance from the distributor. If you redeem within
one year of your purchase, you will be charged a CDSC equal to 1.25% of the
lesser of the current market value or the initial cost of the shares being
redeemed.
Class B and Class C Shares offer the benefit of putting all of your dollars to
work immediately; however, they have higher annual expenses and pay lower
dividends than Class A Shares. Class C Shares have a shorter CDSC period than
Class B Shares; however, they do not convert to Class A Shares.
CLASS I SHARES Class I Shares, which have no initial sales charge and no Rule
12b-1 fee, are currently available for purchase only from Zweig Securities Corp.
by existing clients of Euclid Advisors LLC, by persons subject to the Manager's
Code of Ethics relating to personal securities transactions and by tax-exempt
retirement plans of Zweig Securities Corp. and its affiliates and certain
institutional investors. Class I Shares may be purchased at net asset value in
exchange for security positions on deposit at the Depository Trust Company
("DTC") valued using the same proceedures as used to determine net asset value,
or by a combination of such positions and cash, subject to the determination by
the portfolio manager that the security positions to be exchanged are
appropriate investments and the transaction is in the fund's interest.
Generally, the transaction will be a taxable event for federal income tax
purposes. Class I Shares are not available in all states.
The Distributor will reallow up to 0.15% to dealers whose representatives have
sold or are expected to sell substantial amounts of shares of funds distributed
by Zweig Securities Corp. provided that the dealer has agreed to supply special
assistance in marketing shares of the funds, including providing access to the
dealer's sales personnel and information dissemination systems such as computer
screens, internal publications, publications sent to clients and mailing lists.
These reallowances are in addition to the sales concessions shown in the above
tables, and may be subject to chargeback for redemptions within one year. An
alternative arrangement, available to any dealer that has agreed to provide
marketing, record keeping and related administrative services to tax-qualified
employee benefit plans, including the processing of orders for investment and
reinvestment of plan assets in shares of the funds at net asset value, provides
for compensation at an annual rate of up to 0.20% of plan participant holdings
of Zweig Funds. In addition, Zweig Securities Corp. also may pay dealers a fee
at the annual rate of up to 0.10% of the average daily net assets that have been
continually invested in the funds for at least four years. Zweig Securities
Corp. also may pay dealers a fee of up to 0.10% of the average daily net assets
invested through such dealers in Zweig Funds by participants in programs
sponsored by such dealers. Zweig Securities Corp. reserves the right to alter or
discontinue paying any of the foregoing fees at any time. These fees will be
paid from Zweig Securities Corp.'s or the Manager's own funds, including past
profits or any other source available to them. With respect to certain
retirement plans the distributor may not make dealer payments as described
above.
The Distributor, at its expense, may also provide dealers who have sold shares
of the fund with financial assistance in connection with conferences, sales
training or promotional programs for their employees, seminars for the public,
advertising campaigns regarding one or more of the funds it distributes or other
dealer-sponsored special events. Such financial assistance may include payment
for travel expenses and lodging incurred in connection with trips taken by
invited registered representatives and members of their families for meetings
and seminars of a business nature.
The above arrangements relate to purchases effected through dealers in the
United States. Purchases outside the United States may be subject to local rules
and customs, and different sales charges, fees and dealer compensation may
apply. Certain dealers may not sell all classes of shares.
11
<PAGE>
HOW TO INVEST IN THE FUND
You can buy shares through your investment professional, directly from the
fund's transfer agent, or automatically through a regular investment plan.
- ----------------------------------------------------------------
Minimum
Minimum Initial Minimum Initial Subsequent
Class C Investment IRA Investment* Investment
- ----------------------------------------------------------------
A, B and C $1,000 $250 None
I $1,000,000 $1,000,000 None
- ----------------------------------------------------------------
*or other retirement accounts, pension and profit sharing plans, custodial
accounts under the Uniform Gift to Minors Act, trusts and estates or qualifying
group plans.
The fund and its transfer agent have appointed, and may in the future appoint,
organizations qualified to serve in such capacity to act as a subtransfer agent
for the fund. Purchases of the fund will be at the offering price next
determined after the transfer or sub-transfer agent or investment dealer
receives the order, provided the dealer transmits the order to the fund's
transfer or subtransfer agent that day. We reserve the right to change or waive
minimums or to reject any order.
How to Buy Shares Through your investment professional
o To open your account, contact your investment professional.
If you invest through an investment professional, the firm may have its own
service features, transaction charges and fees. This prospectus should be read
in conjunction with such firms' material regarding their fees and services. If
you wish us to refer you to an investment professional, call us at
1-800-272-2700. Investment professionals receive compensation for providing
investment advice, and such compensation may differ for selling shares of
different classes of Euclid Mutual Funds. The fund may be unable to provide
account information or other services for shares held in the name of, or
controlled by, an investment dealer.
How to Buy Shares Through the Transfer Agent
o Complete the attached application or send a letter specifying the
class of shares you wish to buy. If you do not specify a class, your
purchase will be automatically invested in Class A Shares.
o Enclose a check made payable to State Street Bank and Trust Company
or to Euclid Market Neutral Fund. (We will not accept third party
checks, i.e. any checks which are not payable to the order of State
Street Bank and Trust Company or Euclid Market Neutral Fund.)
o Mail to State Street Bank and Trust Company:
By regular mail: By courier or overnight mail:
2 Heritage Drive
P.O. Box 8505 Third Floor
Boston, MA 02266-8505 Quincy, MA 02171
Att: Euclid Mutual Funds Att: Euclid Mutual Funds
o For wire instructions (Federal funds) please call 1-800-628-0441.
o Automatic investment plan purchases. Move money from your bank
account or via payroll deduction into the fund on any day of each
month or quarter. Please refer to the application form in this
prospectus or call 1-800-272-2700 for assistance. If an account
registration is changed, this feature will be terminated unless its
continuance is specifically requested.
12
<PAGE>
HOW TO SELL YOUR FUND SHARES
You can sell your shares on any day the New York Stock Exchange (NYSE) is open.
The price you receive will be the net asset value less any applicable contingent
deferred sales charge. The net asset value you will receive is calculated as of
the close of regular trading on the NYSE on the day your sell order is received
at the transfer or subtransfer agent. Proceeds of your sale will generally be
mailed to you within seven days after your request is received. If shares are
bought with an uncertified check and sold within 15 days after purchase, the
proceeds may not be paid until 15 days after the purchase. If the fund is given
evidence of cleared funds, money will be released earlier.
Selling Your Shares Through Your Investment Professional
o Contact your investment professional if you bought your shares at
your brokerage firm. If you sell your shares through your investment
professional, the price you will receive will be the price of shares
as of the close of regular trading on the NYSE on the day the order
is transmitted to the transfer or subtransfer agent by your
brokerage firm, less any applicable contingent deferred sales
charge.
Selling Your Shares BY MAIL Through the Transfer Agent
o Send a letter to sell your shares to: State Street Bank and Trust
Company
By regular mail: By courier or overnight mail:
2 Heritage Drive
P.O. Box 8505 Third Floor
Boston, MA 02266-8505 Quincy, MA 02171
Att: Euclid Mutual Funds Att: Euclid Mutual Funds
o Remember to sign the letter exactly as your account is registered.
o Sales over $10,000 for individual accounts (over $25,000 for joint
accounts) require a signature guarantee of the registered owner(s)
or legal representative. Appropriate signature guarantors include:
banks and savings associations, credit unions, member firms of a
national securities exchange, municipal securities dealers and
government securities dealers. See the SAI or call 1-800-272-2700
for assistance.
o Corporate and Fiduciary shareholders selling shares must include the
appropriate documentation establishing the authority of the person
seeking to act on behalf of the account.
Selling your shares BY TELEPHONE through the Transfer Agent
You may sell your shares by telephone (unless you elected not to have this
privilege in your account application or your address of record has been changed
within the preceding 15 day). Call 1-800-272-2700
Proceeds will be mailed to the address on the account. If you designated a
domestic bank on the application form when you opened your account, you may have
redemption proceeds of $1,000 or more wired to the bank. Any change in wire
redemption directions requires a signature guarantee from an appropriate
guarantor. In order to sell shares on the day you place the order, the transfer
agent must receive your instructions to sell before the close of regular trading
on the NYSE.
The maximum amount that may be redeemed by telephone is $10,000 for individual
accounts ($25,000 for joint accounts). Neither the fund, the distributor, nor
the transfer agent will be liable for any loss in acting on telephone
instructions reasonably believed to be authentic, and the investor will bear the
risk of loss in the event of a fraudulent telephone redemption, provided that
the fund and/or its transfer agent has established and employed procedures
reasonably designed to confirm that instructions given by phone are genuine.
Such procedures would include requiring a form of personal identification from
the caller and recording telephone instructions. For identification purposes,
the fund's transfer agent may require such information as it deems necessary
before accepting redemption instructions. Without such reasonable procedures,
the fund may otherwise be liable for any losses due to unauthorized or
fraudulent instructions.
During periods of extremely drastic economic or market changes, it may become
difficult to implement a telephone redemption. In the event that you have
difficulty reaching the transfer agent at its toll-free number, you should
consider sending written redemption instructions in the manner explained above.
We reserve the right to refuse telephone redemption requests and to limit their
amount or frequency. If, however, we determine not to accept a telephone
redemption request, we will seek to advise you promptly of that decision and, to
the extent feasible, will communicate that decision by telephone.
13
<PAGE>
Redemptions normally will be made in cash. Redemptions also may be made in kind
pursuant to an election under Rule 18f-1 of the Investment Company Act of 1940
(the 1940 Act), as discussed more fully in the SAI. Rights of redemption may be
suspended if the NYSE is closed, other than customary weekend or holiday
closings, or for such other periods as the Securities and Exchange Commission
has permitted.
Reinstatement privilege If you have made a partial or complete redemption of
shares, you may reinvest all or part of the redemption proceeds and receive a
pro rata credit for any CDSC or initial sales charge paid, provided the
reinvestment is made within 30 days after the redemption. You may exercise this
privilege only once a year.
Systematic cash withdrawal programs If your account has $5,000 or more, you may
set up a program to receive a specific amount in cash either monthly or
quarterly. Contact your investment professional or complete the application form
in this prospectus. Under these programs, all distributions must be reinvested.
Purchasing additional shares while receiving payments under these programs
ordinarily will be disadvantageous because of sales charges. Shares redeemed may
be subject to a CDSC. We may modify or terminate these programs at any time. If
an account registration is changed, this feature will be terminated unless its
continuance is specifically requested.
Minimum account size If your account balance falls below $1,000 as a result of
redeeming shares, you may be given 60 days' notice to reestablish the minimum
balance. If you do not increase your balance, we reserve the right to close your
account and send the proceeds to you. Your shares will be redeemed at the net
asset value on the day your account is closed. We normally will not close an
account maintained in connection with a tax-deferred retirement plan.
EXCHANGE PRIVILEGE
You can exchange shares of the fund for shares of the same class of another fund
distributed by Zweig Securities Corp. at their respective net asset values. All
exchanges are effected as of the close of regular trading on the NYSE. You can
exchange shares either through your investment professional or, if the shares
are registered in your name, through the transfer agent. You may exchange shares
through the transfer agent by mail or by telephone, or you may instruct the
transfer agent to make systemic exchanges of fund shares on the 15th day of each
month or quarter (see the application form in this Prospectus).
Each exchange is a sale of shares of the fund and a purchase of the same class
of shares of another fund. An exchange may produce a gain or a loss for tax
purposes, and is subject to the terms and conditions applicable to telephone
redemptions and the minimum investment requirement of each fund. We reserve the
right to reject any exchange request, or to modify or terminate exchange
privileges upon 60 days' written notice to shareholders.
NET ASSET VALUE
The fund determines the net asset value of each class of its shares on each day
that the NYSE is open. Net asset values are calculated as of the close of
regular trading on the NYSE.
We value portfolio securities at market value when quotations are readily
available. We value securities for which market quotations are not readily
available at fair value as determined using procedures determined by the Board
of Trustees. We value short-term obligations having a remaining maturity of 60
days or less at amortized cost (which approximates market value).
DISTRIBUTIONS AND TAXES
Any net realized capital gains will be paid at least annually, except that net
short-term capital gains may be paid more frequently, together with the
dividends from net investment income.
Distributions are declared separately for each class of shares of the fund.
Distributions will be reinvested at net asset value unless you elect to receive
distributions in cash. If an account registration is changed, the cash election
will be terminated unless its continuance is specifically requested.
Shareholders who have elected to receive distributions in cash but whose
accounts had two consecutive mailings returned as "undeliverable", will
automatically have their future distributions reinvested at net asset value.
Because Class B and Class C Shares have higher 12b-1 fees, dividends on Class A
Shares will be higher than dividends on Class B and Class C Shares. Because
Class I Shares have no 12b-1 fees, dividends on Class I Shares will be higher
than dividends on Class A Shares.
The fund intends to qualify as a regulated investment company for federal income
tax purposes so long as, in management's view, such qualification is in the
shareholders' interest. We intend to distribute all of the fund's net investment
income and net capital gains so as to be relieved of federal taxes.
Distributions of net investment income and short-term capital gains are taxed as
dividends. For noncorporate taxpayers, long-term capital gains (defined as gains
realized upon
14
<PAGE>
the sale of assets held more than 18 months) are subject to a maximum tax rate
of 20% (10% for individuals in the 15% tax bracket). Gains realized upon the
sale of assets held more than 12 months but not more than 18 months (formerly
considered long-term gains) are now considered medium-term gains subject to a
maximum tax rate of 28% (15% for individuals in the 15% tax bracket).
Distributions are taxable when paid, whether taken in cash or reinvested, except
that distributions declared in November and December and paid in January are
taxable as if paid on December 31st. You should receive by January 31 of each
year, a statement showing the tax status of your distributions for the prior
year and the proceeds of your redemptions (including exchanges), if any. When
you sell your shares, their tax basis is the total of your cash investments plus
all distributions that have been reinvested, less any return of capital
distributions. To assist you in determining your tax basis, please keep your
year-end account statements with your other tax records. The foregoing is a
summary of certain federal income tax consequences. Be sure to consult your own
tax adviser to determine the precise effect of your investment in the fund on
your particular tax situation, and any state and local tax consequences.
THE DISTRIBUTOR
Zweig Securities Corp. serves as principal distributor of shares of the fund. At
any given time, the distributor may incur expenses in distributing shares of the
fund that are in excess of the total payments made by the fund under the Rule
12b-1 Plans for distribution (Class I Shares do not have a Rule 12b-1 Plan).
Because there is no requirement that the distributor be reimbursed for all its
expenses, or that a plan be continued from year to year, this excess does not
constitute a liability of the fund. Although there is no legal obligation for
the fund to pay expenses in excess of payments made to the distributor under the
plans, if for any reason a plan is terminated, the Board of Trustees will
consider the manner in which to treat such expenses. Any cumulative unreimbursed
expenses may or may not be recovered through future distribution fees. If the
distributor receives any Rule 12b-1 payments in excess of actual distribution
expenses, the difference could be viewed as profit to the distributor for that
year. Accordingly, the fund's Class A, B, and C Rule 12b-1 Plans are classified
as compensation plans.
A service fee equal to 0.25% may be paid to financial services firms, including
NASD member firms that have signed agreements for continuous personal service by
such firms to investors in the fund. NASD member firms may also be paid a
portion of the asset-based sales charges on Class C Shares, so that these
dealers receive such reallowances at the following aggregate annual rates: (i)
0.25% commencing from date of purchase for the Class A Shares, (ii) 0.25%
commencing one year after purchase for the Class B Shares, and (iii) 0.95%
commencing one year after purchase for the Class C Shares.
THE MANAGER AND MANAGEMENT FEE
The investments of the fund are managed by Euclid Advisors LLC, a wholly-owned
subsidiary of Zweig/Glaser Advisers. In addition to managing the fund's
investments, Euclid Advisors LLC also: makes recommendations with respect to the
fund's business affairs; furnishes certain administrative services, office space
and equipment; and permits its employees or arranges for employees of affiliates
to serve as the officers of the Trust without additional compensation from the
fund. The Manager's fee is based on the average daily net assets of the fund at
the annual rate of 1.50%. The rate is constant and does not diminish with an
increase in the net assets of the fund. The management fee is higher than that
paid by most funds. All other expenses incurred in the operation of the fund, a
detailed list of which appears in the SAI, are borne by the fund.
Brokerage Transactions To buy and sell securities for the fund, Euclid Advisors
LLC may use its broker/dealer affiliates or other firms that sell shares of the
fund, provided they have the execution capability and that their commission
rates are comparable to those of other unaffiliated broker/dealers.
ORGANIZATION OF THE FUND
The Trust was established as a Delaware business trust on February 3, 1998. The
Board of Trustees directs the management of the business of the Trust. The Board
has duties and responsibilities comparable to those of the boards of directors
of corporations, not to those of trustees under customary trust principles. The
Trustees oversee the Trust's activities, elect the officers of the Trust who are
responsible for its day-to-day operations, review contractual arrangements with
the companies that provide services to the Trust, and review investment
performance.
The Trust, an open-end, diversified, management investment company, has an
unlimited number of shares of beneficial interest which, without shareholder
approval, may be divided by the Trustees into an unlimited number of funds and
classes. Voting rights are based on a shareholder's total dollar interest in a
Series and are thus allocated in proportion to the value of each shareholder's
investment. Shares vote together on matters that concern the entire Trust, or by
individual fund or class when the Board of Trustees determines that the matter
affects only the interests of a particular fund or class.
15
<PAGE>
Application (Do not use for retirement plans) For application assistance
call 1-800-272-2700.
Zweig/Euclid Mutual Funds
Mail all forms and checks to:
Zweig/Euclid Mutual Funds
c/o State Street Bank and
Trust Company
P.O. Box 8505
Boston, MA 02266-8505
By courier to:
Zweig/Euclid Mutual Funds
c/o State Street Bank and
Trust Company
2 Heritage Drive, 3rd Floor
Quincy, MA 02171
If your account is already established enter the account number here:
1. ACCOUNT NAME (Check only one box)
_ Individual or joint owners*
-------------------------------------------------------------------------
Your Name (first, middle, last)
-------------------------------------------------------------------------
Joint Owner Name (first, middle, last)
-------------------------------------------------------------------------
Social Security Number (to be used for tax reporting)
_ Gift to minor A minor is the beneficial owner of the account with an adult
Custodian managing the account until the minor becomes of age, as
specified in the Uniform Gifts/Transfers to Minors Act (UGMA/UTMA). The
Custodian's signature is required for all transactions.
-------------------------------------------------------------------------
Custodian Name (first, middle, last)
-------------------------------------------------------------------------
Minor Name (first, middle, last)
-------------------------------------------------------------------------
Minor Social Security Number Minor State of Residence
_ Trust Account is established in accordance with provisions of a trust
agreement. The Trustee's or designated agent's signature is required for
all transactions.
-------------------------------------------------------------------------
Trust Title Date of Trust Agreement
-------------------------------------------------------------------------
Trustee Name Trust Tax ID Number
-------------------------------------------------------------------------
Additional Trustee Name
_ Corporation or other entity
-------------------------------------------------------------------------
Name
-------------------------------------------------------------------------
Tax ID Number Type of entity
-------------------------------------------------------------------------
Officer or Partner authorized to act on the account
2. ADDRESS AND CITIZENSHIP
- -------------------------------------------------------------------------------
Street or P.O. Box
<PAGE>
- -------------------------------------------------------------------------------
City State Zip Code
- -------------------------------------------------------------------------------
Daytime Phone
- -------------------------------------------------------------------------------
Evening Phone
Citizenship: _ U.S. Citizen
_ Resident Alien
_ Non-Resident Alien:
------------------------------------
Country
- -------------------------------------------------------------------------------
Name of Employer
- -------------------------------------------------------------------------------
Address
* Joint tenancy with right of survivorship unless you reside in a community
property state or prefer otherwise. Note: Both signatures will be required for
changes to an account with joint ownership.
3. INVESTMENT INFORMATION
Minimum initial investment for each fund: $1,000; $250 for IRA and other
Retirement Plans, pension and profit sharing plans, custodial accounts under the
Uniform Gifts to Minors Act, trust and estate or qualifying group plans. There
is no minimum amount for subsequent investments. Please check the Class of
Shares you have chosen.
A.Fund Name:
-------------------------------------------------------------------
_ Class A _ Class B _ Class C
Investment Amount: $
---------------------------------------------------------
B.Fund Name:
-------------------------------------------------------------------
_ Class A _ Class B _ Class C
Investment Amount: $
---------------------------------------------------------
C.Fund Name:
-------------------------------------------------------------------
_ Class A _ Class B _ Class C
Investment Amount: $
---------------------------------------------------------
4. INVESTMENT SOURCE
_ By check Please make your check payable to State Street Bank and Trust
Company or to the appropriate Zweig or Euclid Fund. NO OTHER CHECK WILL BE
ACCEPTED.
$
------------------------------------------------------------------------
_ By wire Call 1-800-628-0441 for instructions.
$
------------------------------------------------------------------------
Account No.____
5. DISTRIBUTION OPTION
See Prospectus for details. If box is not checked, all distributions will be
reinvested. (Check only one box)
_ All dividends and capital gains reinvested
_ Income dividends in cash, capital gains reinvested
_ All dividends and capital gains paid in cash
_ Income dividends reinvested, capital gains in cash
6. SHAREHOLDER PRIVILEGES
Telephone Exchange You may use the telephone to make exchanges among any Zweig
or Euclid Fund with the same registration. Unless the box below is checked, the
telephone service WILL be established. In the event of a fraudulent telephone
redemption, the investor will bear the risk of loss. See Prospectus. (Exchanges
are processed only in the same class of shares). The minimum exchange is $1,000
if establishing a new account.
_ I do NOT want to make exchanges by telephone.
Systematic Exchanges You can automatically exchange $100 or more on the same day
each month or quarter from one fund account to any other fund accounts on or
about the 15th of the month.
_ I/We authorize State Street Bank and Trust Company to exchange $_________
from _______________________________ to _______________________________________
Fund Name Fund Name
_ Class A _ Class B _ Class C
<PAGE>
beginning with the month of
----------------------------------------------------
on a _ monthly _ quarterly basis.
Telephone/Expedited Redemption You may redeem shares by telephone. Proceeds only
will be sent by check to the address of record. If the redemption is by wire
($1,000 minimum for wire redemption), the proceeds will be wired only to the
bank account listed below or attach a voided check to establish this service.
Unless the box is checked the telephone service WILL be established.
_ I do NOT want to redeem my shares by telephone or wire.
Wire instructions:
-------------------------------------------------------
Name of Bank
-------------------------------------------------------
ABA Number (Federal Routing Number)
-------------------------------------------------------
Bank Account Number
-------------------------------------------------------
Name(s) on Bank Account
In the event of a fraudulent telephone redemption, the investor will bear the
risk of loss, since the Trust and its agents disclaim liability for acting upon
telephone instructions reasonably believed to be authentic. Reasonable
procedures are employed to confirm that instructions given by telephone are
genuine, such as requiring a form of personal identification from the caller,
providing written confirmation of these transactions and recording telephone
instructions.
Systematic Cash Withdrawal Program You may receive a check monthly or quarterly
(minimum $25). There must be a minimum of $5,000 in the selected Fund to
initiate this plan. Under this plan dividends and distributions will be
reinvested regardless of the option chosen in Section 5, and all shares will be
on deposit with State Street Bank and Trust Company, not in certificate form.
(Shares redeemed may be subject to a CDSC.) The amount you specify will be
redeemed or exchanged on or about the 20th of the month.
_ I/We authorize State Street Bank and Trust Company to withdraw $ _______
from ______________________ Class A _ Class B _ Class C
Fund Name
beginning with the month of _______
on a _ monthly _ quarterly basis.
Please complete "Bank Information" below if you wish to have your
withdrawal wired to your bank.
If you wish to have your check mailed to an address other than the address
named in Section 2, complete the next section and sign where indicated.
Name (first, middle, last) _______
Address _______
_______
City State Zip Code
-------------------------------------------------------------------------
Signature Signature
Automatic Investment Plan You can automatically move $100 or more (no minimum
for IRA and other plans as described in Section 3) from your bank account _
Savings _ Checking into any of your fund accounts on any day of the month.
Please attach a voided check or deposit slip from your bank account. If your
investment is by wire please provide bank information below.
_I authorize State Street Bank and Trust Company to make regular investments
of $
-------------------------
into my account in
------------------------------------------------------
Fund Name
_ Class A _ Class B _ Class C
beginning with the month of
---------------------------------------------
on the ____ day (choose any day from the 1st
to the 31st) of each _ month _ quarter
<PAGE>
Bank Information:
Note: Your bank must be a member of the Automated Clearing House (ACH). Please
call your bank if you are unsure.
- ----------------------------------------------------------------------
Name of Bank
- ----------------------------------------------------------------------
ACH Routing Number*
*this nine-digit number used to identify your bank to the ACH can be found in
the lower left-hand corner of your bank check. If your account is with a savings
bank or credit union, you must contact the institution to obtain its ACH routing
number.
- ---------------------------------------------------------------------
Name(s) on Bank Account
- ---------------------------------------------------------------------
Bank Account Number
Check one:
Checking Account (You must attach a voided check for the above referenced
account.)
Savings Account (Please obtain proper ACH routing information from your bank.)
Passbook savings and money market mutual fund accounts are NOT eligible.
Activation of Automatic Investment Plan The Zweig/Euclid Automatic Investment
Plan normally becomes active 15 business days after we receive your application.
Your investment may be credited for purchase in Zweig/Euclid Mutual Funds up to
three business days after the date you selected on the application.
Establishment of the Automatic Investment Plan may be delayed if proper
information is not provided.
Zweig/Euclid Savings Plan State Street Bank and Trust Company will send you an
invoice each month or quarter in order to make regular investments into the
fund. The minimum amount is $100 ($25 for retirement plans). You are under no
obligation to make these payments.
_ YES, I want to join the Savings Plan and make regular investments of $
into my account. Please send me an invoice each _ month _ quarter.
7. LETTER OF INTENTION
You may qualify for a reduced sales charge by electing this item. I agree to the
Letter of Intention provisions outlined in the prospectus, and intend to invest
over a 13-month period beginning , 19 (purchase date not more than 90 days prior
to this Letter):
_ $50,000 _ $100,000 _ $250,000 _ $500,000 _ $1,000,000
8. DEALERS AND ADVISERS ONLY
If certification below is executed, duplicate statements will be sent to the
address indicated below. Please be sure to enter the correct Financial
Professional's Number and Branch Number.
- --------------------------------------------------------------------------------
Financial Professional's Name Financial Professional's Number
- --------------------------------------------------------------------------------
Dealer/Adviser's Name Telephone
- --------------------------------------------------------------------------------
Dealer/Adviser's Address Branch Number
9. YOUR ACCEPTANCE
All registrants MUST sign. Until a properly completed SIGNED application has
been received by State Street Bank and Trust Company, no redemptions or
exchanges from the account will be processed.
I (we) have full right, authority, and legal capacity and am (are) of
legal age in state of residence to purchase shares of the designated fund. I
(we) affirm that I (we) have received the current prospectus of the designated
fund (s) and agree to its terms.
<PAGE>
I (we) agree that State Street Bank and Trust Company, Zweig Series Trust,
Euclid Mutual Funds, Zweig Securities Corp., or their officers or employees,
will not be liable for any loss, expense or cost for acting upon any
instructions or inquiries believed to be genuine.
I (we) acknowledge that unless I (we) have elected not to have telephone
privileges in Section 6 above, the account will be subject to the telephone
exchange and redemption privileges described in the current prospectus and agree
that the Trust, the distributor and Transfer Agent will not be liable for any
loss in acting on written or telephone instructions reasonably believed by them
to be authentic.
Under penalties of perjury, each undersigned certifies that the social
security or taxpayer identification number given above is correct and that I
(we) am (are) not subject to backup withholding because I (we) have not been
notified that I (we) am (are) subject to backup withholding or that the IRS has
notified me (us) that I (we) am (are) no longer subject. Sign below exactly as
the account is to be registered (corporations, etc., indicate titles):
- --------------------------------------------------------------------------------
Individual or Custodian Name Date
- --------------------------------------------------------------------------------
Joint Registrant, if any
- --------------------------------------------------------------------------------
Officer, Partner, Trustee, etc. Date Title
- --------------------------------------------------------------------------------
Officer, Partner, Trustee, etc. Date Title
IMPORTANT:
No investment can be redeemed from an account within 15 days following purchase
if an investor purchases shares with a check unless the fund is given evidence
of cleared funds. This limitation does not apply to investments made by wire
transfer. The Internal Revenue Service requires that all taxpayers provide their
Taxpayer Identification Number (Social Security Number) in the space provided in
Section 1 of the Application and certify to its correctness. Failure by
non-exempt taxpayers to furnish State Street Bank with their correct Taxpayer
Identification Number WILL result in withholding 31% of all taxable dividends
paid to the account and/or withholding on certain other payments to the account
(this is referred to as "backup withholding").
Confirmation of Account Establishment - Within a few days after the Application
is received by State Street Bank and Trust Company, a confirmation statement(s)
showing the account number(s), amount received, shares purchased and price paid
per share should be received by the registered shareholder for each Series
selected.
Subsequent payments - A new application need not be submitted with additional
payments to an existing account if a current Application is on file with State
Street Bank and Trust Company. Subsequent purchases should be identified by
account number and account registration. This can be accomplished by using the
payment stub attached to the statement received shortly after making an
investment.
For application assistance or retirement plan information call 1-800-272-2700.
<PAGE>
[LOGO] : Euclid Mutual Funds
900 Third Avenue, 31st Floor
New York, NY 10022-4728
Investment Manager
Euclid Advisors LLC
900 Third Avenue, 31st Floor
New York, New York 10022-4728
Principal Distributor
Zweig Securities Corp.
900 Third Avenue, 31st Floor
New York, New York 10022-4728
Custodian
The Bank of New York
48 Wall Street
New York, New York 10015
Transfer Agent and Dividend Paying Agent
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Counsel
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Independent Accountants
Coopers & Lybrand L.L.P.
1301 Avenue of the Americas
New York, New York 10019
No dealer, salesperson or other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus, and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Trust, the Investment Manager or the
Distributor. This Prospectus does not constitute an offering in any state in
which such offering may not lawfully be made.
For more information, contact your financial advisor or call us at
1-800-272-2700 Visit our website at www.zweig.com
(c) Zweig Securities Corp. Member NASD.
TPMN 9804
[LOGO]
Printed on recycled paper.
<PAGE>
EUCLID MARKET NEUTRAL FUND
A Series of
EUCLID MUTUAL FUNDS
900 Third Avenue, New York, N.Y. 10022-4728
STATEMENT OF ADDITIONAL INFORMATION
April 28, 1998
Euclid Market Neutral Fund (the "Fund"), is a diversified, open-end
management investment company organized as a series of Euclid Mutual Funds, a
Delaware business trust (the "Trust").
This Statement of Additional Information, which should be kept for future
reference, is not a prospectus. It should be read in conjunction with the
Prospectus of the Fund (the "Prospectus" ), dated April , 1998, which can be
obtained without cost by contacting your financial professional or by calling or
writing the Fund at the telephone number and address printed on this cover page.
This Statement of Additional Information is intended to provide you with further
information about the Fund.
Euclid Mutual Funds
(Toll Free 1-800-272-2700)
TABLE OF CONTENTS Page
INVESTMENT OBJECTIVE AND POLICIES 2
INVESTMENT RESTRICTIONS 2
OTHER INVESTMENT POLICIES 3
PURCHASE AND REDEMPTION OF SHARES 6
REINSTATEMENT PRIVILEGE 6
EXCHANGE PRIVILEGE 7
INVOLUNTARY REDEMPTIONS 7
RETIREMENT PLANS 7
NET ASSET VALUE AND TAXES 7
TRUSTEES AND OFFICERS OF THE TRUST 9
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 11
INVESTMENT MANAGEMENT AND OTHER SERVICES 11
Manager 11
Distributor 12
Distribution Plans 12
Custodian, Fund Accounting Agent, Transfer Agent and Dividend Paying Agent 13
Independent Accountants 13
Counsel 13
MANAGER'S PRIOR PERFORMANCE 13
PORTFOLIO TRANSACTIONS AND BROKERAGE 15
YIELD AND PERFORMANCE INFORMATION 16
REGISTRATION STATEMENT 17
FINANCIAL STATEMENTS 18
1
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective and policies and permitted investments are
described in the Prospectus under the headings "Investment Objective", "Our
General Investment Philosophy and Strategy", "Other Investment Policies" and
"Risk Factors". Set forth below is additional information with respect to the
investment policies and a description of certain financial instruments and
techniques utilized by the Fund. Except as explicitly set forth in this
Statement of Additional Information, the investment objective and policies of
the Fund may be changed without shareholder approval.
INVESTMENT RESTRICTIONS
The first eight investment restrictions set forth below are fundamental
policies of the Fund. These restrictions cannot be changed without a vote of a
majority of the outstanding voting securities of the Fund. However, these
policies may be modified by the Trustees without shareholder approval to the
extent necessary to facilitate the implementation of a master-feeder structure
for the Fund ( i.e., a structure under which the Fund acts as a feeder and
invests all of its assets in a single pooled master fund with substantially the
same investment objectives and policies).
Fundamental Policies Except as stated above with respect to a
master-feeder structure, the Fund may not:
1. Purchase the securities of issuers conducting their principal business
activities in the same industry if immediately after such purchase the value of
the Fund's investments in such industry would be 25% or more of the value of its
total assets (there is no such limitation with respect to obligations of the
U.S. Government, its agencies or instrumentalities or with respect to
investments in other investment companies complying with such policy).
2. With respect to 75% of the Fund's assets, purchase the securities of
any one issuer if immediately after such purchase (i) more than 5% of the value
of the Fund's total assets would be invested in such issuer or (ii) the Fund
would own more than 10% of the outstanding voting securities of such issuer.
(Such limitations do not apply to securities issued by the U.S. Government, its
agencies or instrumentalities or with respect to investments in other investment
companies complying with such policy).
3. Invest in real estate, provided that this limitation shall not prohibit
the purchase of securities issued by companies that invest in real estate or
interests therein, including real estate investment trusts.
4. Make loans, except that this restriction shall not prohibit the
purchase and holding of a portion of an issue of publicly distributed debt
securities, the lending of portfolio securities (if the aggregate value of the
loaned securities does not at any time exceed one-third of the total assets of
the Fund), or the entry into repurchase agreements.
5. Issue "senior securities," except as permitted under the Investment
Company Act of 1940.
6. Act as an underwriter, except that the Fund technically may be deemed
to be an underwriter in a registration under the Securities Act of 1933 to
resell restricted securities.
7. Invest in physical commodities or commodity contracts; provided that
this limitation shall not prevent the Fund from purchasing and selling futures
contracts and options.
8. Borrow money in excess of 20% of its total assets taken at cost or at
market value, whichever is lower, and then only from banks as a temporary
measure for extraordinary or emergency purposes. If such borrowings exceed 5% of
the Fund's total assets, the Fund will make no further investments until such
borrowing is repaid. (Short sales and related borrowings of securities are not
subject to these restrictions.)
Non-Fundamental Restrictions The following investment restrictions and
policies are non-fundamental and can be changed by the Board of Trustees without
shareholder approval. Currently, the Fund may not:
9. Maintain a short position, or sell securities short if, when added
together, more than 100% of the value of the Fund's net assets would be (I)
deposited as collateral for the obligation to replace securities borrowed to
effect short sales, and (ii) allocated to segregated accounts in connection with
short sales. Short sales "against the box" are not considered in applying this
limitation.
10. Pledge its assets in an amount greater than 10% of the value of its
total assets, and then only to secure borrowings permitted by Restriction 8
(collateral or deposit arrangements with respect to short sales, swaps and other
derivatives, or the deposit of initial or maintenance margin in connection with
futures contracts, will not be deemed to be a pledge of the Fund's assets).
11. Purchase securities on margin, except for such short-term credits as
are necessary for the clearance of transactions and initial and variation margin
payments in connection with transactions in futures and options contracts.
(Short sales may be made in a margin account).
2
<PAGE>
12. Purchase securities which are not readily marketable, such as
securities subject to legal or contractual restrictions on resale or securities
which are otherwise illiquid including repurchase agreements having more than
seven days remaining to maturity, if, as a result, more than 15% of the Fund's
net assets would consist of such securities.
13. Purchase securities of any other investment company, except (i) by
purchase in the open market involving only customary brokers' commissions, (ii)
in connection with a merger, consolidation, reorganization or acquisition of
assets, or (iii) as otherwise permitted by applicable law.
14. Participate on a joint or a joint and several basis in any trading
account in securities. (The bunching of orders for the sale or purchase of
portfolio securities of two or more accounts managed by the Manager or its
affiliates, shall not be considered participation in a joint securities trading
account).
Limitations apply at the time an investment is made; a subsequent increase or
decrease in percentage resulting from changes in values or net assets will not
be deemed to be an investment that is contrary to these restrictions.
The phrases "shareholder approval" and "vote of a majority of the
outstanding voting securities", as used in the Prospectus or in this Statement
of Additional Information means the affirmative vote of (i) 67% or more of the
Fund's voting securities present at a meeting of shareholders if the holders of
more than 50% of the Fund's outstanding voting securities are present in person
or by proxy, or (ii) more than 50% of the Fund's outstanding voting securities,
whichever is less. Shares of the fund have voting power based on dollar value
and are thus allocated in proportion to the value of each shareholder's
investment on the record date.
The Board of Trustees, which has the primary responsibility for the
overall management of the Fund, has determined that, while there are certain
risks inherent in using short sales, futures and options, the Manager has
demonstrated its expertise and ability to use these financial instruments and
investment techniques effectively. The flexibility and potential for enhanced
long-term performance and risk reduction warrant their use, in the opinion of
the Board of Trustees.
OTHER INVESTMENT POLICIES
Short Sales The Fund will seek to neutralize the exposure of its long
equity positions to general equity market risk and to realize additional gains
through the use of short sales (selling a security it does not own) in
anticipation of a decline in the value of the security sold short relative to
the long positions held by the Fund. To complete such a transaction, the Fund
must borrow the security to make delivery to the buyer. The Fund then is
obligated to replace the security borrowed by purchasing it at the market price
at the time of replacement. The price at such time may be more or less than the
price at which the security was sold by the Fund. Until the security is
replaced, the Fund is required to repay the lender any dividends or interest
that accrue during the period of the loan. To borrow the security, the Fund also
may be required to pay a premium, which would increase the cost of the security
sold. The net proceeds of the short sale will be retained by the broker (or by
the Fund's custodian in a special custody account) until the short position is
closed out, to the extent necessary to meet margin requirements. The Fund also
will incur transaction costs in effecting short sales. The amount of any gain
will be decreased, and the amount of any loss increased, by the amount of the
premium, dividends, interest or expenses the Fund may be required to pay in
connection with a short sale. An increase in the value of a security sold short
by the Fund over the price at which it was sold short will result in a loss to
the Fund, and there can be no assurance that the Fund will be able to close out
the position at any particular time or at an acceptable price.
Index Futures, and Index and Equity Options In addition to purchasing or
selling short individual securities, the Fund may purchase or sell short any
type of future or option related to its investments. These may include options
not traded on exchanges, futures or options tied to stock indexes or averages
and options on individual securities. Futures and options also may be used or
combined with each other in order to implement the Fund's overall strategy.
Futures and options tied to a securities index such as the Standard &
Poor's 500 Composite Stock Price Index (the "S&P 500") have been used by mutual
funds for many years to manage their portfolios more efficiently. An S&P 500
futures contract is a contract to buy or sell units of the S&P 500 at a
specified future date at a price agreed upon when the contract is made. A unit
is the value of the S&P 500 from time to time. Entering into a contract to buy
units is commonly referred to as buying or purchasing a contract, or holding a
long position in the S&P 500. Entering into a contract to sell units is commonly
referred to as selling a contract, or holding a short position in the S&P 500.
3
<PAGE>
Futures Contracts In contrast to purchases of a common stock, no price is
paid or received by the Fund upon the purchase of a futures contract. Upon
entering into a futures contract, the Fund will be required to deposit in an
account for the futures broker a specified amount of cash or liquid securities,
currently 2% to 5% of the contract amount. This is known as "initial margin".
The type of instruments that may be deposited as initial margin, and the
required amount of initial margin, are determined by the futures exchange(s) on
which the futures are traded. The nature of initial margin in futures
transactions is different from that of margin in securities transactions in that
futures contract margin does not involve the borrowing of funds by the customer
to finance the transactions. Rather, the initial margin is in the nature of a
performance bond or good faith deposit on the contract which is returned to the
Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. In addition to initial margin, the Fund is
required to deposit cash, liquid debt securities, liquid equity securities or
cash equivalents in an amount equal to the notional value of all long futures
contracts, less the initial margin amount, in a segregated account with the
custodian to ensure that the use of such futures contracts is not leveraged. If
the value of the securities placed in the segregated account declines,
additional securities, cash or cash equivalents must be placed in the segregated
account so that the value of the account will at least equal the amount of the
Fund's commitments with respect to such futures contracts. Subsequent payments
to and from the broker, called "variation margin," will be made on a daily basis
as the price of the future fluctuates, a process known as "marking-to-the-
market". For example, if the Fund purchases an S&P 500 future and the S&P 500
has risen, the Fund's corresponding futures position will increase in value and
the Fund will receive from the broker a variation margin payment equal to that
increase in value. Conversely, when the S&P 500 declines, the Fund's futures
position will be less valuable and the Fund will be required to make a variation
margin payment to the broker. When the Fund terminates a position in a futures
contract, a final determination of variation margin is made, additional cash is
paid to or by the Fund, and the Fund realizes a gain or a loss.
The price of index futures may not correlate perfectly with movement in
the underlying index due to certain market distortions. First, all participants
in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the index and futures markets.
Secondly, the deposit requirements in the futures market are less onerous than
margin requirements in the securities market, and as a result the futures market
may attract more speculators than does the securities market which also may
cause temporary price distortions.
Positions in futures contracts may be closed out only if there is a
secondary market for such futures. Although the Fund intends to purchase or sell
futures only where there appears to be an active secondary market, there is no
assurance that a liquid secondary market will exist for any particular contract
or at any particular time. In such event, it may not be possible to close a
futures position and, in the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of maintenance margin
Generally, a futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction for a futures contract sale is effected
by the Fund entering into a futures contract purchase for the same aggregate
amount of the specific type of financial instrument with the same delivery date.
If the price in the sale exceeds the price in the offsetting purchase, the Fund
immediately is paid the difference and thus realizes a gain. If the offsetting
purchase price exceeds the price in the sale, the Fund pays the difference and
realizes a loss. Similarly, the closing out of a futures contract purchase is
effected by the Fund entering into a futures contract sale. If the offsetting
sale price exceeds the purchase price, the Fund realizes a gain, and if the
purchase price exceeds the offsetting price, the Fund realizes a loss.
The hours of trading for futures contracts may not conform to the hours
during which the underlying securities are traded. To the extent that the
futures contracts markets close after the markets for the underlying securities,
significant price movements can take place in the futures contracts markets that
cannot be reflected in the markets of the underlying securities.
Successful use of futures contracts by the Fund is also subject to the Manager's
ability to correctly predict movements in the direction of prices for
securities. Due to the possibility of price distortion in the futures market and
because of the imperfect correlation between movements in securities prices and
movements in the prices of futures contracts, a correct forecast of securities
prices by the Manager may still not result in a successful hedging transaction
over a short period of time. The Fund does not intend to devote more than 15% of
its assets to margin on futures contracts.
Options When the Fund purchases an option, an amount equal to the premium
paid by the Fund for the option (its cost) is recorded initially as an
investment. The amount of the investment is "marked-to-the-market" daily to
reflect the current market value of the option. If the current market value of
an option exceeds the
4
<PAGE>
premium paid, the excess represents unrealized appreciation; conversely, if the
premium paid exceeds the current market value, the excess represents unrealized
depreciation.
When the Fund writes an option, an amount equal to the premium received by
the Fund is recorded as an asset and as an offsetting liability. The amount of
the liability is "marked-to-the-market" daily to reflect the current market
value of the option. If an option written by the Fund expires, or the Fund
enters into a closing purchase transaction, the Fund will realize a gain (or a
loss if the cost of a closing transaction exceeds the premium received) and the
liability related to such option will be extinguished.
If the Fund writes a covered call option and is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires and may be required to deliver the
underlying security upon exercise. Although the Fund generally will purchase or
write only those options for which there appears to be an active secondary
market, there is no assurance that a liquid secondary market exist for any
particular option, or at any particular time, and for some options no secondary
market on an exchange may exist. In such event, it might not be possible to
effect closing transactions in particular options, with the result that the Fund
would have to exercise the option in order to realize any profit or would incur
transaction costs on the sale of underlying securities pursuant to the exercise
of put options it had written.
Reasons for the absence of a liquid secondary market include the
following: (a) there may be insufficient interest in trading certain options;
(b) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (c) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (d) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (e) the facilities of an exchange or
the Options Clearing Corporation (the "OCC" ) may not at all times be adequate
to handle current trading volume; or (f) one or more exchanges might, for
economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of options),
in which event the secondary market on that exchange (or in that class or series
of options) would cease to exist, although outstanding options on that exchange
that had been issued by the OCC as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
In addition, there is no assurance that higher-than-anticipated trading
activity or other unforeseen events might not, at times, render certain of the
facilities of the OCC inadequate, and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution of
customers' orders. In the event of a shortage of the underlying securities
deliverable on exercise of a listed option, the OCC has the authority to permit
other, generally comparable securities to be delivered in fulfillment of option
exercise obligations. If the OCC exercises its discretionary authority to allow
such other securities to be delivered, it may also adjust the exercise prices of
the affected options by setting different prices at which otherwise ineligible
securities may be delivered. As an alternative to permitting such substitute
deliveries, the OCC may impose special exercise settlement procedures.
The Fund is required to deposit cash, liquid debt securities, liquid equity
securities or cash equivalents in an amount equal to the exercise price of any
option it has written; in a segregated account with the custodian to ensure that
the use of such options is not leveraged. The Fund does not intend to devote
more than 5% of its assets to option premiums.
Options on Futures Contracts Options on index futures contracts give the
purchaser the right, in return for the premium paid, to assume a position in an
index futures contract at a specified exercise price at any time during the
period of the option. Upon exercise of the option, the holder of the long
position would assume the underlying futures position and would receive a
variation margin payment of cash or securities approximating the increase in the
value of the holder's option position. If an option is exercised on the last
trading day prior to the expiration date of the futures contract, the settlement
will be made entirely in cash based on the difference between the exercise price
of the option and the final settlement price of the futures contract on the
expiration date.
The ability to establish and close out positions in options on futures
contracts will be subject to the development and maintenance of a liquid
secondary market. It is not certain that such a market will develop. Although
the Fund generally will purchase only those options for which there appears to
be an active secondary market, there is no assurance that a liquid secondary
market on an exchange will exist for any particular option or at any particular
time. In the event no such market exists for particular options, it might not be
possible to effect closing transactions in such options, with the result that
the Fund would have to exercise the options in order to realize any profit.
Compared to the purchase or sale of futures contracts, the purchase of
options on futures contracts may involve less potential risk to the Fund because
the maximum amount at risk is the premium paid for the options
5
<PAGE>
(plus transaction costs). However, there may be circumstances when the use of an
option on a futures contract would result in a loss to the Fund when the use of
a futures contract would not, such as when there is no movement in the prices of
debt securities. Purchasers of options who fail to exercise their options prior
to the exercise date suffer a loss of the premium paid.
Writing an option on a futures contract involves risks similar to those
arising in the sale of futures contracts.
In purchasing and selling futures contracts and in purchasing options on
futures contracts, the Fund presently intends to comply with rules and
interpretations of the Commodity Futures Trading Commission ("CFTC") under which
it is exempted from regulation as a commodity pool operator. The CFTC
regulations which exempt the Fund from regulation as a commodity pool operator
require, among other things, (i) that futures and related options be used solely
for bona fide hedging purposes, as defined in CFTC regulations or,
alternatively, with respect to each long futures or options position, the Fund
will ensure that the underlying commodity value of such contract does not exceed
the sum of segregated cash or money market instruments, margin deposits on such
contracts, cash proceeds from investments due in 30 days and accrued profits on
such contracts held by the commodity broker, and (ii) that the Fund not enter
into futures and related options for which the aggregate initial margin and
premiums exceed 5% of the fair market value of the Fund's total assets. There is
no other limitation on the percentage of the Fund's assets that may be invested
in futures and related options.
Repurchase Agreements In a repurchase agreement transaction, the Fund agrees to
purchase and resell, and the seller also agrees to buy back, usually on the next
business day, a security at a fixed time and price which reflects an agreed-upon
market rate. Repurchase agreements may be thought of as loans to the seller
collateralized by the security to be repurchased. The risk to the Fund is the
ability of the seller to pay the agreed-upon sum on the repurchase date. In the
event of default, the repurchase agreement provides that the Fund is entitled to
sell the collateral. If the seller defaults when the value of the underlying
collateral is less than the repurchase price, the Fund could incur a loss of
both principal and interest. The manager monitors the value of the collateral
daily during the term of the repurchase agreement to determine that the value of
the collateral equals or exceeds the agreed-upon repurchase price. If a
defaulting seller were to be subject to a Federal bankruptcy proceeding, the
ability of the Fund to liquidate the collateral could be delayed or impaired
because of certain provisions of the bankruptcy laws. Except for temporary
defensive purposes, the Fund does not intend to invest more than 20% of its
assets in repurchase agreements.
PURCHASE AND REDEMPTION OF SHARES
The Fund does not issue share certificates. Instead, an account is
established for each investor and all shares purchased or received, including
those obtained through reinvestment of distributions, are credited to such
account on the books of the Fund.
Reference is made to the materials in the Prospectus under the headings
"Choosing Among Classes When Purchasing Shares," "How to Invest in the Fund" and
"How to Redeem Your Fund Shares," which describe the methods of purchase and
redemption of the Fund's shares. If you invest through an investment dealer or
agent, that firm may have its own service features, transaction charges and
fees. This SAI and the accompanying Prospectus should be read in conjunction
with such firms' material regarding their fees and services. If you wish us to
refer you to an investment professional, call us at 1-800-272-2700. Investment
professionals receive compensation for providing investment advice, and such
compensation may differ for selling shares of different classes of the Fund.
If the Board of Trustees should determine that it is advisable in the
interest of the remaining shareholders of the Fund or Class to make payment
wholly or partly in kind, the Fund may pay redemption proceeds in whole or in
part by a distribution in kind of securities from the portfolio of the Fund, in
lieu of cash, in conformity with the applicable rules of the Commission. If
shares are redeemed in kind, the redeeming shareholder might incur brokerage
costs in converting the assets into cash. Where the Fund makes a redemption in
kind, such redemption will be made in readily marketable securities whose value
is easily ascertainable. The method of valuing portfolio securities for this
purpose is as described under Net Asset Value and Taxes. The Fund has, however,
elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which it is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
its net assets during any 90-day period for any one shareholder.
REINSTATEMENT PRIVILEGE
Reinvestment of redemption proceeds under the reinstatement privilege
described in the prospectus will be made at the net asset value next determined
after receipt of the reinstatement order. If the shareholder has realized a gain
on the redemption, the transaction is taxable and reinvestment will not alter
any capital gains tax
6
<PAGE>
payable. If there has been a loss on the redemption, some or all of the loss may
not be allowed as a tax deduction depending on the amount reinvested.
For purposes of determining the amount of CDSC payable on any subsequent
redemptions, the purchase payment made through exercise of the reinvestment
privilege will be deemed to have been made at the time of the initial purchase
(rather than at the time the reinvestment was effected).
EXCHANGE PRIVILEGE
The minimum value of any class of shares that may be exchanged into the
fund in which shares are not already held is $1,000 and no exchange out of the
fund (other than by a complete exchange of all the shares of that fund) may be
made if it would reduce the shareholder's interest in that fund to less than
$1,000. Participating securities dealers who have signed a Selling Agreement
with the Distributor may exchange by telephone their clients' shares for the
same class of another fund distributed by the Distributor.
The Fund reserves the right at any time to modify or terminate the
exchange privilege with respect to one or more classes of shares, if the Board
of Trustees determines that continuing the privilege may be detrimental to
shareholders.
INVOLUNTARY REDEMPTIONS
As with voluntary redemptions, an involuntary redemption may result in the
payment of a tax by the shareholder. (See "Distributions and Taxes" in the
Prospectus.)
RETIREMENT PLANS
Shares may be purchased in connection with all types of tax-deferred
retirement plans. The minimum initial investment in connection with tax-deferred
retirement plans is $250 and the minimum may be waived on payments made directly
to the Transfer Agent. There is no minimum for additional purchase payments for
tax-deferred retirement plans.
NET ASSET VALUE AND TAXES
The net asset value per share of each class of shares is determined as of
the close of regular trading on the NYSE, on each day that the NYSE is open. The
NYSE is closed on the following holidays (or the weekdays on which these
holidays are celebrated when they fall on a weekend): New Year's Day,
President's Day, Martin Luther King, Jr. Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
We subtract the non-class specific liabilities of the Fund from the Fund's
assets to determine its total net assets. We then determine each class's
proportionate interest in the Fund's net assets. The liabilities attributable to
that class, including its distribution fees, are then deducted and the resulting
amount is divided by the number of shares of that class outstanding to produce
its net asset value per share.
Stocks, futures and options are valued at the closing prices reported on
recognized securities exchanges or if no sale was reported, and for unlisted
securities, at the mean between the last-reported bid and asked prices.
Securities for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Board of
Trustees. Short-term obligations having a remaining maturity of 60 days or less
are valued at amortized cost (which approximates market value).
Tax Status. By paying dividends representing its investment company
taxable income within the time periods specified in the Internal Revenue Code of
1986, as amended (the Code ) and by meeting certain other requirements, the Fund
intends to qualify as a regulated investment company under the Code. Since the
Fund will distribute annually its investment company taxable income, net capital
gains, and capital gain net income, it will not be subject to income or excise
taxes otherwise applicable to undistributed income of a regulated investment
company. If the Fund were to fail to distribute all its income and gains, it
would be subject to income tax and, in certain circumstances, a 4% excise tax.
Taxation of Shareholders. Dividends from net investment income and
distributions from short-term capital gains are taxable to shareholders as
ordinary income. Regardless of how long the Fund shares have been held,
distributions of long-term gains realized upon the sale of capital assets are
subject to a maximum tax rate for noncorporate taxpayers: if held for more than
18 months - 20% (10% for individuals in the 15% tax bracket); if held more than
12 months but not more than 18 months - 28% (15% for individuals in the 15% tax
bracket). Any loss realized by a shareholder upon the disposition of Fund shares
held for six months or less will be treated as long-term capital loss to the
extent of any amounts treated as distributions of long-term capital gain held
for more than one year during such six-month period.
7
<PAGE>
Distributions by the Fund out of dividend income from domestic
corporations may qualify in whole or in part for the dividends received
deduction if the distributing Fund does not sell the stock in respect of which
it received such dividends before satisfying a 46-day holding period requirement
(91 days for certain preferred stock), and the shareholder holds Fund shares for
at least 46 days. For this purpose, the distributing Fund holding period in such
stock may be reduced for periods during which the Fund reduces its risk of loss
from holding the stock (e.g., by entering into option contracts).
Investors who purchase shares shortly before the record date for a
distribution will pay a share price that includes the value of the anticipated
distribution and will be taxed on the distribution when it is received even
though with respect to them the distribution in effect represents a return of a
portion of their purchase price. Any loss realized on a sale or exchange of
shares will be disallowed if the shares disposed of are replaced within a period
of 61 days beginning 30 days before being acquired.
Individuals and certain other non-exempt payees will be subject to a 31%
backup Federal withholding tax on dividends and other distributions from the
Fund, as well as on the proceeds of redemptions if the Fund is not provided with
the shareholder's correct taxpayer identification number and certification that
the shareholder is not subject to such backup withholding, or if the Internal
Revenue Service notifies the Fund that the shareholder has failed to report
proper interest or dividends. For most individuals, the taxpayer identification
number is the taxpayer's social security number.
Tax Treatment of Certain Transactions. In general, and as explained more
fully below, if the Fund enters into combinations of investment positions by
virtue of which its risk of loss from holding an investment position is reduced
on account of one (or more) other positions (i) losses realized on one position
may be deferred to the extent of any unrecognized gain on another position and
(ii) long-term capital gains or short-term capital losses may be
recharacterized, respectively, as short-term gains and long-term losses.
Investments in foreign currency denominated instruments or securities may
generate, in whole or in part, ordinary income or loss. The Federal income tax
treatment of gains and losses realized from transactions involving options on
stock or securities entered into by the Fund will be as follows: Gain or loss
from a closing transaction with respect to options written by the fund, or gain
from the lapse of any such option, will be treated as short-term capital gain or
loss. Gain or loss from the sale of put and call options that the Fund
purchases, and loss attributable to the lapse of such options, will be treated
as capital gain or loss. Whether, in the case of individual shareholders,
distributions of such gain or loss is subject to the 20% rate (10% for
individuals in the 15% tax bracket), 28% rate, or 39.6% rate depends upon
whether the affected option has been held for more than 18 months, more than 12
months but not more than 18 months, or not more than 12 months, respectively.
For this purpose, an unexercised option will be deemed to have been sold on the
date it expired. It should be noted, however, that if a put is acquired at a
time when the underlying stock or security has been held for not more than one
year, or if shares of the underlying stock or security are acquired while such
put is held, any gain on the subsequent exercise, sale or expiration of the put
will generally be short-term gain.
Any regulated futures contract or listed non-equity option held by the
Fund at the close of its taxable year will be treated as sold for its fair
market value on the last business day of such taxable year. Sixty percent of any
gain or loss with respect to such deemed sales, as well as the gain or loss from
the termination during the taxable year of the Fund's obligation (or rights)
with respect to such contracts by offsetting, by taking or making delivery, by
exercise or being exercised, by assignment or being assigned, by lapse, or
otherwise, will be treated as long-term capital gain or loss and the remaining
forty percent will be treated as short term capital gain or loss. The Fund may
make certain elections that modify the above tax treatment with respect to
regulated futures contracts or listed non-equity options that are part of a
mixed straddle, as defined by the Code.
The Fund may invest in certain investments that may cause it to realize
income prior to the receipt of cash distributions, including securities bearing
original issue discount. The level of such investments is not expected to affect
the Fund's ability to distribute adequate income to qualify as a regulated
investment company.
Treasury Regulations pursuant to Section 1092 provide for the coordination
of the wash sale rules and the short sale rules with the straddle rules.
Generally, the wash sale rules prevent the recognition of loss where a position
is sold at a loss and a substantially identical position is acquired within a
prescribed period. The short sale rules generally prevent the use of short sales
to convert short-term capital gain to long-term capital gain and long-term
capital loss to short-term capital loss.
In addition to the Federal income tax consequences described above
relating to an investment in the Fund, there may be other Federal, state, local
or foreign tax considerations that depend upon the circumstances of each
particular investor. Prospective shareholders are therefore urged to consult
their tax advisers with respect to the effects of this investment on their
specific situations.
8
<PAGE>
TRUSTEES AND OFFICERS OF THE TRUST
The trustees and officers of the Trust and their business affiliations for
the past five years are as follows:
<TABLE>
<CAPTION>
Name,Address and Age Position With the Trust Principal Occupation During Past 5 Years
- -------------------- ----------------------- ----------------------------------------
<S> <C> <C>
James Balog Trustee Retired; Director and member of the
2205 N. South Wind Blvd. Audit, Investment, Stock Option and
Vero Beach, FL 32963 Compensation Committees of
(69) Transatlantic Holdings, Inc.
(reinsurance); Director and Member of
the Executive Committee of Elan, Plc
(pharmaceuticals); Director and Member
of the Executive and Investment &
Credit Committees of Great West Life
and Annuity Insurance Company; Member
of the Technical Advisory Board of
Galen Partners (health care); and
Trustee of Zweig Series Trust. Former
Director, Chairman of the Audit
Committee and Member of the Executive
Committee of A.L. Pharma, Inc. (health
care); Chairman of 1838 Investment
Advisors, L.P. and Chairman of Lambert
Brussels Capital Corporation
(investments);
Claire B. Benenson Trustee Consultant on Financial Conferences
870 U.N. Plaza and Former Director of Financial
New York, NY 10017 (79) Conferences and Chairman, Department
of Business and Financial Affairs, The
New School for Social Research.
President of the Money Marketeers of
New York University; Trustee of Zweig
Series Trust and of Simms Global Fund;
and Director of The Burnham Fund
Inc.; Former Director of Zweig Cash
Fund Inc.
S. Leland Dill Trustee Retired; Director of Coutts & Co.
5070 North Ocean Dr. Trust Holdings Limited, Coutts & Co.
Singer Island, FL 33404 Group, Coutts & Co. (USA) (private
(68) banking); Trustee of BT Portfolios, BT
Investment Funds and Zweig Series
Trust. Former partner of Peat Marwick
Mitchell & Co. and Director of Zweig
Cash Fund Inc. and Vintners
International Company, Inc.(winery).
Eugene J. Glaser* Chairman, President, President of the Manager and of
900 Third Avenue Chief Executive Zweig/Glaser Advisers; President and
New York, NY 10022 Officer and Trustee Director of the Distributor; Chairman
(57) and Trustee of Zweig Series Trust;
Director of The Zweig Fund, Inc.; and
former Director of Zweig Cash Fund
Inc.
David Katzen* Executive Vice President Executive Vice President of the Manager; Senior
900 Third Avenue and Trustee Vice President of Zweig/Glaser Advisors and Zweig
New York, NY 10022 Series Trust, and Vice President of Zweig
(40) Advisors Inc. Former Director of Quantitative
Research at Avatar Investors Associates
Corp.; Director of Equity Research for Zweig Total
Return Advisors, Inc.; Research Director of
Zweig Advisors Inc.; and Vice President of The
Zweig Fund, Inc. and ZZK Management, Inc.
Donald B. Romans Trustee President of Romans & Company (private
233 East Wacker Dr. investors and financial consultants);
Chicago, IL 60601 Director of Zweig Series Trust and
(66) The Burnham Fund Inc.; Former
Consultant to and Executive Vice President
and Chief Financial Officer of Bally
Manufacturing Corporation and Director
of Zweig Cash Fund Inc.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Name,Address and Age Position With the Trust Principal Occupation During Past 5 Years
- -------------------- --------------\--------- ----------------------------------------
<S> <C> <C>
Barry Mandinach First Vice President Executive Vice President of the Distributor;
900 Third Avenue Senior Vice President of the Manager and of
New York, NY 10022 Zweig/Glaser Advisers. First Vice President
(42) of Zweig Series Trust.
Alfred J. Ratcliffe First Vice President, First Vice President of the Manager and of
900 Third Avenue Treasurer, Principal Zweig/Glaser Advisers; First Vice
New York, NY 10022 Accounting Officer President, Principal Accounting Officer,
(50) and Assistant Secretary Treasurer and Assistant Secretary of Zweig
Series Trust; Former Vice President of The
Bank of New York.
Charles I. Leone First Vice President First Vice President and Chief Financial
900 Third Avenue and Assistant Secretary Officer of the Manager and of Zweig/Glaser
New York, NY 10022 Advisers; First Vice President, Chief
(36) Financial Officer and Assistant Secretary of
the Distributor; First Vice President and
Assistant Secretary of Zweig Series Trust;
Former Assistant Treasurer of Zweig Cash
Fund Inc.
Annemarie Gilly First Vice President First Vice President of the Manager and the
900 Third Avenue Distributor; Vice President of Zweig Series
New York, NY 10022 Trust; Former Vice President of Concord
(46) Financial Group and Executive Vice President
and Chief Operating Officer of The Gabelli
Equity Trust, Inc.
Rhonda Lee Berzner Assistant Vice Senior Research Analyst for the Manager and
900 Third Avenue President Zweig/Glaser Advisers; and Assistant Vice
New York, NY 10022 President of Zweig Series Trust.
(33)
Tom Disbrow Assistant Vice Vice President of the Manager and of
900 Third Avenue President and Zweig/Glaser Advisers;
New York, NY 10022 Assistant Treasurer Assistant Vice President and Assistant
(32) Treasurer of Zweig Series Trust.
Tom Farrell Assistant Vice Assistant Vice President of the Manager and
900 Third Avenue President and of Zweig/Glaser Advisers.
New York, NY 10022 Assistant Treasurer
(34)
Marc Baltuch Secretary First Vice President of the Manager and of
900 Third Avenue Zweig/Glaser Advisers; Director, First Vice
New York, NY 10022 President, Chief Compliance Officer and
(52) Secretary of the Distributor.; Director and
President of Watermark Securities, Inc.
Secretary of Zweig Series Trust; Assistant
Secretary of Gotham Advisors, Inc., Zweig
Total Return Advisors, Inc. and of Zweig
Advisors Inc.; Former Secretary of Zweig
Cash Fund Inc.
</TABLE>
*Designates a Trustee who is an interested person of the Trust within the
meaning of the 1940 Act.
10
<PAGE>
Set forth below is a table showing the estimated compensation of the Board
of Trustees:
Total Compensation
Aggregate Compensation from the Trust paid
Name of Person, Position from the Trust to the Trustees
- --------------------------------------------------------------------------------
James Balog, Trustee $5,500 $5,500
Claire B. Benenson, Trustee 5,500 5,500
S. Leland Dill, Trustee 5,500 5,500
Eugene J Glaser, Chairman,
Chief Executive Officer and
Trustee 0 0
David Katzen, Executive Vice
President and Trustee 0 0
Donald B. Romans, Trustee 5,500 5,000
Those trustees and officers of the Trust who are affiliated with the
Distributor or the Manager are not separately compensated for their services as
trustees or officers of the Trust. The Fund currently pays each of its
"disinterested" trustees a fee of $2,500 per year, plus $750 per meeting
attended ($500 per phone meeting) and reimburses their expenses for attendance
at meetings. The trustees and officers of the Trust, as a group, owned less than
1% of any Class of the Fund.
Trustees may be removed from office at any meeting of shareholders by a
vote of two-thirds of the outstanding shares of the Trust. A shareholders
meeting may be called by the Trustees or by the President of the Trust, or shall
be called promptly by the Trustees upon the written request of shareholders of
the Trust holding at least ten percent (10%) of the outstanding shares entitled
to vote. Except as set forth above, the trustees shall continue to hold office
and may appoint their successors.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Until its initial public offering, all shares of the fund will be held by
Zweig/Glaser Advisers, the parent of the Manager.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Manager The Trust and Euclid Advisors LLC, the Manager, entered into an
investment management agreement, dated April 16, 1998, (the "Management
Agreement" ) pursuant to which the Manager reviews the portfolio of securities
and investments of the Fund, and advises and assists the Fund with respect to
the selection, acquisition, holding or disposal of securities. In addition to
managing the investments, the Manager also makes recommendations with respect to
other aspects and affairs of each Fund. The Manager also furnishes the Trust
with certain administrative services, office space and equipment, and permits
its officers and employees who may be elected trustees or officers of the Trust
to serve in the capacities to which they are elected without additional
compensation from the Trust. All other expenses incurred in the operation of the
Fund are borne by the Fund, including: interest, taxes, fees and commissions of
every kind; expenses of issue, repurchase or redemption of shares; costs of
registering or qualifying shares for sale (including printing costs, legal fees
and other expenses relating to the preparation and filing of the Fund's
registration statement with the appropriate regulatory authorities and the
production and filing of the Fund's prospectus); costs of insurance; association
membership dues; all charges of custodians, including fees as custodian, escrow
agent, and fees for keeping books and performing portfolio valuations; all
charges of transfer agents, registrars, pricing services, independent
accountants and legal counsel; expenses of preparing, printing and distributing
prospectuses and all proxy materials, reports and notices to shareholders;
expenses of distribution of shares pursuant to Rule 12b-1 Plans; out-of-pocket
expenses of Trustees; fees of trustees who are not "affiliated persons" as
defined in the 1940 Act; and all other costs incident to the Trust's existence
as a business trust. The Distributor purchases copies of the Fund's prospectus
and shareholder reports used for sales purposes at printer's overrun cost.
11
<PAGE>
The Fund pays the Manager for its services pursuant to the Management
Agreement a monthly fee at the annual rate of 1.50% of the average daily net
assets of the Fund. The Manager has voluntarily undertaken to limit the expenses
of the Fund (exclusive of taxes, interest, brokerage commissions, 12b-1 fees and
extraordinary expenses) until April 30, 1999 to 2.00% of its average daily net
assets. The Manager reserves the right to discontinue this policy at any time
after April 30, 1999.
The Management Agreement will continue in effect from year to year if
specifically approved annually by a majority of the Board of Trustees who are
not parties to such contract or "interested persons" of any such party. The
Management Agreement may be terminated without penalty by either party on 60
days' written notice and must terminate in the event of its assignment.
The Management Agreement provides that the Manager is liable only for its
acts or omissions caused by its willful misfeasance, bad faith or gross
negligence in the performance of its duties or reckless disregard of its
obligations under the Management Agreement. The Management Agreement permits the
Manager to render services to others and to engage in other activities.
The Manager may draw upon the resources of the Distributor and its
qualified affiliates in rendering its services to the Fund. The Distributor or
its affiliates may provide the Manager (without charge to the Fund) with
investment information and recommendations that may serve as the principal basis
for investment decisions with respect to the Fund.
The Manager has adopted a Code of Ethics (the "Code") that requires all
persons subject to the Code to pre-clear any proposed non-exempt personal
securities transaction. Permission for any proposed transaction will be granted
provided it is determined that such would not negatively impact activity in
client accounts. In the event that a client of the Manager's affiliates also
owns such security, or it is proposed that such client purchase such security,
available investments or opportunities for sales will be allocated in a manner
deemed to be equitable by the Manager.
Distributor Pursuant to its Distribution Agreement with the Trust (the
"Distribution Agreement"), Zweig Securities Corp., the Distributor, acts as
distributor of the Fund's shares. The Distribution Agreement was approved by the
Trustees on April 16,1998. The compensation of the Distributor and selling
dealer is described the Prospectus under "Choosing Among Classes When Purchasing
Shares." Normally, the Distributor receives a front-end sales commission on
sales of Class A Shares, a declining CDSC ranging from 5% to 1% on Class B
Shares held for less than seven years, and a CDSC of 1.25% on Class C Shares
held for less than one year. A 1% CDSC may apply on redemptions within 18 months
of purchases of Class A Shares not subject to a sales charge. The Distributor
also is compensated under the Rule 12b-1 distribution plans as described more
fully below.
The Distributor may reallow amounts in excess of the sales concessions
listed in the Prospectus, and pay certain costs, to dealers who provide
additional services and special assistance in selling shares of the Fund.
Distribution Plans The Fund has adopted a distribution plan for each
class of shares except Class I Shares in accordance with Rule 12b-1 under the
Act (the "Plan"), to compensate the Distributor for the services it provides and
for the expenses it bears under the Distribution Agreement. Each class of shares
(other than Class I Shares) pays a service fee at a rate of 0.25% per annum of
the average daily net assets of such class and a distribution fee based on
average daily net assets at the rate of 0.05% per annum for Class A Shares and
0.75% per annum for Class B Shares and Class C Shares.
A report of the amounts expended under the Plan must be made to, and
reviewed by, the Board of Trustees at least quarterly. In addition, the Plan
provides that it may not be amended to increase materially the costs which the
Fund may bear for distribution pursuant to the Plan without shareholder approval
and that other material amendments to the Plan must be approved by a majority of
the Board, including a majority of the Board who are neither "interested
persons" of the Fund (as defined in the 1940 Act) nor have any direct or
indirect financial interest in the operation of the Plan (the "Qualified
Trustees"), by vote cast in person at a meeting called for the purpose of
considering such amendments.
The Plan is subject to annual approval by a majority of the Board of
Trustees, including a majority of the Qualified Trustees, by vote cast in person
at a meeting called for the purpose of voting on the Plan. The Plan is
terminable at any time by vote of a majority of the Qualified Trustees or, with
respect to any class - by vote of a majority of the shares of such class. .If
the Plan is terminated (or not renewed) with respect to one or more classes, it
may continue in effect with respect to any class as to which it has not been
terminated (or has not been renewed). Pursuant to the Plan, any new trustees who
are not "interested persons" must be nominated by existing trustees who are not
"interested persons".
12
<PAGE>
Because all amounts paid pursuant to the Plan are paid to the Distributor,
the Distributor, its officers, directors and employees, may all be deemed to
have a direct or indirect financial interest in the operation of the Plan. None
of the Trustees who is not an "interested person" of the Fund has a direct or
indirect financial interest in the operation of the Plan.
Benefits from the Plan may accrue to the Fund and its shareholders from
the growth in assets due to sales of shares to the public pursuant to the Plan.
Increases in the Fund's net assets from sales pursuant to its Plan may benefit
shareholders by reducing per share expenses, permitting increased investment
flexibility and diversification of the Fund's assets, and facilitating economies
of scale (e.g., block purchases) in the Fund's securities transactions. Under
its terms, the Plan will continue from year to year, provided that such
continuance is approved annually by a vote of the Trustees in the manner
described above.
The adoption of the Plan was approved by the Board of Trustees, including
a majority of the Qualified Trustees, at a meeting held on April 16, 1998. Prior
to approving the adoption of the Plan, the Board requested and received from the
Distributor all the information which it deemed necessary to arrive at an
informed determination as to the adoption of the Plan. In making its
determination to adopt the Plan, the Board considered, among other factors: (1)
the experience under a substantially identical Plan and previous Rule 12b-1
Plan's of Zweig Series Trust, and whether such experience indicates that the
Plan would operate as anticipated; (2) the benefits the Fund would be likely to
obtain under the Plan; including the fact that the Plan was necessary to permit
the Fund to offer exchangeability of its shares for shares of the same class of
the funds that comprise Zweig Series Trust (3) what services would be provided
under the Plan by the Distributor to the Fund and its shareholders; and (4) the
reasonableness of the fees to be paid to the Distributor for its services under
the Plan. Based upon their review, the Board, including each of the Qualified
Trustees, determined that the adoption of the Plan would be in the best interest
of the Fund, and that there was a reasonable likelihood that the Plan would
benefit the Fund and its shareholders. In the Board's quarterly review of the
Plan, the Trustees will consider its continued appropriateness and the level of
compensation provided therein.
The Board of Trustees has the right to terminate the Rule 12b-1 Plan for
the Class B Shares, and in the event of such termination, no further payments
would be made thereunder. However, in the event the Board of Trustees were to
terminate the Rule 12b-1 Plan for the Class B Shares for the Fund, the Fund may
not thereafter adopt a new Rule 12b-1 Plan for a class of that Fund having, in
the good faith determination of the Board of Trustees, substantially similar
economic characteristics to the Class B Shares. Termination of the Rule 12b-1
Plan for the Class B Shares or the Distribution Agreement does not affect the
obligation of the Class B shareholders to pay CDSCs. The Distributor has sold
its right to receive certain payments under the Distribution Agreement to
financial institutions in order to finance the distribution of the Class B
Shares.
The Board of Trustees has also adopted a Rule 18f-3 Multi-Class Share Plan
permitting the issuance of shares in multiple classes.
Custodian, Fund Accounting Agent, Transfer Agent and Dividend Paying
Agent. The Bank of New York, 48 Wall Street, New York, New York 10286 serves as
custodian and fund accounting agent, and State Street Bank and Trust Company,
P.O. Box 8505, Boston, Massachusetts 02260-8505, serves as the transfer agent
and dividend paying agent for the Fund.
Independent Accountants. Coopers & Lybrand L.L.P., 1301 Avenue of the
Americas, New York, New York 10019, serves as independent accountants for the
Fund. In addition to reporting annually on the financial statements of the Fund,
the Fund's accountants also review certain filings of the Fund with the
Securities and Exchange Commission.
Counsel. Shearman & Sterling, 599 Lexington Avenue, New York, New York
10022, is counsel to the Fund. The firm also acts as counsel to the Manager and
the Distributor.
ADVISOR'S PRIOR PERFORMANCE
Euclid Advisors LLC also serves as the manager of other accounts. The
performance information shown below is based on a composite of all accounts with
investment objective, policies and strategies that are substantially similar to
those of the fund managed by Euclid Advisors LLC or by Euclid Advisors, Inc.,
the Manager's predecessor, and Zweig/Katzen Investors, L.P. (collectively, the
"Accounts"). David Katzen was the portfolio manager for each of the Accounts
since inception. The performance information shown in the table below has been
adjusted to give effect to the estimated annualized expenses of the different
classes of shares during the Fund's first year of operations expenses (without
giving effect to any expense waivers or reimbursements). Performance from
inception has a negligible correlation with the stock market (R-squared of .01
against the Standard & Poor's 500 Index - whereas an R-squared of 1.00 would be
a perfect correlation) or the bond market (R-squared of .03 against the Lehman
Government/Corporate Bond index. The
13
<PAGE>
information below should not be considered a prediction of future performance of
the Fund. The performance of the Fund may be higher or lower than the
performance of the Accounts. The Accounts were not registered under the 1940 Act
and therefore were not subject to the diversification and other requirements of
the 1940 Act and the Internal Revenue Code. If the Accounts had been subject to
these requirements, their performance might have been adversely affected. The
following table also shows the average annual total return on 3-month U.S.
Treasury bills for the same periods.
<TABLE>
<CAPTION>
Performance of Accounts adjusted for the One-Year Period Three-Year Period Five-Year Period Eight-Year
Period
fees and expenses of the different classes of Shares of Ending Ending Ending From inception
the Fund on January 1,
1990
Dec. 31, 1997 Dec. 31, 1997 Dec. 31, 1997 to Dec. 31, 1997
<S> <C> <C> <C> <C>
Class A with maximum sales charge 3.34% 9.02% 7.43% 11.11%
Class A with no sales charge 9.36% 11.10% 8.66% 11.90%
Class B with CDSC 3.17% 9.21% 7.47% 11.22%
Class B with no CDSC 8.60% 10.33% 7.90% 11.22%
Class C with CDSC 7.24% 10.33% 7.90% 11.12%
Class C with no CDSC 8.60% 10.33% 7.90% 11.12%
Class I 9.68% 11.43% 8.98% 12.23%
Performance of 3-month U.S. Treasury Bills. 5.31% 5.45% 4.78% 5.14%
</TABLE>
The above table is not the performance of the Fund. Giving effect to the
expense limitation set forth in the "Fee Table" section, the average annual
total return of the Accounts for the one-year, three-year, five-year and
eight-year (since-inception) periods ended December 31, 1997 for the Accounts
would have been approximately 0.16% higher for all classes of shares.
An investment in 3-month U.S. Treasury Bills is different from an
investment in the Fund or in the Accounts because Treasury Bills are backed by
the full faith and credit of the United States, have a fixed rate of return and
a short duration, and investors in Treasury Bills do not risk losing capital.
The following table shows the total return of the Accounts, quarter by
quarter, since inception adjusted for the estimated expenses of the
different classes of shares but without adjustment for sales charges.
Sales charges apply at the time of purchase (Class A Shares) or if shares
are redeemed within specified periods (Class B and Class C Shares) - see
"Choosing Among Classes When Purchasing shares" in the prospectus. Also
shown, by quarter, is the total return of 3-month U.S. Treasury bills.
<TABLE>
<CAPTION>
1998 First Quarter
---- -------------
<S> <C> <C> <C> <C>
adjusted for Class A expenses 4.59%
adjusted for Class B expenses 4.41%
adjusted for Class C expenses 4.41%
adjusted for Class I expenses 4.67%
Performance of 3-month U.S. Treasury Bills. 1.30%
1997 First Quarter Second Quarter Third Quarter Fourth Quarter
---- ------------- -------------- ------------- --------------
adjusted for Class A expenses 0.78% 2.46% 6.84% -0.87%
adjusted for Class B expenses 0.61% 2.28% 6.65% -1.05%
adjusted for Class C expenses 0.61% 2.28% 6.65% -1.05%
adjusted for Class I expenses 0.86% 2.53% 6.91% -0.80%
Performance of 3-month U.S. Treasury Bills. 1.31% 1.31% 1.30% 1.31%
1996 First Quarter Second Quarter Third Quarter Fourth Quarter
---- ------------- -------------- ------------- --------------
adjusted for Class A expenses 0.83% 5.94% 0.01% 3.96%
adjusted for Class B expenses 0.65% 5.76% -0.16% 3.78%
adjusted for Class C expenses 0.65% 5.76% -0.16% 3.78%
adjusted for Class I expenses 0.90% 6..02% 0.09% 4.03%
Performance of 3-month U.S. Treasury Bills. 1.27% 1.30% 1.32% 1.29%
1995 First Quarter Second Quarter Third Quarter Fourth Quarter
---- ------------- -------------- ------------- --------------
adjusted for Class A expenses 0.59% 8.08% 5.83% -1.87%
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
adjusted for Class B expenses 0.41% 7.90% 5.64% -2.04%
adjusted for Class C expenses 0.41% 7.90% 5.64% -2.04%
adjusted for Class I expenses 0.66% 8.16% 5.90% -1.79%
Performance of 3-month U.S. Treasury Bills. 1.49% 1.45% 1.39% 1.36%
1994 First Quarter Second Quarter Third Quarter Fourth Quarter
---- ------------- -------------- ------------- --------------
adjusted for Class A expenses 1.46% -0.48% -4.21% 3.29%
adjusted for Class B expenses 1.28% -0.65% -4.38% 3.11%
adjusted for Class C expenses 1.28% -0.65% -4.38% 3.11%
adjusted for Class I expenses 1.54% -0.40% -4.13% 3.37%
Performance of 3-month U.S. Treasury Bills. 0.83% 1.04% 1.15% 1.36%
1993 First Quarter Second Quarter Third Quarter Fourth Quarter
---- ------------- -------------- ------------- --------------
adjusted for Class A expenses 8.10% 3.41% 4.75% -5.60%
adjusted for Class B expenses 7.92% 3.23% 4.57% -5.77%
adjusted for Class C expenses 7.92% 3.23% 4.57% -5.77%
adjusted for Class I expenses 8.18% 3.49% 4.83% -5.53%
Performance of 3-month U.S. Treasury Bills. 0.76% 0.76% 0.77% 0.79%
1992 First Quarter Second Quarter Third Quarter Fourth Quarter
---- ------------- -------------- ------------- --------------
adjusted for Class A expenses 2.49% 2.80% 0.32% 3.52%
adjusted for Class B expenses 2.32% 2.63% 0.15% 3.34%
adjusted for Class C expenses 2.32% 2.63% 0.15% 3.34%
adjusted for Class I expenses 2.57% 2.88% 0.40% 3.60%
Performance of 3-month U.S. Treasury Bills. 1.00% 0.94% 0.80% 0.79%
1991 First Quarter Second Quarter Third Quarter Fourth Quarter
---- ------------- -------------- ------------- --------------
adjusted for Class A expenses 1.24% 0.53% 3.53% 5.80%
adjusted for Class B expenses 1.06% 0.36% 3.35% 5.62%
adjusted for Class C expenses 1.06% 0.36% 3.35% 5.62%
adjusted for Class I expenses 1.31% 0.61% 3.61% 5.88%
Performance of 3-month U.S. Treasury Bills. 1.56% 1.44% 1.40% 1.17%
1990 First Quarter Second Quarter Third Quarter Fourth Quarter
---- ------------- -------------- ------------- --------------
adjusted for Class A expenses 0.91% 5.18% 14.57% 9.39%
adjusted for Class B expenses 0.73% 5.00% 14.38% 9.20%
adjusted for Class C expenses 0.73% 5.00% 14.38% 9.20%
adjusted for Class I expenses 0.98% 5.26% 14.65% 9.47%
Performance of 3-month U.S. Treasury Bills. 1.99% 2.01 1.94% 1.81%
</TABLE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
Officers and Trustees of the Fund and officers of the Manager who are also
officers or directors of the Distributor or its affiliates receive indirect
benefits from the Fund as a result of its usual and customary brokerage
commissions which the Distributor or its affiliates may receive for acting as
broker to the Fund in the purchase and sale of portfolio securities. The
Management Agreement does not provide for a reduction of the advisory fee by any
portion of the brokerage fees generated by portfolio transactions of the Fund
which the Distributor may receive.
Allocation of transactions, including their frequency, to various dealers
is determined by the Manager in its best judgment and in a manner deemed fair
and reasonable to shareholders. The primary consideration is prompt and
efficient execution of orders in an effective manner at the most favorable
price. Subject to this consideration, dealers who provide supplemental
investment research, statistical or other services to the Manager may receive
orders for transactions by the Fund. Information so received will enable the
Manager to supplement its own research and analysis with the views and
information of other securities firms. Such information may be useful and of
value to the Manager and its affiliates in servicing other clients as well as
the Fund; in addition, information obtained by the Manager and its affiliates in
servicing other clients may be useful and of value to the Manager in servicing
the Fund. No principal transactions are effected with Zweig Securities Corp. or
any of its affiliated companies.
The Fund may from time to time allocate brokerage commissions to firms
that furnish research and
15
<PAGE>
statistical information to the Manager. The supplementary research supplied by
such firms is useful in varying degrees and is of indeterminable value. Such
research may, among other things, include advice regarding economic factors and
trends, advice as to occasional transactions in specific securities and similar
information relating to securities. No formula has been established for the
allocation of business to such brokers. Consideration may be given to research
provided and payment may be made of a fee higher than that charged by another
broker-dealer which does not furnish research services or which furnishes
research services deemed to be of lesser value, so long as the criteria of
Section 28(e) of the Securities Exchange Act of 1934, as amended (the "1934
Act") are met. Section 28(e) of the 1934 Act specifies that a person with
investment discretion shall not be "deemed to have acted unlawfully or to have
breached a fiduciary duty" solely because such person has caused the account to
pay a higher commission than the lowest available under certain circumstances.
To obtain the benefit of Section 28(e), the person so exercising investment
discretion must make a good faith determination that the commissions paid are
reasonable in relation to the value of the brokerage and research services
provided viewed in terms of either that particular transaction or his overall
responsibilities with respect to the accounts as to which he exercises
investment discretion.
Currently, it is not possible to determine the extent to which commissions
that reflect an element of value for research services might exceed commissions
that would be payable for execution alone, nor generally can the value of
research services be measured. Research services furnished might be useful and
of value to the Manager and its affiliates in serving other clients as well as
the Fund, but on the other hand, any research service obtained by the Manager or
the Distributor from the placement of portfolio brokerage of other clients might
be useful and of value to the Manager in carrying out its obligation to the
Fund.
There are no fixed limitations regarding the turnover rates of the Fund's
long and short portfolios. In computing the portfolio turnover rate, all
securities, including options, the maturities or expiration dates of which at
the time of acquisition are one year or less, are excluded. Subject to this
exclusion, the turnover rate is calculated by dividing (A) the lesser of
purchases or sales of securities in the Fund's long portfolio for the fiscal
year by (B) the monthly average of the value of portfolio securities owned by
such portfolio during the fiscal year.
The exercise of calls written by the fund may cause the Fund to sell
portfolio securities, thus increasing its turnover rate. The exercise of puts
also may cause a sale of securities and increase turnover; although such
exercise is within the Fund's control, holding a protective put might cause the
Fund to sell the underlying securities for reasons which would not exist in the
absence of the put. The fund will pay a brokerage commission each time it buys
or sells a security in connection with the exercise of a put or call. Some
commissions may be higher than those which would apply to direct purchases or
sales of portfolio securities.
YIELD AND PERFORMANCE INFORMATION
The Fund will include performance data for Class A, Class B and Class C
Shares of the Fund in its advertisements, sales literature and other information
distributed to the public that includes performance data of the Fund. Such
performance information will be based on investment yields or total returns for
the Fund.
Yield. Yield may not be the same as the distribution rate or the income
reported in the Funds' financial statements. We compute yield by taking the
interest and dividend income the fund earns in a 30-day period, net of expenses,
and dividing that amount by the average number of shares entitled to receive
dividends.
Yield will be calculated, using a one-month base period, according to the
following formula:
Yield = 2 X [(a-b/cd) + 1]6 - 1
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends
d = the maximum offering price per share on the last day of the period.
Average Annual Total Return. Total return represents the average annual
compounded rate of return on an investment of $1,000 at the maximum public
offering price (in the case of Class A Shares) or reflecting the deduction of
any applicable CDSC. All data are based on past investment results. Average
annual total return for a given period is computed by finding the average annual
compounded rate of return over the period that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(1 + T)n = ERV
Where:
P = a hypothetical initial investment in the Fund of $1,000
16
<PAGE>
T = average annual total return
n = number of years in period
ERV = ending redeemable value, at the end of the period, of a hypothetical
$1,000 investment in the Fund made at the beginning of the period.
The investment results of Shares of the Fund will tend to fluctuate over
time, so that historical yields, current distributions and total returns should
not be considered representations of what an investment may earn in any future
period. Actual dividends will tend to reflect changes in market yields, and will
also depend upon the level of a Class's or the Fund's expenses, realized or
unrealized investment gains and losses, and the results of the Fund's investment
policies. Thus, at any point in time, investment yields, current distributions
or total returns may be either higher or lower than past results, and there is
no assurance that any historical performance record will continue.
The Fund also may include in its advertisements data from Age Wave, Inc.;
the American Association of Retired Persons; Barron's; Business Week;
CDA/Wiesenberger Investment Companies Service; Dalbar Surveys; Donoghue's Money
Fund Report; Financial Planning; Financial World; Forbes; Fortune; Fundscope,
Hulbert Financial Digest; Ibbotson Associates; Individual Investor; Investment
Advisor; Investors Business Daily; The Liscio Report; Lipper Analytical
Services, Inc.; Micropal Inc.; Money; Morningstar Mutual Funds; Mutual Fund
Forecaster; Mutual Funds Magazine; The National Center for Education Statistics;
The New York Times; The Philatelic Foundation; Smart Money; USA Today; U.S. News
& World Report; The Wall Street Journal; Worth and other industry publications.
REGISTRATION STATEMENT
This Statement of Additional Information and the Prospectus do not contain
all the information included in the Registration Statement filed with the
Commission under the 1933 Act with respect to the securities offered by the
Prospectus. The Registration Statement, including the exhibits filed therewith,
may be examined at the office of the Commission in Washington, D.C.
Statements contained in this Statement of Additional Information and the
Prospectus as to the contents of any contract or other document are not complete
and, in each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement of which this
Statement of Additional Information and the Prospectus form a part, each such
statement being qualified in all respects by such reference.
17
<PAGE>
FINANCIAL STATEMENTS
EUCLID MARKET NEUTRAL FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 22, 1998
ASSETS
Cash ....................................................... $100,000
Deferred organization expenses ............................. 50,000
--------
Total Assets ............................................... $150,000
LIABILITIES
Accrued organization expenses .............................. 50,000
--------
NET ASSETS ................................................. $100,000
========
- --------------------------------------------------------------------------------
Class A Shares
Net asset value ("NAV") and redemption price per share
($25,000/2,204.586 shares)................................ $11.34
======
Maximum public offering price per share - NAV/
(1-maximum sales charge)($11.34/.945) .................... $12.00
== ======= ==== ======
Class B Shares
Net asset value and offering price per share
($25,000/2,204.586 shares)................................ $11.34
======
Redemption price per share ................................. *
======
Class C Shares
Net asset value and offering price per share
($25,000/2,204.586 shares)................................ $11.34
======
Redemption price per share ................................. *
======
Class I Shares
Net asset value, offering and redemption price per share
($25,000/2,204.586 shares)................................ $11.34
======
- ----------
* Redemption price subject to sales charge.
NOTES
1. Euclid Mutual Funds (the "Trust"), organized as a Delaware business trust on
February 3, 1998 and has been inactive since that date except for matters
relating to its organization and registration under the Investment Company Act
of 1940 as a diversified, open-end management investment company and the sale of
$100,000 of shares of beneficial interest of Euclid Market Neutral Fund (the
"Fund"), a Series of the Trust, to Euclid Advisors LLC, the Fund's investment
manager (the "Manager"). The Fund offers Class A, Class B, Class C and Class I
Shares, and 2,204.586 shares of each Class were issued to the Manager as part
of the $100,000 sale.
2. The organization expenses of the Trust advanced by the Manager will be repaid
by the Fund after commencement of operations. Such costs will be amortized on a
straight-line basis over a five-year period from commencement of operations of
the Fund. In the event that any of the initial shares of the Fund are redeemed
during this period, the Fund will be reimbursed by the Manager for any
unamortized organization expenses in the same proportion as the number of shares
redeemed bears to the number of initial shares outstanding at the time of
redemption.
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of and Shareholder in
Euclid Mutual Funds
We have audited the accompanying statement of assets and liabilities of Euclid
Mutual Funds, comprised of Euclid Market Neutral Fund, as of April 22, 1998.
This financial statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted accounting
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of Euclid
Mutual Funds as April 22, 1998, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
New York, New York
April 22, 1998
19
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
To be filed by amendment.
(b) Exhibits
(1) Agreement and Declaration of Trust.*
(2) By-laws of the Trust.*
(3) Inapplicable.
(4) Inapplicable.
(5) Management Agreement between the Trust and Euclid Advisors
LLC.
(6)(a) Distribution Agreements.
(6)(b) Selling Group Agreement.
(7) Inapplicable.
(8) Custodian Agreement.
(9) Transfer Agency Agreement.
(10) Opinion and consent of counsel.
(11) Consent of independent accountants.
(12) Inapplicable.
(13) Subscription Agreement for Shares of the Euclid Market
Neutral Fund.
(14)(a) Individual Retirement Account.
<PAGE>
(b) Simple Individual Retirement Account.
(c) 401(k) Prototype Plan.
(d) 403(b)(7) Custodial Account.
(15) Rule 12b-1 Distribution Plans.
(16) Inapplicable.
(17) Inapplicable.
(18) Rule 18f-3 Plan.
- -------------------------
Notes to Item 24 (b).
* Filed within the Registrant's Registration Statement filed on Form N-1A on
February 5, 1998.
Item 25. Persons Controlled by or Under Common Control with the Trust
The Trust does not control and is not under common control with any other
person.
Item 26. Number of Holders of Securities
To date no shares have been issued.
Item 27. Indemnification
All officers, Trustees, employees and agents of the Trust are to be
indemnified as set forth in Article VII of the Agreement and Declaration
of Trust filed herewith. The Trust (i) may indemnify an agent of the Trust
or any person who is serving or has served at the Trust's request as an
agent of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise and (ii) shall indemnify each person
who is, or has been, a Trustee, officer or employee of the Trust and any
person who is serving or has served at the Trust's request as a director,
officer, trustee or employee of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise, to the fullest
extent consistent with the Investment Company Act of 1940 and in the
manner provided in the By-Laws; provided that such indemnification shall
not be available to any of the foregoing persons in connection with a
claim, suit or other proceeding by such person against the
<PAGE>
Trust or a series (or class) thereof. To this end, the Trust intends to
obtain an Officers' and Trustees' Errors and Omissions Insurance Policy
for liability and for all expenses reasonably incurred or paid or expected
to be paid by a Trustee, officer, employee or agent of the Trust in
connection with any claim, action, suit or proceeding in which he or she
becomes involved by virtue of his or her capacity or former capacity with
the Trust.
Insofar as indemnification for liability arising under the Securities Act
of 1933, as amended (the "1933 Act") may be permitted for trustees,
officers and controlling persons of the Trust pursuant to the foregoing
provisions, or otherwise, the Trust has been advised that, in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Trust of expenses incurred or paid by a trustee,
officer or controlling person of the Trust in the successful defense of
any action, suit or proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities being registered, the
Trust 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 1933 Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Manager
The investment manager of the Trust, Euclid Advisors LLC ("Euclid"), which
is a wholly owned subsidiary of Zweig/Glaser Advisers, a general
partnership ("ZGA"), engages in no business other than that of investment
counselling for clients, including the Zweig Series Trust and the Trust,
registered investment companies. The Officers and Directors of Euclid and
ZGA and their respective relationships with Zweig Securities Corp. (the
"Distributor") and with the Trust are as follows:
POSITION
POSITION WITH
-------------------------------------------------------
EUCLID and ZGA DISTRIBUTOR TRUST
-------------- ----------- -----
Eugene J. Glaser Manager and President and Trustee,
President of Director Chairman,
Euclid and President and
President of ZGA Chief Executive
Officer
<PAGE>
POSITION WITH
-------------------------------------------------------
EUCLID and ZGA DISTRIBUTOR TRUST
-------------- ----------- -----
Martin E. Zweig, Chairman of None None
Ph.D. Euclid and ZGA
Barry M. Mandinach Senior Vice Executive Vice First Vice
President of President President
Euclid and ZGA
David Katzen Executive Vice None Trustee and
President of Executive Vice
Euclid and Senior President
Vice President of
ZGA
Alfred J. Ratcliffe First Vice None First Vice
President of President,
Euclid and ZGA Treasurer,
Principal
Accounting
Officer and
Assistant
Secretary
Charles I. Leone First Vice First Vice First Vice
President and President, Chief President and
Chief Financial Financial Officer Assistant
Officer of Euclid and Assistant Secretary
and ZGA Secretary
Annemarie Gilly First Vice First Vice First Vice
President of President President
Euclid
Marc Baltuch First Vice First Vice Secretary
President of President, Chief
Euclid and ZGA Compliance
Officer, Secretary
and Director
Gavin M. Whitmore First Vice None None
President of
Euclid and Vice
President of ZGA
Jeffrey Cerutti First Vice None None
President of
Euclid and Vice
President of ZGA
Rhonda Lee Berzner Senior Research None Assistant Vice
Analyst for President
Euclid and ZGA
<PAGE>
POSITION WITH
-------------------------------------------------------
EUCLID and ZGA DISTRIBUTOR TRUST
-------------- ----------- -----
Tom Disbrow Assistant Vice None Assistant Vice
President of President and
Euclid and Vice Assistant
President of ZGA Treasurer
Tom Farrell Assistant Vice None Assistant Vice
President of President and
Euclid and ZGA Assistant
Treasurer
The principal occupation of all of such persons other than Dr. Zweig
and Mr. Baltuch is with Euclid and ZGA, and the business address of
such persons is 900 Third Avenue, New York, New York 10022. Dr.
Zweig's principal occupation is an investment advisor and analyst,
and Mr. Baltuch's principal occupation is Chief Compliance Officer
of the Distributor and Zweig Series Trust; their business address is
900 Third Avenue, New York, New York 10022.
Item 29. Principal Underwriters
(a) Zweig Securities Corp., the Distributor, acts as principal
distributor of the Trust's shares and for Zweig Series Trust.
(b) The officers and directors of the Distributor who also serve
on behalf of the Trust are as follows:
POSITION WITH POSITION WITH
THE DISTRIBUTOR THE TRUST
--------------- -------------
Eugene J. Glaser President and Director Trustee, Chairman,
President and Chief
Executive Officer
Barry M. Mandinach Executive Vice President First Vice President
Marc Baltuch First Vice President, Secretary
Chief Compliance
Officer, Secretary and
Director
Annemarie Gilly First Vice President Vice President
Charles I. Leone Chief Financial Officer, First Vice President and
First Vice President and Assistant Secretary
Assistant Secretary
<PAGE>
The principal business address of all such persons is 900 Third
Avenue, New York, New York 10022.
(c) None.
Item 30. Location of Accounts and Records
Euclid Mutual Funds
900 Third Avenue
New York, New York 10022
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02266
Item 31. Management Services
The Trust has not entered into any management-related service
contracts other than as described in Part A and B of this
Registration Statement.
Item 32. Undertakings
(a) not applicable
(b) not applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment No. 1 to the Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
and State of New York on this 27th day of April, 1998.
Euclid Mutual Funds
By: /s/ Eugene J. Glaser
----------------------------
Eugene J. Glaser, Chairman, President,
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 1 to the Registration Statement of the Trust on
Form N-1A has been signed below by the following persons in the capacities and
on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ James Balog* Trustee April 27, 1998
- --------------------------------
James Balog
/s/ Claire B. Benenson* Trustee April 27, 1998
- --------------------------------
Claire B. Benenson
/s/ S. Leland Dill* Trustee April 27, 1998
- --------------------------------
S. Leland Dill
/s/ Eugene J. Glaser Chairman, President April 27, 1998
- -------------------------------- Chief Executive
Eugene J. Glaser Officer and Trustee
/s/ David Katzen* Executive Vice April 27, 1998
- -------------------------------- President and Trustee
David Katzen
/s/ Donald B. Romans* Trustee April 27, 1998
- --------------------------------
Donald B. Romans
/s/ Alfred J. Ratcliffe First Vice President April 27, 1998
- -------------------------------- Treasurer, Principal
Alfred J. Ratcliffe Accounting Officer
and Assistant
Secretary
* By Eugene J. Glaser by Power of Attorney
<PAGE>
EXHIBIT INDEX TO
TO THE REGISTRATION STATEMENT
ON FORM N-1A
(1) Agreement and Declaration of Trust.*
(2) By-laws of the Trust.*
(3) Inapplicable.
(4) Inapplicable.
(5) Management Agreement between the Trust and Euclid Advisors
LLC.
(6) Distribution Agreements.
(7) Inapplicable.
(8) Custodian Agreement.
(9) Transfer Agency Agreement.
(10) Opinion and consent of counsel.
(11) Consent of independent accountants.
(12) Inapplicable.
(13) Subscription Agreement for Shares of the Euclid Market
Neutral Fund.
(14)(a) Individual Retirement Account.
(b) Simple Individual Retirement Account.
(c) 401(k) Prototype Plan.
(d) 403(b)(7) Custodial Account.
<PAGE>
(15) Rule 12b-1 Distribution Plans.
(16) Inapplicable.
(17) Inapplicable.
(18) Rule 18f-3 Plan.
- -------------------------
NOTES TO EXHIBIT INDEX
* Filed within the Registrant's Registration Statement filed on Form N-1A on
February 5, 1998.
Exhibit 5
EUCLID MUTUAL FUNDS
MANAGEMENT AGREEMENT
April 16, 1998
EUCLID ADVISORS LLC
900 Third Avenue
New York, New York 10022-4728
Gentlemen:
Euclid Mutual Funds, a Delaware business trust (the "Trust"), is an
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Trust currently offers shares of one series,
Euclid Market Neutral Fund, with four classes of shares, designated as Class A,
Class B, Class C and Class I shares. In the future the Trust may issue other
series and other classes of shares.
Each series of the Trust invests and reinvests its assets in a portfolio
of securities and investments. The Trust hereby engages you to act as its
investment manager for each series of the Trust authorized now or in the future
subject to the terms and conditions of this Agreement.
SECTION 1. Investment Management Services.
You shall use your staff and other facilities to conduct and maintain a
continuous review of each series' portfolio of securities and investments, and
shall advise and assist each series of the Trust with respect to the selection,
acquisition, holding and disposal of securities and investments. In so doing,
you shall be guided by the investment objectives and policies of each series
delineated and limited in documents filed with the SEC, by policies adopted by
the Board of Trustees of the Trust (the "Board") and by the provisions of the
1940 Act and the rules thereunder, so that at all times the Trust shall be in
compliance with its policies and the provisions of the 1940 Act. The Trust
agrees to supply you with copies of all such documents and to notify you of any
changes in its investment objectives, policies and restrictions.
In rendering services to the Trust pursuant to this Agreement, you may
employ, retain or otherwise avail yourself of the services or facilities of
other persons or organizations for the purpose of providing you or the Trust
with such statistical and other factual information, such advice regarding
economic factors and trends, such advice as to occasional transactions in
specific securities, or such other information, advice or assistance as you may
deem necessary, appropriate or convenient for the discharge of your obligations
under this Agreement or otherwise helpful to the Trust or in the discharge of
your overall responsibilities with respect to the other accounts for which you
or your affiliates serve as investment manager.
You and any person performing executive, administrative or trading
functions for the Trust, whose services were made available to the Trust by you,
are specifically authorized to allocate brokerage and principal business to
firms that provide such services or facilities or to cause the Trust to pay a
member of a securities exchange or any other securities broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange or broker or dealer would
have charged for effecting that transaction if you or such person determine in
good faith that such amount of commission is reasonable in relation to the value
of the brokerage and research services (as such services are defined in Section
28(e) of the Securities Exchange Act of 1934, as amended (the "1934 Act"))
provided by such member, broker or dealer, viewed in terms of either that
particular transaction or your or such person's over-all responsibilities with
respect to the accounts as to which you or such person exercise investment
discretion.
<PAGE>
SECTION 2. Resumes and Reports, etc.
You shall maintain a record of all the investments and securities which
comprise the portfolios of each series of the Trust and shall furnish to the
Board, at its regularly scheduled meetings and at such other times as the Board
may reasonably request, a resume of the portfolios and report on all matters
pertaining to your services as investment manager. In addition, you shall
furnish the Trust with such statistical information reasonably available to you
as the Board shall reasonably request.
SECTION 3. Additional Services to be Furnished.
You shall maintain the books and financial records of the Trust and shall
perform such other services as are reasonably incidental to the foregoing duties
including supervising the Trust Custodian's recordkeeping. You shall assist in
the computation of the net asset value of the shares of each class of each
series of the Trust (in accordance with the Trust's Prospectus and the
instructions of the Board) and shall furnish to the Trust and its distributor
any statements with respect to the net assets of each series of the Trust and
the net asset value per share of each class of each series of the Trust at such
times, and in such forms, as the Trust may prescribe. You shall also furnish the
Trust with office space reasonably suited to its operations and with
bookkeeping, internal accounting and administrative services, and shall permit
such of your directors, officers and employees as may be elected as Trustees or
officers of the Trust to serve in the capacities to which they are elected. All
services to be furnished by you under this Agreement may be furnished through
directors, officers or employees of you or your affiliates.
In acting under this Agreement, you shall be an independent contractor and
shall not be an agent of the Trust. The investment policies, the administration
of its business and affairs and all other acts of the Trust are and shall at all
times be subject to the approval and direction of the Board.
SECTION 4. Multiple Capacities.
Nothing in this Agreement shall be deemed to prohibit you or your
affiliates from acting, and being separately compensated for acting, in one or
more capacities on behalf of the Trust including, but not limited to, the
capacities of broker or distributor. The Trust understands that you and your
affiliates may act as investment manager or in other capacities on behalf of
other investment companies and customers. While information and recommendations
you supply to the Trust shall in your judgment be appropriate under the
circumstances and in light of the investment objectives and policies of the
Trust, they may be different from the information and recommendations you supply
to other investment companies and customers. You shall give the Trust equitable
treatment under the circumstances in supplying information, recommendations and
any other services requested of you but you shall not be required to give
preferential treatment to the Trust as compared with the treatment given to any
other investment company or customer. Whenever you shall act in multiple
capacities on behalf of the Trust, you shall maintain the appropriate separate
accounts and records for each such capacity. All information and advice supplied
by you to the Trust under this Agreement shall be for its own use exclusively.
SECTION 5. Payment of Expenses.
You shall assume and pay all of your own costs and expenses under this
Agreement. The Trust shall assume and pay, or reimburse you for, all expenses
incurred in the operation of the Trust (to the extent not specifically allocated
to you hereunder) and, in particular but without limitation, the Trust shall
bear the cost of and pay all interest, taxes, fees and commissions of every
kind, expenses of issue, repurchase or redemption of shares, expenses of
registering or qualifying shares for sale, insurance, association
<PAGE>
membership dues, all charges of custodians (including fees as custodian, escrow
agent, for keeping books and performing portfolio valuations) , transfer agents,
registrars, dividend disbursing agents, independent auditors and legal counsel,
expenses of preparing, printing and distributing prospectuses and all proxy
materials, reports and notices to shareholders, expenses of distribution of
shares in accordance with a plan adopted pursuant to Rule 12b-1 under the 1940
Act, out-of-pocket expenses of trustees and fees of trustees who are not
"interested persons", and all other costs incident to the Trust's existence.
SECTION 6. Compensation for Services.
Each series of the Trust will pay to you monthly, a management fee
determined daily at the rate set forth below times its net assets.
Euclid Market Neutral Fund 1/365 (1/366 for Leap Years) of 1.50%
Notwithstanding the foregoing, nothing shall preclude you or your
affiliates from executing brokerage transactions for the Trust, charging the
Trust brokerage commissions therefor and deriving profit therefrom, provided
such payments to you by the Trust are reviewed in connection with each annual
continuation of this Agreement required by the 1940 Act and Section 9 below.
SECTION 7. Liability of the Investment Manager, etc.
You shall be liable for your own acts and omissions caused by your willful
misfeasance, bad faith or gross negligence in the performance of your duties or
by your reckless disregard of your obligations under this Agreement, and nothing
in this Agreement shall protect you against any such liability to the Trust or
its security holders. You shall not be liable for the acts and omissions of any
agent employed by you, nor for those of any bank, trust company, broker or other
person with whom, or into whose hands, any monies, shares of the Trust or
securities and investments may be deposited or come, pursuant to the provisions
of this Agreement. You shall not be liable for any defect in title of any
property acquired, nor for any loss unless it shall occur through your own
willful default. Subject to the first sentence of this section, you shall not be
liable for any action taken or omitted on advice, obtained in good faith, of
counsel, provided such counsel is satisfactory to the Trust.
SECTION 8. Termination of Agreement, Assignment, etc.
This Agreement may be terminated at any time, without the payment of any
penalty, upon sixty (60) days' written notice by the terminating party to the
other party, by you or by the Trust, acting pursuant to a resolution adopted by
its Board or by a vote of shareholders in accordance with the requirements of
the 1940 Act. This Agreement shall automatically terminate in the event of its
assignment. Termination shall not affect rights of the parties which have
accrued prior thereto.
SECTION 9. Duration of Agreement.
Unless sooner terminated, this Agreement shall continue in effect for two
years, and thereafter until terminated, provided that the continuation of this
Agreement and the terms thereof are specifically approved annually in accordance
with the requirements of the 1940 Act by a majority of the Trustees, including a
majority of the Trustees who are not "interested persons" of you or of the
Trust, cast in person at a meeting called for the purpose of voting on such
approval.
<PAGE>
SECTION 10. Definitions.
The terms "assignment" and "interested person" when used in this Agreement
shall have the meanings given such terms in the 1940 Act and the rules and
regulations thereunder.
SECTION 11. Obligation of the Trust.
The Trust's Agreement and Declaration of Trust is on file with the
Secretary of the State of Delaware and notice is hereby given that this
Agreement is made and executed on behalf of the Trust, and not by the Trustees
or officers of the Trust individually, and the obligations of or arising out of
this Agreement are not binding upon the Trustees, officers or shareholders of
the Trust individually but are binding only upon the assets and property of one
or more classes or series of the Trust.
SECTION 12. Concerning Applicable Provisions of Law, etc.
This Agreement shall be subject to all applicable provisions of law,
including, without limitation, the applicable provisions of the 1940 Act, and to
the extent that any provisions in this Agreement conflict with any such
applicable provisions of law, the latter shall control.
SECTION 13. Counterparts.
This Agreement may be executed by any one or more of the parties in any
number of counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same instrument.
SECTION 14. Effective Date.
This Agreement is effective upon such date on or after its initial
approval in accordance with the 1940 Act as may be agreed upon by the parties.
Very truly yours,
EUCLID MUTUAL FUNDS
By:______________________________
Name:
Attest:__________________________
Accepted and agreed to this Title:
_______ day of ____________, 1998
EUCLID ADVISORS LLC
By:_____________________________
Name:
Title:
Attest:________________________________
Exhibit 6a
EUCLID MUTUAL FUNDS
DISTRIBUTION AGREEMENT
April 16,1998
ZWEIG SECURITIES CORP.
900 Third Avenue
New York, New York 10022-4728
The undersigned, Euclid Mutual Funds, a Delaware business trust (the
"Trust"), is an open-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). The Trust currently offers its
shares in one series, Euclid Market Neutral Fund, and currently issues four
classes of shares designated as Class A, Class B, Class C and Class I shares
(the "Class A, Class B, Class C and Class I Shares"). In the future, the Trust
may authorize and issue other series and other classes of shares
SECTION 1. General Duties as Distributor of the Trust's Shares. You are
hereby engaged, as agent of the Trust, to sell and solicit the sale of shares of
all classes of Euclid Market Neutral Fund and any series of the Trust
established in the future. In the performance of these duties, you shall be
subject to the requirements of this agreement (the "Agreement"), the applicable
provisions of the Trust's Agreement and Declaration of Trust and its By-Laws,
the Trust's Prospectuses and Statements of Additional Information, and
applicable federal and state law, all as amended and in effect from time to
time. During the term of this Agreement, you will use your best efforts to
solicit or otherwise promote sales of the Trust's shares in jurisdictions where
shares may legally be offered for sale.
SECTION 2. Dealers and Service Organizations. You may enter into dealer
agreements with qualified dealers, the form thereof to be as mutually agreed
upon by the Trust and you, and shall solicit such dealers for orders to purchase
shares of the Trust. You may also enter into Service Agreements, in appropriate
form and consistent with this Agreement and the 1940 Act, with securities
dealers, financial institutions or other industry professionals (severally, a
"Service Organization") for promotion of, administration of, and servicing
investors in, the Trust's shares.
SECTION 3. Sales Literature and Advertisements. All sales literature and
advertisements used by you in connection with the sale of the Trust's shares
must be submitted to the Trust for its advance approval. In connection with the
sale or arranging for the sale of the Trust's shares, you are authorized to give
only such information and to make only such representations as are contained in
the Trust's then-current Prospectuses and Statements of Additional Information
or in sales literature or advertisements approved by the Trust.
SECTION 4. Information Relating to the Trust. The Trust will keep you
fully informed with regard to its affairs, will furnish you with copies of all
financial statements and a signed copy of each report prepared by its
independent public accountants, and will cooperate fully with you in your
efforts to sell the Trust's shares and in the performance of your duties under
this Agreement.
SECTION 5. Filing of Registration Statements, etc. The Trust will from
time to time file (and furnish you with copies of) such registration statements,
amendments thereto, and reports or other documents as may be required under the
Securities Exchange Act of 1933, the 1940 Act, or the laws of the states in
which you desire to sell Trust shares.
<PAGE>
SECTION 6. Offering Price; Net Asset Value Per Share, cancellation of Orders.
Shares of the Trust shall be offered and sold only at the price in effect at the
time of such sale ( the respective "Offering Prices") as described in the
Trust's then-current Prospectus and Statement of Additional Information. The
Trust shall receive not less than the full net asset value per share of all
shares sold. You may re-allow to dealers all or any part of the discount you are
allowed.
Shares shall be redeemed at the applicable redemption price (net asset
value per share less any applicable sales charge) as set
forth in the Trust's then-current Prospectus and Statement of Additional
Information.
Any references herein to "net asset value per share" refer to the net
asset value per share computed separately for each class of each series in
accordance with the Trust's Agreement and Declaration of Trust, its Prospectus
and Statement of Additional Information and the instructions of its Board of
Trustees, all as revised or amended from time to time. The Trust or its
investment manager will advise you as promptly as practicable of the net asset
value per share for each class of each series on each day that net asset values
are determined.
You shall reimburse the Trust for any loss caused to any series of the
Trust by the failure to settle of any purchase, redemption or repurchase order
accepted by you. In such event, you shall pay to the Trust, on at least an
annual basis, an amount equal to the losses (net of any gains) realized by any
series of the Trust as a result of such cancellations.
SECTION 7. Transactional Services. In addition to your duties as
Distributor, we understand that you may, in your discretion, perform additional
functions in connection with transactions of Trust shares but without any
additional charge by you to the Trust other than as specified in this Agreement
or the Trust's Rule 12b-1 Distribution Plan.
You may process or cause to be processed requests received from your
customers in connection with their purchase, redemption or submission for
repurchase of shares of any series, in the manner prescribed from time to time
by the Board, and shall arrange for payment for such shares to or from the
Trust's account with its custodian..
The processing of Trust transactions may include, but is not limited to:
compilation of all share transactions from your office; communication with
account executives in connection with the execution of transactions; recording
and reporting of these transactions as executed by the Trust's transfer agent in
your customer statements; rendering of periodic customer statements; and the
reporting of 1099 information at year end.
You may also provide other shareholder services, such as communicating
with Trust shareholders and other functions in administering customer accounts
for Trust shareholders. We understand that these services may result in cost
savings to the Trust or to the Manager, and the Manager may compensate you for
all or a portion of the costs incurred in performing such functions on behalf of
the Trust. Nothing herein is intended, nor shall be construed, as requiring you
to perform any of the foregoing functions and none of these functions performed
by you shall be deemed distribution services.
SECTION 8. Multiple Capacities. Nothing contained in this agreement shall
be deemed to prohibit you from acting, and being separately compensated for
acting, in one or more capacities on behalf of the Trust, including, but not
limited to, the capacities of investment manager, broker and distributor. The
Trust understands that you may act in one or more such capacities on behalf of
other investment companies and customers. You shall give the Trust equitable
treatment under the circumstances in supplying services in any capacity, but the
Trust recognizes that it is not entitled to receive preferential treatment from
you as compared with the treatment given to any other investment company or
customer. Whenever you shall act in multiple capacities on behalf of the Trust,
you shall maintain the appropriate separate accounts and records for each such
capacity.
<PAGE>
SECTION 9. Payment of Fees and Expenses.
(a) For your services as Distributor, you shall receive the fees in
accordance with the plans adopted by each series (or class of a series) of the
Trust pursuant to Rule 12b-1 under the 1940 Act, and the fees set forth herein
or in the Trust's Prospectus and Statement of Additional Information. The Trust
will pay you in consideration of your services in connection with the
distribution of Class B Shares of any series your "Allocable Portion", as
hereinafter defined, of the distribution fee allowable under the Rules of
Conduct of NASD Regulation, Inc. (the "Rules of Conduct") in respect of such
Class B Shares of such series consisting of a distribution fee at the rate of
three quarters of one percent (0.75%) per annum of the average daily net asset
value of the Class B Shares of such series of the Trust (the "Distribution
Fee"). For purposes of applying the limitation set forth in the Rules of Conduct
on the maximum amount of the Distribution Fee payable in respect of the Class B
and Class C Shares of any series, the Trust hereby elects to add to six and one
quarter percent (6.25%) of the issue price of the Class B Shares or Class C
Shares, as the case may be, interest thereon at the rate of prime plus one
percent per annum. The Distribution Fee shall be calculated and accrued daily
and shall be paid to you, or at your direction, as soon as practicable after the
end of the calendar month in which it accrues, but in any event not later than
10 days after the end of each such month.
(b) For your services as Distributor of the Trust's shares, you shall also
receive the proceeds of any front-end sales charges or CDSCs referred to in
Section 5 hereof. The Trust shall withhold and pay over to you, or at your
direction, on the date redemption proceeds are paid to a Class B or Class C
Shareholder of the Trust, your Allocable Portion of the CDSC, if any, applicable
to such redemption.
(c) Furthermore, the Trust shall assume and pay, or reimburse you for,
expenses of preparing and printing quarterly, semi-annual and annual reports for
distribution to the Trust's then existing shareholders, of maintaining a current
prospectus and statement of additional information, of qualification of the
Trust's shares for sale in various jurisdictions and of preparing and printing
prospectuses and statements of additional information for distribution to the
Trust's then existing shareholders. You shall pay, directly or by reimbursing
the Trust, the expenses of preparing, printing and distributing all sales
literature of the Trust, including printing and distributing prospectuses
required for your purposes, except to the extent payable by the Trust in
accordance with the terms of an effective plan pursuant to Rule 12b-1 under the
1940 Act.
(d) You will be deemed to have fully earned your Allocable Portion of the
Distribution Fee and CDSC, if any (as the case may be), payable in respect of
Class B Shares of any series upon the sale of each "Initial Issue Commission
Share" (as hereinafter defined) of such Class B of such series taken into
account in determining your Allocable Portion of such Distribution Fee or CDSC,
if any, as the case may be.
(e) Except as provided in (f) below and notwithstanding anything to the
contrary set forth elsewhere is this Agreement, the Trust's obligation to pay
you your Allocable Portion of the Distribution Fee payable in respect of the
Class B Shares of each series shall be (to the extent you have assigned your
rights to your Allocable Portion) absolute and unconditional and shall not be
subject to dispute, offset, counterclaim or any defense whatsoever (it being
understood that such provision is not a waiver of the Trust's right to pursue
you and enforce such claims against your assets other than your right to the
Distribution Fees and CDSCs in respect of the Class B Shares of such series).
(f) The Trust's obligation to pay you your Allocable Portion of the
Distribution Fee payable in respect of the Class B Shares of each series shall
not be terminated or modified except to the extent required by a change in the
1940 Act or the Rules of Conduct enacted or promulgated after January 31, 1996
(a "Change-in-Applicable Law"), or in connection with a "Complete Termination"
(as hereinafter defined) of the Rule 12b-1 distribution plan in respect of the
Class B Shares of such series.
<PAGE>
(g) The Trust will not waive or change any CDSC in respect of the Class B
Shares of any series, except as provided in the Trust's Prospectus or Statement
of Additional Information without your consent (or consent of your assigns).
(h) Except to the extent required by a Change-in-Applicable-Law, neither
the termination of your role as principal distributor of the Class B Shares of
any series, nor the termination of this Agreement nor the termination (other
than a "Complete Termination," as hereinafter defined) of the Rule 12b-1
distribution plan with respect to the Class B Shares will terminate your right
to your Allocable Portion of the CDSCs in respect of the Class B Shares of such
series that are sold prior to such termination.
(i) Except as provided in the Trust's Prospectus and Statement of
Additional Information, until you have been paid your Allocable Portion of the
Distribution Fees in respect of the Class B Shares of each series, the Trust
will not adopt a plan of liquidation in respect of such series without your
consent (or the consent of your assigns), which consent will not be unreasonably
withheld.
(j) You may sell and assign your rights to your Allocable Portion of the
Distribution Fees and CDSCs (but not your obligations to the Trust under this
Distribution Agreement) in respect of the Class B Shares of any series to raise
funds to make the expenditures related to the distribution of Class B Shares of
such series and in connection therewith, upon receipt of notice of such sale and
assignment, the Trust shall pay to the purchaser or assignee such portion of
your Allocable Portion of the Distribution Fees and CDSCs in respect of the
Class B Shares of such series so sold or assigned.
(k) For purposes of this Agreement, the term "Allocable Portion" means, in
respect of Distribution Fees and CDSCs payable in respect of the Class B Shares
of any series as applied to you, the portion of such Distribution Fees allocated
to you in accordance with the Allocation Schedule attached hereto as Exhibit A.
(l) For purposes of this Agreement, the term "Complete Termination" means,
in respect of the Rule 12b-1 distribution plan in respect of the Class B Shares
of any series, a termination of such plan involving the cessation of payments of
Distribution Fees thereunder in respect of Class B Shares of such series and the
cessation in payments of distribution fees pursuant to every other Rule 12b-1
plan of the Trust in respect of such series for every future class of shares of
such series which, in the good faith determination of the Board of Trustees, has
substantially similar economic characteristics to the Class B Shares taking into
account the total sales charge, sales charge and other
similar charges, it being understood that the existing Class A, existing Class
C, and existing Class I Shares do not have substantially similar economic
characteristics to the Class B Shares.
(m) For purposes of paragraph (d) above, the term "Initial Issue
Commission Share" shall mean, in respect of any series, a Class B Share which is
a Commission Share issued by such series under circumstances other than in
connection with a permitted free exchange with another fund. For purposes of the
foregoing definition a "Commission Share" shall mean, in respect of any series,
each Class B Share of such series which is issued under circumstances which
would normally give rise to an obligation of the holder of such Class B Share to
pay a CDSC upon redemption of such Share, including, without limitation, any
Class B Share of such series issued in connection with a permitted free exchange
as set forth in the Trust's then current Prospectus and Statement of Additional
Information ("Permitted Free Exchange"), and any such Class B Share shall not
cease to be a Commission Share prior to the redemption (including a redemption
in connection with a Permitted Free Exchange) or conversion even though the
obligation to pay the CDSC shall have expired or conditions for waivers thereof
shall exist.
SECTION 10. Liability of the Distributor, etc. You shall be liable for
your own acts and omissions caused by your willful misfeasance, bad faith or
gross negligence in the performance of your duties or by your reckless disregard
of your obligations under this agreement, and nothing herein shall protect you
against any such liability to the Trust or its shareholders. Subject to the
first sentence of this
<PAGE>
Section, you shall not be liable for any action taken or omitted on advice,
obtained in good faith, of counsel, provided such counsel is satisfactory to the
Trust.
SECTION 11. Termination of Agreement, Assignment, etc. This agreement may
be terminated with respect to the Trust at any time, without the payment of any
penalty, on sixty days' written notice (i) by you; (ii) by the Trust, acting
pursuant to a resolution adopted by the Board; or (iii) by a vote of the holders
of the lesser of (1) 67% of the Trust's outstanding voting securities present at
a meeting if the holders of more than 50% of the outstanding shares of the Trust
are present or represented by proxy, or (2) more than 50% of the outstanding
shares of the Trust. This agreement shall automatically terminate in the event
of its assignment; provided, however, that this agreement has been approved by
the Board and the Disinterested Trustees of the Board in anticipation of your
transfer of the Allocable Portion in order for you to raise funds to cover
distribution expenses associated with Class B Shares and therefore such transfer
will not cause this agreement to terminate. Termination shall not affect the
rights of the parties which have accrued prior thereto, including, without
limitation, your right to be paid your Allocable Portion as provided in Section
9 hereof (subject to the limitations therein set forth).
SECTION 12. Duration of Agreement. Unless sooner terminated, this
agreement shall continue in effect for two years, and thereafter until
terminated, provided that such continuation of this agreement and the terms
thereof are specifically approved annually in accordance with the requirements
of the 1940 Act by a majority of the Trustees, including a majority of the
Trustees who are not interested persons of you or of the Trust, cast in person
at a meeting called for the purpose of voting on such approval.
SECTION 13. Definitions. The terms "assignment" and "interested person"
when used in this agreement shall have the meanings given such terms in the 1940
Act and the rules and regulations promulgated thereunder.
SECTION 14. Obligation of the Trust, etc. The Trust's Agreement and
Declaration of Trust is on file with the Secretary of the State of Delaware and
notice is hereby given that this agreement is made and executed on behalf of the
Trust, and not by the Trustees or officers of the Trust individually, and the
obligations of or arising out of this agreement are not binding upon the
Trustees, officers or shareholders of the Trust individually but are binding
only upon the assets and property of the Trust. Notice is hereby given that the
debts, liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to a particular series of the Trust shall be
enforceable against the assets of such series only, and not against the assets
of the Trust generally.
SECTION 15. Counterparts. This Agreement may be executed by any one or
more of the parties in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one and
the same instrument.
SECTION 16. Concerning Applicable Provisions of Law, etc. This agreement
is executed and delivered in New York, New York, and the laws of the State of
New York shall, except to the extent that any applicable provisions of Federal
law shall be controlling, govern the construction, validity and effect of this
agreement.
If the agreement set forth herein is acceptable to you, please so
indicate by executing the enclosed copy of this agreement and returning the same
to the undersigned, whereupon this contract shall constitute a binding contract
between the parties hereto effective upon such date on or after its initial
<PAGE>
approval in accordance with the 1940 Act as may be agreed by the Trust and
Distributor, consistent with the requirements of the 1940 Act.
Very truly yours,
EUCLID MUTUAL FUNDS
By:__________________________
Name:
Title:
Accepted and agreed this
____ day of ____________, 1998
ZWEIG SECURITIES CORP.
By: ___________________________
Name:
Title:
Exhibit 6b
ZWEIG SECURITIES CORP.
900 THIRD AVENUE
NEW YORK, NY 10022
212-451-1100
SELLING GROUP AGREEMENT
As principal underwriter of the shares (the "Shares") of Zweig Series
Trust and Euclid Mutual Funds (each a "Trust", collectively the "Trusts"), we
invite you to join a selling group for the distribution of the Shares. As
exclusive agent of the Trusts, we offer to sell you Shares on the following
terms:
1. Orders received from you will be accepted only at the offering price
applicable to each order, as described in a Trust's then-current prospectus (the
"Prospectus"). Acceptance of orders shall be subject to all provisions of the
Prospectus, including the applicable minimum and the Trust's right to decline to
accept any order, and to the terms and conditions set forth herein. No
conditional orders will be accepted. As distributor of the Shares of the Trust,
we shall have full authority to take such action as we may deem advisable in
respect of all matters pertaining to the distribution of its Shares. The
procedures relating to the handling of orders shall be subject to instructions
that we shall forward to you from time to time.
2. Each series of each Trust currently issues multiple classes of Shares.
Each series of each Trust currently offers the same classes of Shares except for
Zweig Cash Fund, a money market series of Zweig Series Trust, which offers Class
M Shares in addition to the other classes of Shares offered. In the future a
Trust may create additional classes of Shares. The Trust's prospectus will be
revised to reflect the creation of any such additional classes. This Agreement
is applicable to the distribution of any Shares, whether of a class currently
issued or issued in the future. The creation of any class of Shares in the
future will not affect the terms of this Agreement with respect to any existing
class of Shares, and will not constitute an amendment or modification to this
Agreement. The sales charges and dealer concessions applicable to sales of
Shares by you which are accepted by us shall be as set forth in each Trust's
Prospectus. For the payment of asset based sales charges and service fees, as
set forth in the Prospectus and in accordance with any distribution plan or
plans adopted by the Board of Trustees of a Trust pursuant to Rule 12b-1 under
the Investment Company Act of 1940 with respect to any class of Shares of any
series of the Trust, you will assist us in providing services to customers who
may, from time to time, directly or beneficially own shares of the Trust,
including but not limited to, distributing prospectuses and sales literature,
answering routine customer inquiries regarding the Trust, assisting customers in
effecting administrative changes, such as, changing dividend options, account
designations and addresses, assisting in the establishment and maintenance of
customer accounts and records and in the processing of purchase and redemption
transactions, investing dividends and capital gains distributions automatically
in Shares and providing such other information and services as the Trust or
customer may reasonably request. In accordance with Zweig Series Trust's
Distribution Sharing Plan for the Class M Shares of the Zweig Cash Fund adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, and
related Service Agreements, to the extent that you have entered into a Service
Agreement for distribution, promotion, and administration of and/or servicing
investors in the Class M Shares, you will be paid Service Payments, as set forth
in Zweig Series Trust's Prospectus describing Zweig Cash Fund Class M Shares.
<PAGE>
3. You understand that all fees and concessions relating to the Shares,
including any Rule 12b-1 fees applicable to any class of Shares, shall be
payable to you only if and to the extent that such fees and/or concessions are
actually received by us from a Trust. Any sales commission or concession shall
be payable only upon the Trust's receipt of the full public offering price of
the related purchase of shares. We reserve the right at any time without notice
to modify, suspend, or terminate such payments hereunder. All such payments
shall be subject to our continued authority to distribute a Trust's Shares and
its authority to terminate or modify its distribution arrangements with us.
4. You shall have the option of placing orders for Shares through State
Street Bank and Trust Company (the "Transfer Agent") or the National Securities
Clearing Corporation ("NSCC"). Payment for Shares shall be made to the Transfer
Agent on or before the settlement date specified in the applicable confirmation,
and each Trust reserves the right to delay transfer of Shares until the check in
payment for such Shares has cleared. If such payment is not received, we reserve
the right, without notice, forthwith to cancel the sale or, at our option, to
resell the Shares on your behalf to the Trust at the prevailing repurchase
price. In this event or in the event you cancel the trade for any reason, you
agree to be responsible for any loss, expense, liability or damage resulting to
the Trust or us or our designated agent from your failure to make payment as
aforesaid. You shall not be entitled to any benefit, whether by offset or
otherwise, resulting from any increase in the asset value of Shares, payment for
which has not been received by us.
5. By accepting this Agreement you agree that:
a. You will order Shares only from us and our designated agents. All
such purchases shall be made only to cover purchase orders already received from
your customers or for your own bona fide investment.
b. You will not withhold placing orders received from your customers
so as to profit yourself as a result of such withholding, and you will place
orders for purchases and redemptions promptly upon receipt from your customers.
6. By opening an omnibus account for any class of Shares, you thereby
represent, warrant and covenant that you will accurately perform the necessary
subaccounting functions, including properly computing and remitting applicable
sales charges and conversions of one class of Shares to
another under the terms of the applicable Prospectus and will deliver all
required prospectuses, shareholder reports and proxy materials.
7. If any of the Shares sold through you hereunder are redeemed by a Trust
or repurchased by us as agent for a Trust within seven business days after
confirmation of the original purchase, it is agreed that you shall forfeit your
right to the entire dealer concession received by you on such Shares. We will
notify you of any such repurchase or redemption within ten business days from
the date thereof and you shall forthwith refund to us the entire amount of all
concessions received by you on such sale. We agree, in the event of any such
repurchase or redemption, to refund to the Trust our share of the sales charge
retained by us, if any, and upon receipt from you of the refund of the
concession allowed to you, to pay such refund forthwith to the Trust.
8. No person is authorized to make any representations concerning the
Shares except those contained in the Prospectus and Statement of Additional
Information of a Trust and in sales literature issued by us supplemental to such
Prospectus and Statement of Additional Information. We will furnish additional
copies of the Trust's Prospectus and any sales literature and other information
issued by us or the Trust in reasonable quantities upon request. If you wish to
use your own advertising material such as mailers, brochures, prospecting
letter, etc. with respect to the availability of Shares of the Trust, all such
advertising must be submitted to us for review and approval prior to use. You
shall be
<PAGE>
responsible for filing and obtaining any approvals of such advertising as may be
required by applicable law or regulation.
9. In all sales of Shares to the public you shall act as dealer for your
own account, and in no transaction shall you have any authority to act as agent
for a Trust, for us or for any other member of the Selling Group. You are
responsible for your own conduct, for the employment, control and conduct of
your employees and agents, for injury to such employees or agents or to others
through such employees or agents, and for thorough and prior training of such
employees or agents concerning the selling methods to be used in connection with
the offer and sale of Shares, giving special emphasis to the principles of full
and fair disclosure to prospective investors. You assume full responsibility for
your employees and agents under applicable laws and agree to pay all employer
taxes relating thereto.
10. This Agreement is conditioned upon your representation and warranty
that you (i) are a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD") and are registered as a broker-dealer
under the Securities Exchange Act of 1934, or that you are a foreign
broker-dealer not eligible for membership in the NASD and agree to comply with
its Conduct Rules, including specifically Rule 2830 thereof applicable to
investment company securities; (ii) are qualified to act as a dealer in each
jurisdiction in which you will offer shares of the Trust; and (iii) will
maintain such registrations, qualifications and memberships throughout the term
of this Agreement. You shall comply with all applicable federal law, the laws of
each jurisdiction in which you will offer Shares of a Trust and the rules and
regulations of the NASD and any self-regulatory organization to which you, the
Trust or we are subject. You will provide immediate notice to us if you become
the subject of any order of expulsion or suspension. Expulsion from the NASD
will automatically terminate this Agreement. You shall not be entitled to any
compensation during any period in which you have been suspended or for any
period following your expulsion from membership in the NASD. You further agree
that you will not make available Shares of a Trust in any state or other
jurisdiction in which such Shares may not be lawfully offered for sale. You
shall promptly answer all written complaints received by you relating to Shares
or any account in a Trust and forward copies of such complaints and your
responses to Zweig Securities Corp., 900 Third Avenue, New York, New York 10022,
Attn: Office of the President.
11. You agree to indemnify, defend and hold us and our several officers
and directors and each Trust and its several officers and trustees and any
person who controls us and/or the Trust within the meaning of Section 15 of the
Securities Act of 1933, as amended, free and harmless from and against any and
all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims and any counsel fees incurred or in
connection therewith) which we or our several officers and directors, and any
such controlling person, as aforesaid, may incur arising out of or based upon
(i) any breach of any representation, warranty or covenant made by you herein,
(ii) any failure by you to perform your obligations as set forth herein, (iii)
your action or inaction relating to any duties, functions, procedures or
responsibilities undertaken by you pursuant to your use of NSCC, including that
which may arise out of the malfunction of programs, systems and equipment, or
(iv) any violation by you of any law, rule or regulation, which violation may
result in liability to us or to the Trust. In the event that we or a Trust
determine to refund any amounts paid by an investor by reason of your breach,
failure or violation, you shall return to us or the Trust any fees previously
paid to you with respect to the transaction for which the refund is being made.
This section shall survive termination of this Agreement.
12. This Agreement shall become effective when accepted by you below. We
and each Trust reserve the right, in our discretion upon notice to you, to
amend, modify or terminate this Agreement at any time or to suspend sales or
withdraw the offering of Shares of a Trust entirely or to change the fees
payable hereunder. You may, upon notice to us, terminate this Agreement at any
time.
<PAGE>
Orders received following notice to you of any amendment or modification to this
Agreement shall be deemed to be a confirmation of your acceptance of such
amendment or modification.
13. This Agreement is not assignable or transferable, except that we may
assign or transfer this Agreement to any successor which becomes principal
underwriter of a Trust.
14. All communications to us should be sent to: Zweig Securities Corp.,
31st Floor, 900 Third Avenue, New York, New York 10022. Any notice to you shall
be duly given if mailed to you at the address specified by you below. This
Agreement shall be construed under the laws of the State of New York."
Please confirm your acceptance by executing both copies of this Agreement
and returning one of the originals to us for our files.
ZWEIG SECURITIES CORP.
(Distributor)
By:___________________________________
Annemarie Gilly
First Vice President
ACCEPTED:
___________________________________
(Selling Group Member)
By:________________________________
Title:_____________________________
___________________________________
(Address)
___________________________________
(City) (State) (Zip Code)
DATED:_____________________________
Exhibit 8
CUSTODY AGREEMENT
Agreement made as of this day of , 1998, between EUCLID MUTUAL
FUNDS, a Delaware business trust organized and existing under the laws of the
State of Delaware, having its principal office and place of business at c/o
Euclid Advisors LLC, 900 Third Avenue, 31st Floor, New York, NY 10022
(hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New York
corporation authorized to do a banking business, having its principal office and
place of business at One Wall Street, New York, New York 10286 (hereinafter
called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1. "Authorized Persons" shall be deemed to include any person, whether or
not such person is an officer or employee of the Fund, duly authorized by the
Board of Trustees of the Fund to execute any Certificate, instruction, notice or
other instrument on behalf of the Fund and listed in the Certificate annexed
hereto as Appendix A or such other Certificate as may be received by the
Custodian from time to time.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
3. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
4. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the
Custodian which is actually received by the Custodian and signed on behalf of
the Fund by any two Authorized Persons, and the term Certificate shall also
include Instructions.
5. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
<PAGE>
6. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII herein.
7. "Composite Currency Unit" shall mean the European Currency Unit or any
other composite unit consisting of the aggregate of specified amounts of
specified Currencies as such unit may be constituted from time to time.
8. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.
9. "Currency" shall mean money denominated in a lawful currency of any
country or the European Currency Unit.
10. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits therein by the
Custodian.
11. "Financial Futures Contract" shall mean the firm commitment to buy or
sell fixed income securities including, without limitation, U.S. Treasury Bills,
U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of deposit,
and Eurodollar certificates of deposit, during a specified month at an agreed
upon price.
12. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contracts.
13. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
14. "FX Transaction" shall mean any transaction for the purchase by one
party of an agreed amount in one Currency against the sale by it to the other
party of an agreed amount in another Currency.
15. "Instructions" shall mean instructions communications transmitted by
electronic or telecommunications media including S.W.I.F.T.,
computer-to-computer interface, dedicated transmission line, facsimile
transmission (which may be signed by an Authorized Person or unsigned) and
tested telex.
16. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit
2
<PAGE>
of a broker, dealer, futures commission merchant, or Clearing Member, or
otherwise, in accordance with an agreement between the Fund, the Custodian and a
broker, dealer, futures commission merchant or a Clearing Member (a "Margin
Account Agreement"), separate and distinct from the custody account, in which
certain Securities and/or money of the Fund shall be deposited and withdrawn
from time to time in connection with such transactions as the Fund may from time
to time determine. Securities held in the Book-Entry System or the Depository
shall be deemed to have been deposited in, or withdrawn from, a Margin Account
upon the Custodian's effecting an appropriate entry in its books and records.
17. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and principal by the government of the United States
or agencies or instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public authority, commercial
paper, certificates of deposit and bankers' acceptances, repurchase agreements
with respect to the same and bank time deposits, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale.
18. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
19. "Option" shall mean a Call Option, Covered Call Option, Stock Index
Option and/or a Put Option.
20. "Oral Instructions" shall mean verbal instructions actually received
by the Custodian from an Authorized Person or from a person reasonably believed
by the Custodian to be an Authorized Person.
21. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.
22. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
23. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock Index
Futures Contracts, Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
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receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or assets.
24. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
25. "Series" shall mean the various portfolios, if any, of the Fund listed
on Appendix B hereto as amended from time to time.
26. "Shares" shall mean the shares of beneficial interest of the Fund,
each of which is, in the case of a Fund having Series, allocated to a particular
Series.
27. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.
28. "Stock Index Option" shall mean an exchange traded option entitling
the holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
the Securities and money at any time owned by the Fund during the period of this
Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all money owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate and apart. The
Custodian will not be responsible for any Securities and money not actually
received
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by it. The Custodian will be entitled to reverse any credits made on the Fund's
behalf where such credits have been previously made and money is not finally
collected. The Fund shall deliver to the Custodian a certified resolution of the
Board of Trustees of the Fund, substantially in the form of Exhibit A hereto,
approving, authorizing and instructing the Custodian on a continuous and
on-going basis to deposit in the Book-Entry System all Securities eligible for
deposit therein, regardless of the Series to which the same are specifically
allocated and to utilize the Book-Entry System to the extent possible in
connection with its performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities, loans of
Securities and deliveries and returns of Securities collateral. Prior to a
deposit of Securities specifically allocated to a Series in the Depository, the
Fund shall deliver to the Custodian a certified resolution of the Board of
Trustees of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate actually received by the
Custodian to deposit in the Depository all Securities specifically allocated to
such Series eligible for deposit therein, and to utilize the Depository to the
extent possible with respect to such Securities in connection with its
performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Securities and money deposited
in either the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for customers,
including, but not limited to, accounts in which the Custodian acts in a
fiduciary or representative capacity and will be specifically allocated on the
Custodian's books to the separate account for the applicable Series. Prior to
the Custodian's accepting, utilizing and acting with respect to Clearing Member
confirmations for Options and transactions in Options for a Series as provided
in this Agreement, the Custodian shall have received a certified resolution of
the Fund's Board of Trustees, substantially in the form of Exhibit C hereto,
approving, authorizing and instructing the Custodian on a continuous and
on-going basis, until instructed to the contrary by a Certificate actually
received by the Custodian, to accept, utilize and act in accordance with such
confirmations as provided in this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all money received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be disbursed by
the Custodian only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name and address of
the person to whom the payment is to be made, the Series account from which
payment is to be made and the purpose for which payment is to be made; or
(c) in payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series.
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3. Promptly after the close of business on each day, the Custodian shall
furnish the Fund with confirmations and a summary, on a per Series basis, of all
transfers to or from the account of the Fund for a Series, either hereunder or
with any co-custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the account of
the Fund for a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Fund with a detailed statement, on a per Series basis, of the Securities and
money held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or the
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in the Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall with respect to all Securities held
for the Fund hereunder in accordance with preceding paragraph 4:
(a) collect all income, dividends and distributions due or payable;
(b) give notice to the Fund and present payment and collect the
amount payable upon such Securities which are called, but only if either (i) the
Custodian receives a written notice of such call, or (ii) notice of such call
appears in one or more of the publications listed in Appendix C annexed hereto,
which may be amended at any time by the Custodian without the prior notification
or consent of the Fund;
(c) present for payment and collect the amount payable upon all
Securities which mature;
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(d) surrender Securities in temporary form for definitive
Securities;
(e) execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;
(f) hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the account of a
Series, all rights and similar securities issued with respect to any Securities
held by the Custodian for such Series hereunder; and
(g) deliver to the Fund all notices, proxies, proxy soliciting
materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agrement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered owner (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) execute and deliver to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any other instruments whereby
the authority of the Fund as owner of any Securities held by the Custodian
hereunder for the Series specified in such Certificate may be exercised;
(b) deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate in exchange for other Securities or cash
issued or paid in connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or the exercise of
any conversion privilege and receive and hold hereunder specifically allocated
to such Series any cash or other Securities received in exchange;
(c) deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series such
certificates of deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Series
specified in such Certificate, and take such other steps as shall be stated in
such Certificate to be for the purpose of effectuating any duly authorized plan
of liquidation, reorganization, merger, consolidation or recapitalization of the
Fund; and
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(e) present for payment and collect the amount payable upon
Securities not described in preceding paragraph 5(b) of this Article which may
be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the Custodian
shall not be required to obtain possession of any instrument or certificate
representing any Futures Contract, any Option, or any Futures Contract Option
until after it shall have determined, or shall have received a Certificate from
the Fund stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than the
business day preceding the availability of any such instrument or certificate.
Prior to such availability, the Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940, as amended, in connection with the purchase,
sale, settlement, closing-out or writing of Futures Contracts, Options, or
Futures Contract Options by making payments or deliveries specified in
Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing-out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or futures commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission merchant, in
book-entry form or otherwise, in the name of the Custodian (or any nominee of
the Custodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from the Margin
Account, and payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of the Margin
Account Agreement. Whenever any such instruments or certificates are available,
the Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a
purchase of an Option, a Futures Contract, or a Futures Contract Option, the
Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to
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<PAGE>
each such purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount purchased and
accrued interest, if any; (d) the date of purchase and settlement; (e) the
purchase price per unit; (f) the total amount payable upon such purchase; (g)
the name of the person from whom or the broker through whom the purchase was
made, and the name of the clearing broker, if any; and (h) the name of the
broker to whom payment is to be made. The Custodian shall, upon receipt of
Securities purchased by or for the Fund, pay to the broker specified in the
Certificate out of the money held for the account of such Series the total
amount payable upon such purchase, provided that the same conforms to the total
amount payable as set forth in such Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund, other than a sale
of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a Certificate or
Oral Instructions, specifying with respect to each such sale: (a) the Series to
which such Securities were specifically allocated; (b) the name of the issuer
and the title of the Security; (c) the number of shares or principal amount
sold, and accrued interest, if any; (d) the date of sale; (e) the sale price per
unit; (f) the total amount payable to the Fund upon such sale; (g) the name of
the broker through whom or the person to whom the sale was made, and the name of
the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the Securities
specifically allocated to such Series to the broker specified in the Certificate
against payment of the total amount payable to the Fund upon such sale, provided
that the same conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund shall
deliver to the Custodian a Certificate specifying with respect to each Option
purchased: (a) the Series to which such Option is specifically allocated; (b)
the type of Option (put or call); (c) the name of the issuer and the title and
number of shares subject to such Option or, in the case of a Stock Index Option,
the stock index to which such Option relates and the number of Stock Index
Options purchased; (d) the expiration date; (e) the exercise price; (f) the
dates of purchase and settlement; (g) the total amount payable by the Fund in
connection with such purchase; (h) the name of the Clearing Member through whom
such Option was purchased; and (i) the name of the broker to whom payment is to
be made. The Custodian shall pay, upon receipt of a Clearing Member's statement
confirming the purchase of such Option held by such Clearing Member for the
account of the Custodian (or any duly appointed and registered nominee of the
Custodian) as custodian for the Fund, out of money held for the account of the
Series to which such Option is to be
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<PAGE>
specifically allocated, the total amount payable upon such purchase to the
Clearing Member through whom the purchase was made, provided that the same
conforms to the total amount payable as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the Series to which such Option
was specifically allocated; (b) the type of Option (put or call); (c) the name
of the issuer and the title and number of shares subject to such Option or, in
the case of a Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options sold; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the Clearing Member through whom the sale was
made. The Custodian shall consent to the delivery of the Option sold by the
Clearing Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the Fund, provided that
the same conforms to the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Call Option: (a) the Series to
which such Call Option was specifically allocated; (b) the name of the issuer
and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the money held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Put Option: (a) the Series to
which such Put Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Put Option; (c) the expiration
date; (d) the date of exercise and settlement; (e) the exercise price per share;
(f) the total amount to be paid to the Fund upon such exercise; and (g) the name
of the Clearing Member through whom such Put Option was exercised. The Custodian
shall, upon receipt of the amount payable upon the exercise of the Put Option,
deliver or direct the Depository to deliver the Securities specifically
allocated to such Series, provided the same conforms to the amount payable to
the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Stock Index Option:
(a) the
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Series to which such Stock Index Option was specifically allocated; (b) the type
of Stock Index Option (put or call); (c) the number of Options being exercised;
(d) the stock index to which such Option relates; (e) the expiration date; (f)
the exercise price; (g) the total amount to be received by the Fund in
connection with such exercise; and (h) the Clearing Member from whom such
payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Covered
Call Option: (a) the Series for which such Covered Call Option was written; (b)
the name of the issuer and the title and number of shares for which the Covered
Call Option was written and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be received by the Fund; (f) the date
such Covered Call Option was written; and (g) the name of the Clearing Member
through whom the premium is to be received. The Custodian shall deliver or cause
to be delivered, in exchange for receipt of the premium specified in the
Certificate with respect to such Covered Call Option, such receipts as are
required in accordance with the customs prevailing among Clearing Members
dealing in Covered Call Options and shall impose, or direct the Depository to
impose, upon the underlying Securities specified in the Certificate specifically
allocated to such Series such restrictions as may be required by such receipts.
Notwithstanding the foregoing, the Custodian has the right, upon prior written
notification to the Fund, at any time to refuse to issue any receipts for
Securities in the possession of the Custodian and not deposited with the
Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct the Depository to deliver, the underlying Securities as specified in
the Certificate against payment of the amount to be received as set forth in
such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to such Put Option: (a)
the Series for which such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is written; (g)
the name of the Clearing Member through whom the premium is to be received and
to whom a Put Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in the Senior Security Account for such Series;
and
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(i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for such
Series. The Custodian shall, after making the deposits into the Collateral
Account specified in the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Certificate against
receipt of the premium specified in said Certificate. Notwithstanding the
foregoing, the Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery; (e)
the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the money held for the account
of the Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
whether such Stock Index Option is a put or a call; (c) the number of options
written; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the Clearing Member through whom such Option
was written; (h) the premium to be received by the Fund; (i) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Senior Security Account for such Series; (j) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Collateral Account for such
Series; and (k) the amount of cash and/or the amount and kind of Securities, if
any, specifically allocated to such Series to be deposited in a Margin Account,
and the name in which such account is to be or has been established. The
Custodian shall, upon receipt of the premium specified in the Certificate, make
the deposits, if any, into the Senior Security Account specified in the
Certificate, and either (1) deliver such receipts, if any, which the Custodian
has specifically agreed to issue, which are in accordance with the customs
prevailing among Clearing Members in Stock Index Options and make the deposits
into the Collateral Account specified in the Certificate, or (2) make the
deposits into the Margin Account specified in the Certificate.
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11. Whenever a Stock Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
such information as may be necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index Option is being
exercised; (d) the total amount payable upon such exercise, and whether such
amount is to be paid by or to the Fund; (e) the amount of cash and/or amount and
kind of Securities, if any, to be withdrawn from the Margin Account; and (f) the
amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series; and the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the money held for the account of the Series to which
such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the
Series for which the Option was written; (c) the name of the issuer and the
title and number of shares subject to the Option, or, in the case of a Stock
Index Option, the stock index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the type of Option (put or call); (h) the date of
such purchase; (i) the name of the Clearing Member to whom the premium is to be
paid; and (j) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified Margin Account, or
the Senior Security Account for such Series. Upon the Custodian's payment of the
premium and the return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction, the Custodian shall remove,
or direct the Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein,
and upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
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ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Futures
Contract, (or with respect to any number of identical Futures Contract(s)): (a)
the Series for which the Futures Contract is being entered; (b) the category of
Futures Contract (the name of the underlying stock index or financial
instrument); (c) the number of identical Futures Contracts entered into; (d) the
delivery or settlement date of the Futures Contract(s); (e) the date the Futures
Contract(s) was (were) entered into and the maturity date; (f) whether the Fund
is buying (going long) or selling (going short) on such Futures Contract(s); (g)
the amount of cash and/or the amount and kind of Securities, if any, to be
deposited in the Senior Security Account for such Series; (h) the name of the
broker, dealer, or futures commission merchant through whom the Futures Contract
was entered into; and (i) the amount of fee or commission, if any, to be paid
and the name of the broker, dealer, or futures commission merchant to whom such
amount is to be paid. The Custodian shall make the deposits, if any, to the
Margin Account in accordance with the terms and conditions of the Margin Account
Agreement. The Custodian shall make payment out of the money specifically
allocated to such Series of the fee or commission, if any, specified in the
Certificate and deposit in the Senior Security Account for such Series the
amount of cash and/or the amount and kind of Securities specified in said
Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract, shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is retained
by the Fund until delivery or settlement is made on such Futures Contract, the
Fund shall deliver to the Custodian a Certificate specifying: (a) the Futures
Contract and the Series to which the same relates; (b) with respect to a Stock
Index Futures Contract, the total cash settlement amount to be paid or received,
and with respect to a Financial Futures Contract, the Securities and/or amount
of cash to be delivered or received; (c) the broker, dealer, or futures
commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account for such Series. The Custodian shall make the payment or
delivery specified in the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein.
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4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
5. Notwithstanding any other provision in this Agreement to the contrary,
the Custodian shall deliver cash and Securities to a futures commission merchant
upon receipt of a Certificate from the Fund specifying: (a) the name of the
futures commission merchant; (b) the specific cash and Securities to be
delivered; (c) the date of such delivery; and (d) the date of the agreement
between the Fund and such futures commission merchant entered pursuant to Rule
17f-6 under the Investment Company Act 1940, as amended. Each delivery of such a
Certificate by the Fund shall constitute (x) a representation and warranty by
the Fund that the Rule 17f-6 agreement has been duly authorized, executed and
delivered by the Fund and the futures commission merchant and complies with Rule
17f-6, and (y) an agreement by the Fund that the Custodian shall not be liable
for the acts or omissions of any such futures commission merchant.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the Fund,
the Fund shall promptly deliver to the Custodian a Certificate specifying with
respect to such Futures Contract Option: (a) the Series to which such Option is
specifically allocated; (b) the type of Futures Contract Option (put or call);
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Contract Option
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the amount of premium to be paid by the Fund upon
such purchase; (h) the name of the broker or futures commission merchant through
whom such option was purchased; and (i) the name of the broker, or futures
commission merchant, to whom payment is to be made. The Custodian shall pay out
of the money specifically allocated to such Series, the total amount to be paid
upon such purchase to the broker or futures commissions merchant through whom
the purchase was made, provided that the same conforms to the amount set forth
in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by the
Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such sale: (a) Series to
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which such Futures Contract Option was specifically allocated; (b) the type of
Futures Contract Option (put or call); (c) the type of Futures Contract and such
other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker or futures commission merchant through
whom the sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of the
total amount payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the money and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the money and Securities specifically allocated to such
Series the deposits into the Senior Security Account, if any, as specified in
the Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a call
is exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures
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<PAGE>
commission merchant through whom such Futures Contract Option was exercised; (e)
the net total amount, if any, payable to the Fund upon such exercise; (f) the
net total amount, if any, payable by the Fund upon such exercise; and (g) the
amount of cash and/or the amount and kind of Securities to be deposited in the
Senior Security Account for such Series. The Custodian shall, upon its receipt
of the net total amount payable to the Fund, if any, specified in such
Certificate make the payments, if any, and the deposits, if any, into the Senior
Security Account as specified in the Certificate. The deposits, if any, to be
made to the Margin Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the money and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical to a
previously written Futures Contract Option described in this Article in order to
liquidate its position as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to which such Option
is specifically allocated; (b) that the transaction is a closing transaction;
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Option Contract; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the expiration date;
(g) the name of the broker or futures commission merchant to whom the premium is
to be paid; and (h) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for such Series. The
Custodian shall effect the withdrawals from the Senior Security Account
specified in the Certificate. The withdrawals, if any, to be made from the
Margin Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing transaction
with respect to, any Futures Contract Option written or purchased by the Fund
and described in this Article, the Custodian shall (a) delete such Futures
Contract
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Option from the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein and, (b) make such withdrawals from and/or in the case of an
exercise such deposits into the Senior Security Account as may be specified in a
Certificate. The deposits to and/or withdrawals from the Margin Account, if any,
shall be made by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
10. Notwithstanding any other provision in this Agreement to the contrary,
the Custodian shall deliver cash and Securities to a futures commission merchant
upon receipt of a Certificate from the Fund specifying: (a) the name of the
futures commission merchant; (b) the specific cash and Securities to be
delivered; (c) the date of such delivery; and (d) the date of the agreement
between the Fund and such futures commission merchant entered pursuant to Rule
17f-6 under the Investment Company Act 1940, as amended. Each delivery of such a
Certificate by the Fund shall constitute (x) a representation and warranty by
the Fund that the Rule 17f-6 agreement has been duly authorized, executed and
delivered by the Fund and the futures commission merchant and complies with Rule
17f-6, and (y) an agreement by the Fund that the Custodian shall not be liable
for the acts or omissions of any such futures commission merchant.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying: (a) the Series
for which such short sale was made; (b) the name of the issuer and the title of
the Security; (c) the number of shares or principal amount sold, and accrued
interest or dividends, if any; (d) the dates of the sale and settlement; (e) the
sale price per unit; (f) the total amount credited to the Fund upon such sale,
if any, (g) the amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (h) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in a Senior Security
Account, and (i) the name of the broker through whom such short sale was made.
The Custodian shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon such sale, if any,
as specified in the Certificate is held by such broker for the account of the
Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a
receipt or make the deposits into the Margin Account and the Senior Security
Account specified in the Certificate.
2. In connection with the closing-out of any short sale, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such closing-out: (a) the Series for which such transaction is being made; (b)
the name of the issuer and the title of the Security; (c) the
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<PAGE>
number of shares or the principal amount, and accrued interest or dividends, if
any, required to effect such closing-out to be delivered to the broker; (d) the
dates of closing-out and settlement; (e) the purchase price per unit; (f) the
net total amount payable to the Fund upon such closing-out; (g) the net total
amount payable to the broker upon such closing-out; (h) the amount of cash and
the amount and kind of Securities to be withdrawn, if any, from the Margin
Account; (i) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Senior Security Account; and (j) the name of the
broker through whom the Fund is effecting such closing-out. The Custodian shall,
upon receipt of the net total amount payable to the Fund upon such closing-out,
and the return and/or cancellation of the receipts, if any, issued by the
Custodian with respect to the short sale being closed-out, pay out of the money
held for the account of the Fund to the broker the net total amount payable to
the broker, and make the withdrawals from the Margin Account and the Senior
Security Account, as the same are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase Agreement is
entered; (b) the total amount payable to the Fund in connection with such
Reverse Repurchase Agreement and specifically allocated to such Series; (c) the
broker or dealer through or with whom the Reverse Repurchase Agreement is
entered; (d) the amount and kind of Securities to be delivered by the Fund to
such broker or dealer; (e) the date of such Reverse Repurchase Agreement; and
(f) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable to the Fund
specified in the Certificate or Oral Instructions make the delivery to the
broker or dealer, and the deposits, if any, to the Senior Security Account,
specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions to the Custodian specifying: (a)
the Reverse Repurchase Agreement being terminated and the Series for which same
was entered; (b) the total amount payable by the Fund in connection with such
termination; (c) the amount and kind of Securities to be received by the Fund
and specifically allocated to such Series in connection with such termination;
(d) the date of termination; (e) the name of the broker or dealer with or
through whom the Reverse Repurchase Agreement is to be terminated; and (f) the
amount of cash and/or the amount and kind of Securi-
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<PAGE>
ties to be withdrawn from the Senior Securities Account for such Series. The
Custodian shall, upon receipt of the amount and kind of Securities to be
received by the Fund specified in the Certificate or Oral Instructions, make the
payment to the broker or dealer, and the withdrawals, if any, from the Senior
Security Account, specified in such Certificate or Oral Instructions.
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically allocated
to a Series held by the Custodian hereunder, the Fund shall deliver or cause to
be delivered to the Custodian a Certificate specifying with respect to each such
loan: (a) the Series to which the loaned Securities are specifically allocated;
(b) the name of the issuer and the title of the Securities, (c) the number of
shares or the principal amount loaned, (d) the date of loan and delivery, (e)
the total amount to be delivered to the Custodian against the loan of the
Securities, including the amount of cash collateral and the premium, if any,
separately identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount designated as to be
delivered against the loan of Securities. The Custodian may accept payment in
connection with a delivery otherwise than through the Book-Entry System or
Depository only in the form of a certified or bank cashier's check payable to
the order of the Fund or the Custodian drawn on New York Clearing House funds
and may deliver Securities in accordance with the customs prevailing among
dealers in securities.
2. Promptly after each termination of the loan of Securities by the Fund,
the Fund shall deliver or cause to be delivered to the Custodian a Certificate
specifying with respect to each such loan termination and return of Securities:
(a) the Series to which the loaned Securities are specifically allocated; (b)
the name of the issuer and the title of the Securities to be returned, (c) the
number of shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the Custodian (including
the cash collateral for such Securities minus any offsetting credits as
described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the money held for the account of the Fund, the total amount payable
upon such return of Securities as set forth in the Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
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1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such Series.
In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and the number of shares or the principal amount
of any particular Securities to be deposited by the Custodian into, or withdrawn
from, a Senior Securities Account, the Custodian shall be under no obligation to
make any such deposit or withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin Account
to the broker, dealer, futures commission merchant or Clearing Member in whose
name, or for whose benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in and
to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in which cash
and/or Securities are maintained in a Collateral Account for any Series, the
Custodian shall furnish the Fund with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding the
delivery to the Fund of such statement, the Fund shall furnish to the Custodian
a Certificate specifying the then market value of the Securities described in
such statement. In the event such then market value is indicated to be less than
the Custodian's obligation with respect to any outstanding Put Option guarantee
letter or
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similar document, the Fund shall promptly specify in a Certificate the
additional cash and/or Securities to be deposited in such Collateral Account to
eliminate such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of the
Board of Trustees of the Fund, certified by the Secretary or any Assistant
Secretary, either (i) setting forth with respect to the Series specified therein
the date of the declaration of a dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Dividend Agent and
any sub-dividend agent or co-dividend agent of the Fund on the payment date, or
(ii) authorizing with respect to the Series specified therein the declaration of
dividends and distributions on a daily basis and authorizing the Custodian to
rely on Oral Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall be determined,
the amount payable per Share of such Series to the shareholders of record as of
that date and the total amount payable to the Dividend Agent on the payment
date.
2. Upon the payment date specified in such resolution, Oral Instructions
or Certificate, as the case may be, the Custodian shall pay out of the money
held for the account of each Series the total amount payable to the Dividend
Agent and any sub-dividend agent or co-dividend agent of the Fund with respect
to such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying:
(a) the Series, the number of Shares sold, trade date, and price;
and
(b) the amount of money to be received by the Custodian for the sale
of such Shares and specifically allocated to the separate account in the name of
such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian shall
credit such money to the separate account in the name of the Series for which
such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
the account of such Series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
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4. Except as provided hereinafter, whenever the Fund desires the Custodian
to make payment out of the money held by the Custodian hereunder in connection
with a redemption of any Shares, it shall furnish to the Custodian a Certificate
specifying:
(a) the number and Series of Shares redeemed; and
(b) the amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the money held in the separate account in
the name of the Series the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Fund, the Custodian,
unless otherwise instructed by a Certificate, shall, upon receipt of an advice
from the Fund or its agent setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the money held in
the separate account of the Series of the Shares being redeemed.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on behalf
of any Series which results in an overdraft because the money held by the
Custodian in the separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities specifically allocated to
such Series, as set forth in a Certificate or Oral Instructions, or which
results in an overdraft in the separate account of such Series for some other
reason, or if the Fund is for any other reason indebted to the Custodian with
respect to a Series, including any indebtedness to The Bank of New York under
the Fund's Cash Management and Related Services Agreement (except a borrowing
for investment or for temporary or emergency purposes using Securities as
collateral pursuant to a separate agreement and subject to the provisions of
paragraph 2 of this Article), such overdraft or indebtedness shall be deemed to
be a loan made by the Custodian to the Fund for such Series payable on demand
and shall bear interest from the date incurred at a rate per annum (based on a
360-day year for the actual number of days involved) equal to 1/2% over
Custodian's prime commercial lending rate in effect from time to time, such rate
to be adjusted on the effective date of any change in such prime commercial
lending rate but in no event to be less than 6% per annum. In addition, the Fund
hereby agrees that the Custodian shall have a continuing lien, security
interest, and security entitlement in and to any property including any
investment
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property or any financial asset specifically allocated to such Series at any
time held by it for the benefit of such Series or in which the Fund may have an
interest which is then in the Custodian's possession or control or in possession
or control of any third party acting in the Custodian's behalf. The Fund
authorizes the Custodian, in its sole discretion, at any time to charge any such
overdraft or indebtedness together with interest due thereon against any balance
of account standing to such Series' credit on the Custodian's books. In
addition, the Fund hereby covenants that on each Business Day on which either it
intends to enter a Reverse Repurchase Agreement and/ or otherwise borrow from a
third party, or which next succeeds a Business Day on which at the close of
business the Fund had outstanding a Reverse Repurchase Agreement or such a
borrowing, it shall prior to 9 a.m., New York City time, advise the Custodian,
in writing, of each such borrowing, shall specify the Series to which the same
relates, and shall not incur any indebtedness not so specified other than from
the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the bank, (c) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Fund, or other loan
agreement, (d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the total
amount payable to the Fund on the borrowing date, (g) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities, and (h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and that such loan is
in conformance with the Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the borrowing date specified in a
Certificate the specified collateral and the executed promissory note, if any,
against delivery by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set forth in the
Certificate. The Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or loan
agreement. The Custodian shall deliver such Securities as additional collateral
as may be specified in a Certificate to collateralize further any transaction
described in this paragraph. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian, and the Custodian
shall receive from time to time such return of collateral as may be tendered to
it. In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and number of shares or the principal amount of
any particular Securities to be delivered as
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collateral by the Custodian, the Custodian shall not be under any obligation to
deliver any Securities.
ARTICLE XV.
INSTRUCTIONS
1. With respect to any software provided by the Custodian to a Fund in
order for the Fund to transmit Instructions to the Custodian (the "Software"),
the Custodian grants to such Fund a personal, nontransferable and nonexclusive
license to use the Software solely for the purpose of transmitting Instructions
to, and receiving communications from, the Custodian in connection with its
account(s). The Fund agrees not to sell, reproduce, lease or otherwise provide,
directly or indirectly, the Software or any portion thereof to any third party
without the prior written consent of the Custodian.
2. The Fund shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications services,
necessary for it to utilize the Software and transmit Instructions to the
Custodian. The Custodian shall not be responsible for the reliability,
compatibility with the Software or availability of any such equipment or
services or the performance or nonperformance by any nonparty to this Custody
Agreement.
3. The Fund acknowledges that the Software, all data bases made available
to the Fund by utilizing the Software (other than data bases relating solely to
the assets of the Fund and transactions with respect thereto), and any
proprietary data, processes, information and documentation (other than which are
or become part of the public domain or are legally required to be made available
to the public) (collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Fund shall keep the Information
confidential by using the same care and discretion that the Fund uses with
respect to its own confidential property and trade secrets and shall neither
make nor permit any disclosure without the prior written consent of the
Custodian. Upon termination of this Agreement or the Software license granted
hereunder for any reason, the Fund shall return to the Custodian all copies of
the Information which are in its possession or under its control or which the
Fund distributed to third parties.
4. The Custodian reserves the right to modify the Software from time to
time upon reasonable prior notice and the Fund shall install new releases of the
Software as the Custodian may direct. The Fund agrees not to modify or attempt
to modify the Software without the Custodian's prior written consent. The Fund
acknowledges that any modifications to the Software, whether by the Fund or the
Custodian and whether with or without the Custodian's consent, shall become the
property of the Custodian.
5. The Custodian makes no warranties or representations of any kind with
regard to the Software or the method(s) by which the Fund may transmit
Instructions to the Custodian, express or implied, including but not limited to
any implied warranties of merchantability or fitness for a particular
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purpose.
6. Where the method for transmitting Instructions by the Fund involves an
automatic systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the Custodian shall not
be liable for any failure to act pursuant to such Instructions, the Fund may not
claim that such Instructions were received by the Custodian, and the Fund shall
deliver a Certificate by some other means.
7. (a) The Fund agrees that where it delivers to the Custodian
Instructions hereunder, it shall be the Fund's sole responsibility to ensure
that only persons duly authorized by the Fund transmit such Instructions to the
Custodian. The Fund will cause all persons transmitting Instructions to the
Custodian to treat applicable user and authorization codes, passwords and
authentication keys with extreme care, and irrevocably authorizes the Custodian
to act in accordance with and rely upon Instructions received by it pursuant
hereto.
(b) The Fund hereby represents, acknowledges and agrees that it is
fully informed of the protections and risks associated with the various methods
of transmitting Instructions to the Custodian and that there may be more secure
methods of transmitting instructions to the Custodian than the method(s)
selected by the Fund. The Fund hereby agrees that the security procedures (if
any) to be followed in connection with the Fund's transmission of Instructions
provide to it a commercially reasonable degree of protection in light of its
particular needs and circumstances.
8. The Fund hereby represents, warrants and covenants to the Custodian
that this Agreement has been duly approved by a resolution of its Board of
Trustees, and that its transmission of Instructions pursuant hereto shall at all
times comply with the Investment Company Act of 1940, as amended.
9. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event within 24 hours after
the earliest of (i) discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest notice which
reflects such error, it being agreed that discovery and receipt of notice may
only occur on a business day. The Custodian shall promptly advise the Fund
whenever the Custodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Fund's ability to send Instructions.
ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as sub-custodian
for each Series' Securities for which the primary market is outside the United
States ("Foreign Securities") and other assets, the foreign banking
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institutions and foreign securities depositories and clearing agencies
designated on Schedule I hereto ("Foreign Sub-Custodians"). The Fund may
designate any additional foreign sub-custodian with which the Custodian has an
agreement for such entity to act as the Custodian's agent, as its sub-custodian
and any such additional foreign sub-custodian shall be deemed added to Schedule
I. Upon receipt of a Certificate from the Fund, the Custodian shall cease the
employment of any one or more Foreign Sub-Custodians for maintaining custody of
the Fund's assets and such Foreign Sub-Custodian shall be deemed deleted from
Schedule I.
2. Each delivery of a Certificate to the Custodian in connection with a
transaction involving the use of a Foreign Sub-Custodian shall constitute a
representation and warranty by the Fund that its Board of Directors, or its
third party foreign custody manager as defined in Rule 17f-5 under the
Investment Company Act of 1940, as amended, if any, has determined that use of
such Foreign Sub-Custodian satisfies the requirements of such Investment Company
Act of 1940 and such Rule 17f-5 thereunder.
3. The Custodian shall identify on its books as belonging to each Series
of the Fund the Foreign Securities of such Series held by each Foreign
Sub-Custodian. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims by the Fund
or any Series against a Foreign Sub-Custodian as a consequence of any loss,
damage, cost, expense, liability or claim sustained or incurred by the Fund or
any Series if and to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or claim.
4. Upon request of the Fund, the Custodian will, consistent with the terms
of the applicable Foreign Sub-Custodian agreement, use reasonable efforts to
arrange for the independent accountants of the Fund to be afforded access to the
books and records of any Foreign Sub-Custodian insofar as such books and records
relate to the performance of such Foreign Sub-Custodian under its agreement with
the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as mutually
agreed upon, statements in respect of the securities and other assets of each
Series held by Foreign Sub-Custodians, including but not limited to, an
identification of entities having possession of each Series' Foreign Securities
and other assets, and advices or notifications of any transfers of Foreign
Securities to or from each custodial account maintained by a Foreign
Sub-Custodian for the Custodian on behalf of the Series.
6. The Custodian shall transmit promptly to the Fund all notices, reports
or other written information received pertaining to the Fund's Foreign
Securities, including without limitation, notices of corporate action, proxies
and proxy solicitation materials.
7. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any Series and
delivery of securities maintained for the account of such Series may be effected
in
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accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
8. Notwithstanding any other provision in this Agreement to the contrary,
with respect to any losses or damages arising out of or relating to any actions
or omissions of any Foreign Sub-Custodian the sole responsibility and liability
of the Custodian shall be to take appropriate action at the Fund's expense to
recover such loss or damage from the Foreign Sub-Custodian. It is expressly
understood and agreed that the Custodian's sole responsibility and liability
shall be limited to amounts so recovered from the Foreign Sub-Custodian.
ARTICLE XVII.
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction, the Fund shall
promptly deliver to the Custodian a Certificate or Oral Instructions specifying
with respect to such FX Transaction: (a) the Series to which such FX Transaction
is specifically allocated; (b) the type and amount of Currency to be purchased
by the Fund; (c) the type and amount of Currency to be sold by the Fund; (d) the
date on which the Currency to be purchased is to be delivered; (e) the date on
which the Currency to be sold is to be delivered; and (f) the name of the person
from whom or through whom such currencies are to be purchased and sold. Unless
otherwise instructed by a Certificate or Oral Instructions, the Custodian shall
deliver, or shall instruct a Foreign Sub-Custodian to deliver, the Currency to
be sold on the date on which such delivery is to be made, as set forth in the
Certificate, and shall receive, or instruct a Foreign Sub-Custodian to receive,
the Currency to be purchased on the date as set forth in the Certificate.
2. Where the Currency to be sold is to be delivered on the same day as the
Currency to be purchased, as specified in the Certificate or Oral Instructions,
the Custodian or a Foreign Sub-Custodian may arrange for such deliveries and
receipts to be made in accordance with the customs prevailing from time to time
among brokers or dealers in Currencies, and such receipt and delivery may not be
completed simultaneously. The Fund assumes all responsibility and liability for
all credit risks involved in connection with such receipts and deliveries, which
responsibility and liability shall continue until the Currency to be received by
the Fund has been received in full.
3. Any FX Transaction effected by the Custodian in connection with this
Agreement may be entered with the Custodian, any office, branch or subsidiary of
The Bank of New York Company, Inc., or any Foreign Sub-Custodian acting as
principal or otherwise through customary banking channels. The Fund may issue a
standing Certificate with respect to FX
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Transaction but the Custodian may establish rules or limitations concerning any
foreign exchange facility made available to the Fund. The Fund shall bear all
risks of investing in Securities or holding Currency. Without limiting the
foregoing, the Fund shall bear the risks that rules or procedures imposed by a
Foreign Sub-Custodian or foreign depositories, exchange controls, asset freezes
or other laws, rules, regulations or orders shall prohibit or impose burdens or
costs on the transfer to, by or for the account of the Fund of Securities or any
cash held outside the Fund's jurisdiction or denominated in Currency other than
its home jurisdiction or the conversion of cash from one Currency into another
currency. The Custodian shall not be obligated to substitute another Currency
for a Currency (including a Currency that is a component of a Composite Currency
Unit) whose transferability, convertibility or availability has been affected by
such law, regulation, rule or procedure. Neither the Custodian nor any Foreign
Sub-Custodian shall be liable to the Fund for any loss resulting from any of the
foregoing events.
ARTICLE XVIII.
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI, neither
the Custodian nor its nominee shall be liable for any loss or damage, including
counsel fees, resulting from its action or omission to act or otherwise, either
hereunder or under any Margin Account Agreement, except for any such loss or
damage arising out of its own negligence or willful misconduct. In no event
shall the Custodian be liable to the Fund or any third party for special,
indirect or consequential damages or lost profits or loss of business, arising
under or in connection with this Agreement, even if previously informed of the
possibility of such damages and regardless of the form of action. The Custodian
may, with respect to questions of law arising hereunder or under any Margin
Account Agreement, apply for and obtain the advice and opinion of counsel to the
Fund, or of its own counsel, at the expense of the Fund, and shall be fully
protected with respect to anything done or omitted by it in good faith in
conformity with such advice or opinion. The Custodian shall be liable to the
Fund for any loss or damage resulting from the use of the Book-Entry System or
any Depository arising by reason of any negligence or willful misconduct on the
part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian shall
be under no obligation to inquire into, and shall not be liable for:
(a) the validity of the issue of any Securities purchased, sold, or
written by or for the Fund, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received therefor;
(b) the legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor;
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(c) the legality of the declaration or payment of any dividend by
the Fund;
(d) the legality of any borrowing by the Fund using Securities as
collateral;
(e) the legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that any cash collateral
delivered to it by a broker, dealer, or financial institution or held by it at
any time as a result of such loan of portfolio Securities of the Fund is
adequate collateral for the Fund against any loss it might sustain as a result
of such loan. The Custodian specifically, but not by way of limitation, shall
not be under any duty or obligation periodically to check or notify the Fund
that the amount of such cash collateral held by it for the Fund is sufficient
collateral for the Fund, but such duty or obligation shall be the sole
responsibility of the Fund. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer or financial institution to which
portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
(f) the sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund. In addition, the Custodian
shall be under no duty or obligation to see that any broker, dealer, futures
commission merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be entitled to
receive from such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount the Fund is
entitled to receive, or to notify the Fund of the Custodian's receipt or
non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives and collects such money directly or by the
final crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable for
ascertaining or acting upon any calls, conversions, exchange offers, tenders,
interest rate changes or similar matters relating to Securities held in the
Depository, unless the Custodian shall have actually received timely notice from
the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a Certificate from
the Fund of an
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overdue amount on Securities held in the Depository the Custodian shall make a
claim against the Depository on behalf of the Fund, except that the Custodian
shall not be under any obligation to appear in, prosecute or defend any action,
suit or proceeding in respect to any Securities held by the Depository which in
its opinion may involve it in expense or liability, unless indemnity
satisfactory to it against all expense and liability be furnished as often as
may be required.
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Fund from the Transfer Agent of
the Fund nor to take any action to effect payment or distribution by the
Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking institutions
as Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and money at any time
owned by the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian, the Fund and
the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it or by
any Foreign Sub-Custodian, for the account of the Fund and specifically
allocated to a Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus, or (b) to ascertain
whether any transactions by the Fund, whether or not involving the Custodian,
are such transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to pay
to the Custodian all reasonable out-of-pocket expenses and such compensation as
may be agreed upon from time to time between the Custodian and the Fund. The
Custodian may charge such compensation and any expenses with respect to a Series
incurred by the Custodian in the performance of its duties pursuant to such
agreement against any money specifically allocated to such Series. Unless and
until the Fund instructs the Custodian by a Certificate to apportion any loss,
damage, liability or expense among the Series in a specified manner, the
Custodian shall also be entitled to charge against any money held by it for the
account of a Series such Series' pro rata share (based on such
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Series, net asset value at the time of the charge to the aggregate net asset
value of all Series at that time) of the amount of any loss, damage, liability
or expense, including counsel fees, for which it shall be entitled to
reimbursement under the provisions of this Agreement. The expenses for which the
Custodian shall be entitled to reimbursement hereunder shall include, but are
not limited to, the expenses of sub-custodians and foreign branches of the
Custodian incurred in settling outside of New York City transactions involving
the purchase and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate, notice
or other instrument in writing received by the Custodian and reasonably believed
by the Custodian to be a Certificate. The Custodian shall be entitled to rely
upon any Oral Instructions actually received by the Custodian hereinabove
provided for. The Fund agrees to forward to the Custodian a Certificate or
facsimile thereof confirming such Oral Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions are given to the Custodian.
The Fund agrees that the fact that such confirming instructions are not
received, or that contrary instructions are received, by the Custodian shall in
no way affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Fund. The Fund agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions provided such instructions
reasonably appear to have been received from an Authorized Person.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its expenses of
providing such copies. Upon reasonable request of the Fund, the Custodian shall
provide in hard copy or on micro-film, whichever the Custodian elects, any
records included in any such delivery which are maintained by the Custodian on a
computer disc, or are similarly maintained, and the Fund shall reimburse the
Custodian for its expenses of providing such hard copy or micro-film.
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13. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry System,
the Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of or in
connection with this Agreement, including the Custodian's payment or non-payment
of checks pursuant to paragraph 6 of Article XIII as part of any check
redemption privilege program of the Fund, except for any such liability, claim,
loss and demand arising out of the Custodian's own negligence or willful
misconduct.
15. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI and XVII the Custodian may
deliver and receive Securities, and receipts with respect to such Securities,
and arrange for payments to be made and received by the Custodian in accordance
with the customs prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities against
payment, delivery of such Securities and receipt of payment therefor may not be
completed simultaneously. The Fund assumes all responsibility and liability for
all credit risks involved in connection with the Custodian's delivery of
Securities pursuant to instructions of the Fund, which responsibility and
liability shall continue until final payment in full has been received by the
Custodian.
16. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XIX.
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than ninety (90) days after the date of giving of such
notice. In the event such notice is given by the Fund, it shall be accompanied
by a copy of a resolution of the Board of Trustees of the Fund, certified by the
Secretary or any Assistant Secretary, electing to terminate this Agreement and
designating a successor custodian or custodians, each of which shall be a bank
or trust company having not less than $2,000,000 aggregate capital, surplus and
undivided profits. In the event such notice is given by the Custodian, the Fund
shall, on or before the termination date, deliver to the Custodian a copy of a
resolution of the Board of Trustees of the Fund, certified by the Secretary or
any Assistant Secretary, designating a successor custodian or custodians.
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In the absence of such designation by the Fund, the Custodian may designate a
successor custodian which shall be a bank or trust company having not less than
$2,000,000 aggregate capital, surplus and undivided profits. Upon the date set
forth in such notice this Agreement shall terminate, and the Custodian shall
upon receipt of a notice of acceptance by the successor custodian on that date
deliver directly to the successor custodian all Securities and money then owned
by the Fund and held by it as Custodian, after deducting all fees, expenses and
other amounts for the payment or reimbursement of which it shall then be
entitled.
2. If a successor custodian is not designated by the Fund or the Custodian
in accordance with the preceding paragraph, the Fund shall upon the date
specified in the notice of termination of this Agreement and upon the delivery
by the Custodian of all Securities (other than Securities held in the Book-Entry
System which cannot be delivered to the Fund) and money then owned by the Fund
be deemed to be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement, other than the duty
with respect to Securities held in the Book Entry System which cannot be
delivered to the Fund to hold such Securities hereunder in accordance with this
Agreement.
ARTICLE XX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Authorized Persons of the Fund under its seal, setting forth the names
and the signatures of the present Authorized Persons. The Fund agrees to furnish
to the Custodian a new Certificate in similar form in the event that any such
present Authorized Person ceases to be an Authorized Person or in the event that
other or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the Authorized Persons as set forth in the last delivered Certificate.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other place as the
Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
4. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund.
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5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Trustees.
6. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
EUCLID MUTUAL FUNDS
[SEAL] By:_______________________
Attest:
________________________
THE BANK OF NEW YORK
[SEAL] By:_______________________
Name:
Title:
Attest:
________________________
<PAGE>
APPENDIX A
I, , President and I, ,
of EUCLID MUTUAL FUNDS, a Delaware business trust (the "Fund"), do hereby
certify that:
The following persons have been duly authorized in conformity with the
Fund's Declaration of Trust and By-Laws to execute any Certificate, instruction,
notice or other instrument on behalf of the Fund, and the signatures set forth
opposite their respective names are their true and correct signatures:
Name Position Signature
-------------------- ------------------- -----------------
<PAGE>
APPENDIX B
SERIES
EUCLID MARKET NEUTRAL FUND
<PAGE>
APPENDIX C
I, Jorge E. Ramos, a Vice President with THE BANK OF NEW YORK do hereby
designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting of EUCLID MUTUAL FUNDS, a Delaware
business trust (the "Fund"), and further certifies that the following resolution
was adopted by the Board of Trustees of the Fund at a meeting duly held on ,
1998, at which a quorum was at all times present and that such resolution has
not been modified or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated
as of , 1998, (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis to deposit in the Book-Entry
System, as defined in the Custody Agreement, all securities eligible
for deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Book-Entry System to the
extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of
purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of EUCLID
MUTUAL FUNDS, as of the day of , 1998.
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or she
is the duly elected and acting of EUCLID MUTUAL FUNDS, a Delaware business trust
(the "Fund"), and further certifies that the following resolution was adopted by
the Board of Trustees of the Fund at a meeting duly held on ,
1998, at which a quorum was at all times present and that such resolution has
not been modified or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated
as of , 1998, (the "Custody Agreement") is authorized
and instructed on a continuous and ongoing basis until such time as
it receives a Certificate, as defined in the Custody Agreement, to
the contrary to deposit in the Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless
of the Series to which the same are specifically allocated, and to
utilize the Depository to the extent possible in connection with its
performance thereunder, including, without limitation, in connection
with settlements of purchases and sales of securities, loans of
securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of EUCLID
MUTUAL FUNDS, as of the day of , 1998.
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or she is the
duly elected and acting of EUCLID MUTUAL FUNDS, a Delaware
business trust (the "Fund"), and further certifies that the following resolution
was adopted by the Board of Trustees of the Fund at a meeting duly held on
, 1998, at which a quorum was at all times present and that
such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated
as of , 1998, (the "Custody Agreement") is authorized
and instructed on a continuous and ongoing basis until such time as
it receives a Certificate, as defined in the Custody Agreement, to
the contrary to deposit in the Participants Trust Company as
Depository, as defined in the Custody Agreement, all securities
eligible for deposit therein, regardless of the Series to which the
same are specifically allocated, and to utilize the Participants
Trust Company to the extent possible in connection with its
performance thereunder, including, without limitation, in connection
with settlements of purchases and sales of securities, loans of
securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of EUCLID
MUTUAL FUNDS, as of the day of , 1998.
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he or she is the
duly elected and acting of EUCLID MUTUAL FUNDS, a Delaware
business trust (the "Fund"), and further certifies that the following resolution
was adopted by the Board of Trustees of the Fund at a meeting duly held on
, 1998, at which a quorum was at all times present and
that such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated
as of , 1998, (the "Custody Agreement") is authorized
and instructed on a continuous and ongoing basis until such time as
it receives a Certificate, as defined in the Custody Agreement, to
the contrary, to accept, utilize and act with respect to Clearing
Member confirmations for Options and transaction in Options,
regardless of the Series to which the same are specifically
allocated, as such terms are defined in the Custody Agreement, as
provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of EUCLID
MUTUAL FUNDS, as of the day of , 1998.
[SEAL]
<PAGE>
EXHIBIT D
The undersigned, , hereby certifies that he or she is
the duly elected and acting of EUCLID MUTUAL FUNDS, a Delaware
business trust (the "Fund"), further certifies that the following resolutions
were adopted by the Board of Trustees of the Fund at a meeting duly held on
, 1998, at which a quorum was at all times present and that
such resolutions have not been modified or rescinded and are in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
the Custody Agreement between The Bank of New York and the Fund
dated as of , 1998 (the "Custody Agreement") is
authorized and instructed on a continuous and ongoing basis to act
in accordance with, and to rely on Instructions (as defined in the
Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant
use of such access codes only to Authorized Persons of the Fund as
defined in the Custody Agreement, shall establish internal
safekeeping procedures to safeguard and protect the confidentiality
and availability of user and access codes, passwords and
authentication keys, and shall use Instructions only in a manner
that does not contravene the Investment Company Act of 1940, as
amended, or the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of EUCLID
MUTUAL FUNDS, as of the day of , 1998.
[SEAL]
Exhibit 9
TRANSFER AGENCY AND SERVICE AGREEMENT
between
EUCLID MUTUAL FUNDS
and
STATE STREET BANK AND TRUST COMPANY
1C-Domestic Trust/Series
1
<PAGE>
TABLE OF CONTENTS
Page
1. Terms of Appointment; Duties of the Bank.........................1
2. Fees and Expenses................................................3
3. Representations and Warranties of the Bank.......................4
4. Representations and Warranties of the Fund.......................4
5. Wire Transfer Operating Guidelines...............................5
6. Data Access and Proprietary Information..........................6
7. Indemnification..................................................7
8. Standard of Care.................................................9
9. Year 2000........................................................9
10. Confidentiality .................................................9
11. Covenants of the Fund and the Bank...............................9
12. Termination of Agreement........................................10
13. Additional Funds................................................10
14. Assignment......................................................10
15. Amendment.......................................................11
16. Massachusetts Law to Apply......................................11
17. Force Majeure...................................................11
18. Consequential Damages...........................................11
19. Merger of Agreement.............................................11
20. Limitations of Liability of the Trustees
or Shareholders.................................................11
21. Counterparts....................................................12
22. Reproduction of Documents.......................................12
2
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the day of April, 1998, by and between EUCLID MUTUAL
FUNDS, a Delaware business trust, having its principal office and place of
business at 900 Third Avenue, New York, New York 10022-4728 (the "Fund"), and
STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company having its
principal office and place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in one (1) series, such
series shall be named in the attached Schedule A which may be amended by the
parties from time to time (each such series, together with all other series
subsequently established by the Fund and made subject to this Agreement in
accordance with Article 13, being herein referred to as a "Portfolio", and
collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank as its
transfer agent, dividend disbursing agent, custodian of certain retirement plans
and agent in connection with certain other activities, and the Bank desires to
accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
l. Terms of Appointment; Duties of the Bank
1.1 Subject to the terms and conditions set forth in this Agreement, the Fund,
on behalf of the Portfolios, hereby employs and appoints the Bank to act
as, and the Bank agrees to act as its transfer agent for the Fund's
authorized and issued shares of its beneficial interest, no par value,
("Shares"), dividend disbursing agent, custodian of certain retirement
plans and agent in connection with any accumulation, open-account or
similar plans provided to the shareholders of each of the respective
Portfolios of the Fund ("Shareholders") and set out in the currently
effective prospectus and statement of additional information
("prospectus") of the Fund on behalf of the applicable Portfolio,
including without limitation any periodic investment plan or periodic
withdrawal program.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as
applicable and the Bank, the Bank shall:
3
<PAGE>
(i) receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof
to the Custodian of the Fund authorized pursuant to the
Declaration of Trust of the Fund (the "Custodian");
(ii) pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof
to the Custodian;
(iv) in respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with
broker-dealers authorized by the Fund;
(v) at the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over
or cause to be paid over in the appropriate manner such monies
as instructed by the redeeming Shareholders;
(vi) effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vii) prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the applicable Portfolio;
(viii) issue replacement certificates for those certificates alleged
to have been lost, stolen or destroyed upon receipt by the
Bank of indemnification satisfactory to the Bank and
protecting the Bank and the Fund, and the Bank at its option,
may issue replacement certificates in place of mutilated stock
certificates upon presentation thereof and without such
indemnity;
(ix) maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(x) record the issuance of shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number
of shares of the Fund which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. The
Bank shall also provide the Fund on a regular basis with the
total number of shares which are authorized and issued and
outstanding and shall have no obligation, when recording the
issuance of shares, to monitor the issuance of such shares or
to take cognizance of any laws relating to the issue or sale
of such Shares, which functions shall be the sole
responsibility of the Fund.
4
<PAGE>
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i)
perform the customary services of a transfer agent, dividend
disbursing agent, custodian of certain retirement plans and, as
relevant, agent in connection with accumulation, open-account or
similar plans (including without limitation any periodic investment
plan or periodic withdrawal program), including but not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing Shareholder proxies, Shareholder reports and
prospectuses to current Shareholders, withholding taxes on U.S.
resident and non-resident alien accounts, preparing and filing U.S.
Treasury Department Forms 1099 and other appropriate forms required
with respect to dividends and distributions by federal authorities
for all Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information and (ii)
provide a system which will enable the Fund to monitor the total
number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in writing
those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The
responsibility of the Bank for the Fund's blue sky State
registration status is solely limited to the initial establishment
of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services in
Section 1 may be established from time to time by agreement between
the Fund on behalf of each Portfolio and the Bank per the attached
service responsibility schedule. The Bank may at times perform only
a portion of these services and the Fund or its agent may perform
these services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the Fund
(e.g., escheatment services) which may be agreed upon in writing
between the Fund and the Bank.
2. Fees and Expenses
2.1 For the performance by the Bank pursuant to this Agreement, the Fund
agrees on behalf of each of the Portfolios to pay the Bank an annual
maintenance fee for each Shareholder account as set out in the initial fee
schedule attached hereto. Such fees and out-of-pocket expenses and
advances identified under Section 2.2 below may be changed from time to
time subject to mutual written agreement between the Fund and the Bank.
5
<PAGE>
2.2 In addition to the fee paid under Section 2.1 above, the Fund agrees on
behalf of each of the Portfolios to reimburse the Bank for out-of-pocket
expenses, including but not limited to confirmation production, postage,
forms, telephone, microfilm, microfiche, mailing and tabulating proxies,
records storage, or advances incurred by the Bank for the items set out in
the fee schedule attached hereto. In addition, any other expenses incurred
by the Bank at the request or with the consent of the Fund, will be
reimbursed by the Fund on behalf of the applicable Portfolio.
2.3 The Fund agrees on behalf of each of the Portfolios to pay all fees and
reimbursable expenses within five days following the receipt of the
respective billing notice. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all shareholder accounts shall be advanced
to the Bank by the Fund at least seven (7) days prior to the mailing date
of such materials.
3. Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
4. Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.1 It is a business trust duly organized and existing and in good standing
under the laws of the State of Delaware.
4.2 It is empowered under applicable laws and by its Declaration of Trust and
By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
6
<PAGE>
4.4 It is an open-end and diversified management investment company registered
under the Investment Company Act of 1940, as amended.
4.5 A registration statement under the Securities Act of 1933, as amended on
behalf of each of the Portfolios is currently effective and will remain
effective, and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of the Fund being
offered for sale.
5. Wire Transfer Operating Guidelines/Articles 4A of the Uniform Commercial
Code
5.1 The Bank is authorized to promptly debit the appropriate Fund account(s)
upon the receipt of a payment order in compliance with the selected
security procedure (the "Security Procedure") chosen for funds transfer
and in the amount of money that the Bank has been instructed to transfer.
The Bank shall execute payment orders in compliance with the Security
Procedure and with the Fund instructions on the execution date provided
that such payment order is received by the customary deadline for
processing such a request, unless the payment order specifies a later
time. All payment orders and communications received after this the
customary deadline will be deemed to have been received the next business
day.
5.2 The Fund acknowledges that the Security Procedure it has designated on the
Fund Selection Form was selected by the Fund from security procedures
offered by the Bank. The Fund shall restrict access to confidential
information relating to the Security Procedure to authorized persons as
communicated to the Bank in writing. The Fund must notify the Bank
immediately if it has reason to believe unauthorized persons may have
obtained access to such information or of any change in the Fund's
authorized personnel. The Bank shall verify the authenticity of all Fund
instructions according to the Security Procedure.
5.3 The Bank shall process all payment orders on the basis of the account
number contained in the payment order. In the event of a discrepancy
between any name indicated on the payment order and the account number,
the account number shall take precedence and govern.
5.4 The Bank reserves the right to decline to process or delay the processing
of a payment order which (a) is in excess of the collected balance in the
account to be charged at the time of the Bank's receipt of such payment
order; (b) if initiating such payment order would cause the Bank, in the
Bank's sole judgement, to exceed any volume, aggregate dollar, network,
time, credit or similar limits which are applicable to the Bank; or (c) if
the Bank, in good faith, is unable to satisfy itself that the transaction
has been properly authorized.
7
<PAGE>
5.5 The Bank shall use reasonable efforts to act on all authorized requests to
cancel or amend payment orders received in compliance with the Security
Procedure provided that such requests are received in a timely manner
affording the Bank reasonable opportunity to act. However, the Bank
assumes no liability if the request for amendment or cancellation cannot
be satisfied.
5.6 The Bank shall assume no responsibility for failure to detect any
erroneous payment order provided that the Bank complies with the payment
order instructions as received and the Bank complies with the Security
Procedure. The Security Procedure is established for the purpose of
authenticating payment orders only and not for the detection of errors in
payment orders.
5.7 The Bank shall assume no responsibility for lost interest with respect to
the refundable amount of any unauthorized payment order, unless the Bank
is notified of the unauthorized payment order within thirty (30) days of
notification by the Bank of the acceptance of such payment order. In no
event (including failure to execute a payment order) shall the Bank be
liable for special, indirect or consequential damages, even if advised of
the possibility of such damages.
5.8 When the Fund initiates or receives Automated Clearing House credit and
debit entries pursuant to these guidelines and the rules of the National
Automated Clearing House Association and the New England Clearing House
Association, the Bank will act as an Originating Depository Financial
Institution and/or receiving depository Financial Institution, as the case
may be, with respect to such entries. Credits given by the Bank with
respect to an ACH credit entry are provisional until the Bank receives
final settlement for such entry from the Federal Reserve Bank. If the Bank
does not receive such final settlement, the Fund agrees that the Bank
shall receive a refund of the amount credited to the Fund in connection
with such entry, and the party making payment to the Fund via such entry
shall not be deemed to have paid the amount of the entry.
5.9 Confirmation of Bank's execution of payment orders shall ordinarily be
provided within twenty four (24) hours notice of which may be delivered
through the Bank's proprietary information systems, or by facsimile or
call-back. Fund must report any objections to the execution of an order
within thirty (30) days.
6. Data Access and Proprietary Information
6.1 The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Bank as part of the Fund's ability to
access certain Fund-related data ("Customer Data") maintained by the Bank
on data bases under the control and ownership of the Bank or other third
party ("Data Access Services") constitute copyrighted, trade secret, or
other proprietary information (collectively, "Proprietary Information") of
substantial value to the Bank or other third party. In no event shall
Proprietary Information be deemed Customer Data. The Fund agrees to treat
all
8
<PAGE>
Proprietary Information as proprietary to the Bank and further agrees that
it shall not divulge any Proprietary Information to any person or
organization except as may be provided hereunder. Without limiting the
foregoing, the Fund agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be designated
in writing by the Bank and solely in accordance with the Bank's
applicable user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently
obtained, to inform in a timely manner of such fact and dispose of
such information in accordance with the Bank's instructions;
(d) to refrain from causing or allowing the data acquired hereunder from
being retransmitted to any other computer facility or other
location, except with the prior written consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to protect
at the Bank's expense the rights of the Bank in Proprietary
Information at common law, under federal copyright law and under
other federal or state law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 6. The obligations of this Section shall
survive any earlier termination of this Agreement.
6.2 If the Fund notifies the Bank that any of the Data Access Services do not
operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely
manner to correct such failure. Organizations from which the Bank may
obtain certain data included in the Data Access Services are solely
responsible for the contents of such data and the Fund agrees to make no
claim against the Bank arising out of the contents of such third-party
data, including, but not limited to, the accuracy thereof. DATA ACCESS
SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN
CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE
BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED
HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
9
<PAGE>
6.3 If the transactions available to the Fund include the ability to originate
electronic instructions to the Bank in order to (i) effect the transfer or
movement of cash or Shares or (ii) transmit Shareholder information or
other information, then in such event the Bank shall be entitled to rely
on the validity and authenticity of such instruction without undertaking
any further inquiry as long as such instruction is undertaken in
conformity with security procedures established by the Bank from time to
time.
7. Indemnification
7.1 The Bank shall not be responsible for, and the Fund shall on behalf of the
applicable Portfolio indemnify and hold the Bank harmless from and
against, any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to:
(a) all actions of the Bank or its agents or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct;
(b) the Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of
the Fund hereunder;
(c) the reliance on or use by the Bank or its agents or subcontractors
of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have
been prepared, maintained or performed by the Fund or any other
person or firm on behalf of the Fund including but not limited to
any previous transfer agent or registrar;
(d) the reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund on behalf
of the applicable Portfolio;
(e) the offer or sale of Shares in violation of federal or state
securities laws or regulations requiring that such Shares be
registered or in violation of any stop order or other determination
or ruling by any federal or any state agency with respect to the
offer or sale of such Shares;
(f) the negotiations and processing of checks made payable to
prospective or existing Shareholders tendered to the Bank for the
purchase of Shares, such checks are commonly known as "third party
checks"; and
(g) upon the Fund's request entering into any agreements required by the
National Securities Clearing Corporation (the "NSCC") required by
the NSCC for the transmission of Fund or Shareholder data through
the NSCC clearing systems.
10
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7.2 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the Bank
under this Agreement, and the Bank and its agents or subcontractors shall
not be liable and shall be indemnified by the Fund on behalf of the
applicable Portfolio for any action taken or omitted by it in reliance
upon such instructions or upon the opinion of such counsel. The Bank, its
agents and subcontractors shall be protected and indemnified in acting
upon any paper or document, reasonably believed to be genuine and to have
been signed by the proper person or persons, or upon any instruction,
information, data, records or documents provided the Bank or its agents or
subcontractors by machine readable input, telex, CRT data entry or other
similar means authorized by the Fund, and shall not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from the Fund. The Bank, its agents and subcontractors shall also
be protected and indemnified in recognizing stock certificates which are
reasonably believed to bear the proper manual or facsimile signatures of
the officers of the Fund, and the proper countersignature of any former
transfer agent or former registrar, or of a co-transfer agent or
co-registrar.
7.3 In order that the indemnification provisions contained in this Section 7
shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Bank, the Bank shall promptly notify the Fund of
such assertion, and shall keep the Fund advised with respect to all
developments concerning such claim. The Fund shall have the option to
participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank. The Bank
shall in no case confess any claim or make any compromise in any case in
which the Fund may be required to indemnify the Bank except with the
Fund's prior written consent.
8. Standard of Care
The Bank shall at all times act in good faith and agrees to use its best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are
caused by its negligence, bad faith, or willful misconduct or that of its
employees.
9. Year 2000
The Bank will take reasonable steps to ensure that its products (and those
of its third-party suppliers) reflect the available technology to offer
products that are Year 2000 ready, including, but not limited to, century
recognition of dates, calculations that correctly compute same century and
multi century formulas and date values, and interface values that reflect
the date issues arising between now and the next one-hundred years, and if
any changes are required, the Bank will make the changes to its products
at a price to be agreed upon by the parties and in a commercially
reasonable time frame and will require third-party suppliers to do
likewise.
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10. Confidentiality
10.1 The Bank and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily disclosed to any
other person, except as may be required by law.
10.2 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, the Bank will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder
records to such person.
11. Covenants of the Fund and the Bank
11.1 The Fund shall on behalf of each of the Portfolios promptly furnish to the
Bank the following:
(a) A certified copy of the resolution of the Board of Trustees of the
Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
11.2 The Bank hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of stock certificates,
check forms and facsimile signature imprinting devices, if any; and for
the preparation or use, and for keeping account of, such certificates,
forms and devices.
11.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Fund Act of 1940, as amended, and
the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the
Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules,
and will be surrendered promptly to the Fund on and in accordance with its
request.
12. Termination of Agreement
12.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
12
<PAGE>
12.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
borne by the Fund on behalf of the applicable Portfolio(s). Additionally,
the Bank reserves the right to charge for any other reasonable expenses
associated with such termination and a charge equivalent to the average of
three (3) months' fees.
13. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to the attached Schedule A with respect to which it desires to
have the Bank render services as transfer agent under the terms hereof, it
shall so notify the Bank in writing, and if the Bank agrees in writing to
provide such services, such series of Shares shall become a Portfolio
hereunder.
14. Assignment
14.1 Except as provided in Section 14.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
14.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
14.3 The Bank may, without further consent on the part of the Fund, subcontract
for the performance hereof with (i) Boston Financial Data Services, Inc.,
a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(2) of the Securities Exchange
Act of 1934, as amended ("Section 17A(c)(2)"), (ii) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c)(2) or (iii) a
BFDS affiliate; provided, however, that the Bank shall be as fully
responsible to the Fund for the acts and omissions of any subcontractor as
it is for its own acts and omissions.
15. Amendment
This Agreement may be amended or modified by a written agreement executed
by both parties and authorized or approved by a resolution of the Board of
Trustees of the Fund.
16. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of The Commonwealth of
Massachusetts.
13
<PAGE>
17. Force Majeure
In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to
perform or otherwise from such causes.
18. Consequential Damages
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
19. Merger of Agreement
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
20. Limitations of Liability of the Trustees and Shareholders
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of the Trust as
Trustees and not individually and that the obligations of this instrument
are not binding upon any of the Trustees or Shareholders individually but
are binding only upon the assets and property of the Fund.
21. Counterparts
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.
22. Reproduction of Documents
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties
hereto each agree that any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not
such reproduction was made by a party in the regular course of business,
and that any enlargement, facsimile or further reproduction shall likewise
be admissible in evidence.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
EUCLID MUTUAL FUNDS
BY:
---------------------------------
ATTEST:
- -----------------------------
STATE STREET BANK AND TRUST COMPANY
BY:
---------------------------------
ATTEST:
- -----------------------------
15
<PAGE>
STATE STREET BANK AND TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
1. Receives orders for the purchase X
of Shares.
2. Issue Shares and hold Shares in X
Shareholders accounts.
3. Receive redemption requests. X
4. Effect transactions 1-3 above X
directly with broker-dealers.
5. Pay over monies to redeeming X
Shareholders.
6. Effect transfers of Shares. X
7. Prepare and transmit dividends X
and distributions.
8. Issue Replacement Certificates. X
9. Reporting of abandoned property. X
10. Maintain records of account. X
11. Maintain and keep a current and X
accurate control book for each issue of
securities.
12. Mail proxies. X X
13. Mail Shareholder reports. X X
14. Mail prospectuses to current X X
Shareholders.
15. Withhold taxes on U.S. resident X
and non-resident alien accounts.
16
<PAGE>
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
16. Prepare and file U.S. Treasury X
Department forms.
17. Prepare and mail account and X
confirmation statements for
Shareholders.
18. Provide Shareholder account X
information.
19. Blue sky reporting. X X
* Such services are more fully described in Section 1.2 (a), (b) and (c) of
the Agreement.
EUCLID MUTUAL FUNDS
BY:
--------------------------------
ATTEST:
- -----------------------------
STATE STREET BANK AND TRUST COMPANY
BY:
--------------------------------
ATTEST:
- -----------------------------
17
<PAGE>
SCHEDULE A
Euclid Market Neutral Fund
18
April 24, 1998
Euclid Mutual Funds
900 Third Avenue - 31st Floor
New York, NY 10105
Re: Euclid Mutual Funds
Ladies and Gentlemen:
We have acted as special Delaware counsel to Euclid Mutual Funds, a
Delaware business trust (the "Trust"), in connection with certain matters
relating to the creation of the Trust and the issuance of Shares of beneficial
interest in the Trust. Capitalized terms used herein and not herein defined are
used as defined in the Agreement and Declaration of Trust of the Trust dated
February 2, 1998 (the "Governing Instrument").
In rendering this opinion, we have examined copies of the following
documents, each in the form provided to us: the Certificate of Trust of the
Trust as filed in the Office of the Secretary of State of the State of Delaware
(the "State Office") on February 3, 1998 (the "Certificate"); the Governing
Instrument; the By-laws of the Trust; the resolutions of the Trustees of the
Trust prepared for adoption at the Trustees' April 16, 1998 meeting; the Trust's
Registration Statement under the Securities Act of 1933 on Form N-1A as filed
with the Securities and Exchange Commission on February 5, 1998 (the
"Registration Statement"); and a certification of good standing of the Trust
obtained as of a recent date from the State Office. In such examinations, we
have assumed the genuineness of all signatures, the conformity to original
documents of documents submitted to us as copies or drafts of documents to be
executed, and the legal capacity of natural persons to complete the execution of
documents. We have further assumed for purposes of this opinion: (i) the due
adoption, authorization, execution and delivery by, or on behalf of, each of the
parties thereto of the above-referenced resolutions, instruments, certificates
and other documents, and of all documents contemplated by the Governing
Instrument and applicable resolutions of the Trustees to be executed by
investors
<PAGE>
Euclid Mutual Funds
April 24, 1998
Page 2
desiring to become Shareholders; (ii) the payment of consideration for
Trust Shares, and the application of such consideration, as provided in the
Governing Instrument, and compliance with the other terms, conditions and
restrictions set forth in the Governing Instrument and all applicable
resolutions of the Trustees in connection with the issuance of Trust Shares
(including, without limitation, the taking of all appropriate action by the
Trustees to designate Series of Trust Shares and the rights and preferences
attributable thereto as contemplated by the Governing Instrument); (iii) that
appropriate notation of the names and addresses of, the number of Trust Shares
held by, and the consideration paid by, Shareholders will be maintained in the
appropriate registers and other books and records of the Trust in connection
with the issuance or transfer of Trust Shares; (iv) that no event has occurred
subsequent to the filing of the Certificate that would cause a termination or
reorganization of the Trust under Section 2 or Section 3 of Article VIII of the
Governing Instrument; (v) that the Trust had or will become a registered
investment company under the 1940 Act within 180 days following the first
issuance of beneficial interests by the Trust; (vi) that the activities of the
Trust have been and will be conducted in accordance with the terms of the
Governing Instrument and the Delaware Business Trust Act, 12 Del. C. ss.ss. 3801
et. seq.; and (vii) that each of the documents examined by us is in full force
and effect and has not been amended, supplemented or otherwise modified except
as herein referenced. No opinion is expressed herein with respect to the
requirements of, or compliance with, federal or state securities laws including,
without limitation, the 1940 Act. Further, we express no opinion on the
sufficiency or accuracy of any registration or offering material relating to the
Trust or the Trust Shares. As to any fact material to our opinion, other than
those assumed, we have relied without independent investigation on the above
referenced documents and on the accuracy, as of the date hereof, of the matters
therein contained.
Based on and subject to the foregoing, and limited in all respects
to matters of Delaware law, it is our opinion that:
1. The Trust is a duly created and validly existing business trust
in good standing under the laws of the State of Delaware.
2. The Shares, when issued to a Shareholders in accordance with the
terms, conditions, requirements and procedures set forth in the Governing
Instrument, will constitute legally issued, fully paid and non-assessable shares
of a beneficial interest in the Trust.
3. Under the Delaware Act and the terms of the Governing
<PAGE>
Euclid Mutual Funds
April 24, 1998
Page 3
Instrument, each Shareholder of the Trust, in such capacity, will be entitled to
the same limitation of personal liability as that extended to stockholders of
private corporations for profit organized under the general corporation law of
the State of Delaware; provided, however, that we express no opinion with
respect to the liability of any Shareholder who is, was or may become a named
Trustee of the Trust. Notwithstanding the foregoing or the opinion expressed in
paragraph 2 above, we note that, pursuant to Section 6 of Article IV of the
Governing Instrument, the Trustees have the power to cause Shareholders, or
Shareholders of a particular Series, to pay certain custodian, transfer,
servicing or similar agent charges by setting off the same against declared but
unpaid dividends or by reducing Share ownership (or by both means).
We hereby consent to the filing of a copy of this opinion with the
Securities and Exchange Commission together with a pre-effective amendment to
the Registration Statement to be filed on or about the date hereof. In giving
this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder. The opinion set forth above is expressed solely for your
benefit in connection with the transactions contemplated hereby and may not be
relied upon for any other purpose or by any other person or entity without our
prior written consent.
Very truly yours,
MORRIS, NICHOLS, ARSHT & TUNNELL
CONSENT OF INDEPENDENT ACCOUNTANTS
-------------------
We consent to the inclusion in this Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-1A (File No. 333-45675) of our report dated
April 22, 1998 on our audit of the statement of assets and liabilities of Euclid
Market Neutral Fund, a series of Euclid Mutual Funds.
We also consent to the reference to our Firm in the Statement of Additional
Information under the caption "Investment Management And Other
Services-Independent Accountants."
Coopers & Lybrand L.L.P.
New York, New York
April 23, 1998
Exhibit 13
EUCLID MUTUAL FUNDS
SUBSCRIPTION AGREEMENT
The undersigned, Euclid Advisors LLC (the "Subscriber") hereby subscribes
for twenty-five thousand dollars ($25,000.00) worth of shares of beneficial
interest, without par value, of each of the following: (1) Class A Shares, (2)
Class B Shares, (3) Class C Shares and (4) Class I Shares of Euclid Market
Neutral Fund, a series of EUCLID MUTUAL FUNDS, a Delaware business trust (the
"Trust"), at the net asset value per share of each such share, payment of which
is herewith made in full.
The Trust reserves the right to reject this subscription for any reason
whatsoever which it, in its sole discretion, deems sufficient, by not signing
this Agreement and refunding all funds paid herewith, in which event the Trust
shall have no further obligations thereunder.
The Subscriber hereby represents that it is acquiring the shares for its
own account for investment and with no present intention of reselling or
otherwise distributing the same.
This Subscription Agreement contains the entire agreement between the
Trust and the Subscriber respecting the subject matter hereof, and no agent or
other representative of the Trust or any person has any power to change or alter
its terms.
The Declaration of Trust of the Trust, is on file with the Secretary of
State of Delaware and notice is hereby given that this Agreement is made and
executed on behalf of the Trust, and not by the Trustees or officers of the
Trust individually, and the obligations of or arising out of this Agreement are
not binding upon the Trustees, officers or shareholders of the Trust
individually but are binding only upon the assets and property of the Trust.
Notice is hereby given that the debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a particular
series of the Trust shall be enforceable against the assets of such series only,
and not against the assets of the Trust generally.
Accepted and agreed to this ____ day of ______________, 1998
EUCLID MUTUAL FUNDS EUCLID ADVISORS LLC
- ---------------------- ------------------------------
Alfred J. Ratcliffe Eugene J. Glaser
First Vice President & President
Treasurer
Exhibit 14a
[LOGO] Zweig [LOGO] EUCLID
Mutual Funds MUTUAL FUNDS
IRA
&
ROTH IRA
APPLICATION
<PAGE>
==============================================
[LOGO] Zweig [LOGO] EUCLID IRA/ROTH IRA APPLICATION
Mutual Funds MUTUAL FUNDS For application assistance call 1-800-272-2700
==============================================
- --------------------------------------------------------------------------------
1. ACCOUNT NAME (All items must be completed)
- --------------------------------------------------------------------------------
Name (last, first, middle)
- --------------------------------------------------------------------------------
Social Security Number Date of Birth
2. ADDRESS AND SHAREOWNER INFORMATION
- --------------------------------------------------------------------------------
Street or P.O. Box
- --------------------------------------------------------------------------------
City State Zip Code
- --------------------------------------------------------------------------------
Daytime Phone Evening Phone
Citizenship: [ ] U.S. Citizen [ ] Resident Alien
[ ] Non-Resident Alien:
--------------------------------------------
Country
3.TYPE OF IRA INVESTMENT (Check only one box)
[ ] Regular IRA contribution Check this box if you wish to fund your IRA with an
annual contribution of up to a maximum of $2,000.
[ ] Spousal IRA The combined total of the two contributions cannot exceed
$4,000, but can be split between the two IRAs. No more than $2,000 can be
contributed to one IRA. (Complete a separate application).
[ ] Direct transfer of an existing IRA Check if you wish to transfer your
existing IRA from another custodian to Zweig/ Euclid. In addition to this
application you must complete the IRA Transfer and Direct Rollover Form.
[ ] Rollover of a distribution from a regular IRA Check here if you are funding
this IRA with money you have received from an IRA at another custodian and are
now reinvesting it with Zweig/Euclid.
[ ] Rollover from an Employer Sponsored Plan Check here only if you are funding
this exclusively with money you accumulated in an employer's retirement plan
which is eligible for rollover.
[ ] Enclosed is a check made payable to State Street Bank and Trust Co.
(SSB) Third party checks will NOT be accepted.
[ ] A check will be sent directly to SSB by my employer.
[ ] SEP-IRA
[ ] SAR-SEP IRA (For plans established prior to 1/1/97 only.)
--------------------------------------------------------------------
Name of Employer
--------------------------------------------------------------------
Address
4. ROTH IRAs
[ ] Roth IRA contribution Check this box if you wish to fund a Roth IRA with an
annual contribution of up to a maximum of $2,000.
[ ] Conversion from Regular Zweig/Euclid IRA to Roth Zweig/Euclid IRA
Check with your tax adviser for tax consequences.
Current Regular Zweig IRA Account #___________________
Amount to be converted: [ ] All [ ] $___________________
[ ] Rollover or Transfer from an existing (non-Zweig/Euclid) Regular IRA to a
Roth IRA with Zweig/Euclid
Check with your tax adviser for tax consequenses. In addition to this
application, please complete the Transfer and Direct Rollover Form.
[ ] Roth IRA to Roth IRA Check here if you wish to transfer your existing Roth
IRA from another custodian to Zweig/Euclid. In addition to this application,
please complete the Transfer and Direct Rollover Form.
5. TYPE OF CONTRIBUTION
[ ] Contribution for tax year 19__.
[ ] Rollover IRA originally funded with a distribution from an employer-
sponsored plan.
6. INVESTMENT INFORMATION
The minimum investment is $250 per fund. Be sure to read the prospectus. Checks
should be made payable to State Street Bank and Trust Company. NO THIRD PARTY
CHECKS WILL BE ACCEPTED. Please be sure to write the fund names and your social
security number on the check.
A. Fund Name:
-------------------------------------------------------------------
[ ] Class A [ ] Class B [ ] Class C
Investment amount: $
------------------------------------------------------------
B. Fund Name:
-------------------------------------------------------------------
[ ] Class A [ ] Class B [ ] Class C
Investment amount: $
------------------------------------------------------------
C. Fund Name:
-------------------------------------------------------------------
[ ] Class A [ ] Class B [ ] Class C
Investment amount: $________________
7. BENEFICIARY DESIGNATION
Please complete page 4.
(over please)
2
<PAGE>
8. DEALERS AND ADVISERS ONLY
If certification below is executed, duplicate statements will be sent to the
address indicated below.
- --------------------------------------------------------------------------------
Financial Professional's Name
- --------------------------------------------------------------------------------
Financial Professional's Number Telephone
- --------------------------------------------------------------------------------
Dealer/Adviser's Name
- --------------------------------------------------------------------------------
Dealer/Adviser's Branch Address Branch Number
9. SHAREHOLDER PRIVILEGES
o Telephone Exchange You may use the telephone to make exchanges among any
Zweig or Euclid Mutual Fund with the same registration. Unless the box
below is checked, the telephone service WILL be established. (Exchanges
are processed only in the same class of shares).
[ ] I do NOT want to make exchanges by telephone.
o Automatic Investment Plan You can automatically move $100 or more from you
bank account Savings Checking into any of your fund accounts on any day of
the month. Please attach a voided check or deposit slip from your bank
account. If your investment is by wire please provide bank information
below.
[ ] I authorize State Street Bank to make regular investments of $____________
into my account in:
Fund Name:
----------------------------------------------------------------
[ ] Class A [ ] Class B [ ] Class C beginning with
month _______________day____________on a
[ ] monthly [ ] quarterly basis.
Bank Information: Note: Your bank must be a member of the Automated
Clearing House (ACH). Please call your bank if you are unsure.
--------------------------------------------------------------------------
Name of Bank
--------------------------------------------------------------------------
ACH Routing Number
* this 9-digit number used to identify your bank to the ACH can be found
in the lower left-hand corner of your bank check. If the account is a
savings bank or credit union, please contact them to obtain their ACH
routing number.
--------------------------------------------------------------------------
Name(s) on Bank Account
--------------------------------------------------------------------------
Bank Account Number
Check one:
[ ] Checking Account (You must attach a voided check.)
[ ] Savings Account (Obtain ACH routing info from your bank.)
Passbook savings and money market fund accounts are NOT eligible.
Activation of Automatic Investment Plan. The Zweig/Euclid Automatic
Investment Plan normally becomes active 15 business days after we receive
your application. Your investment may be credited for purchase in Zweig or
Euclid Mutual Funds up to 3 business days after the date you selected on
the application. Establishment of the Plan may be delayed if proper
information is not provided.
o Systematic Cash Withdrawal:
Please call 1-800-272-2700 for the appropriate form.
o Zweig Savings Plan State Street Bank will send you an invoice each month
or quarter in order to make regular investments into Zweig or Euclid
Mutual Funds. The minimum amount is $100. You are under no obligation to
make these payments.
[ ] YES, I want to join the Savings Plan and make regular investments of
________________________($100 minimum) into my account. Please send an
invoice each: [ ] month [ ] quarter.
10. YOUR ACCEPTANCE
If the Depositor has indicted a Regular IRA Rollover or Direct Rollover above,
Depositor certifies that the contribution does not include any employee
contributions to any qualified plan (other than accumulated deductible employee
contributions) or 403(b) arrangement; that any assets transferred in kind by
Depositor are the same assets received by the Depositor in the distribution
being rollover; if the distribution is from another Regular IRA, that Depositor
has not made another rollover within the one-year period immediately preceding
this rollover; that such distribution was received within 60 days of making the
rollover to this Account; and that no portion of the amount rolled over is a
required minimum distribution under the required distribution rules.
If Depositor has indicted a Conversion or a Rollover of an existing Regular to a
Roth IRA, Depositor acknowledges that the amount converted will be treated as
taxable income (except for prior nondeductible contributions) for federal income
tax purposes. If Depositor has indicated a Rollover from another Roth IRA (Item
4 above, Depositor certifies that the information given in Item 4 is correct and
acknowledges that adverse tax consequences or penalties could result from giving
incorrect information.
Depositor has received and read the applicable sections of the "State Street
Bank and Trust Company Universal Individual Retirement Account Disclosure
Statement" relating to the Account (including the Custodian's fee schedule), the
Custodial Account document, and the "Instructions" pertaining to this Adoption
Agreement. Depositor acknowledges receipt of the Universal Individual Retirement
Custodial Account document and Universal IRA Disclosure Statement at least 7
days before the date inscribed below and acknowledges that Depositor has no
further right of revocation. I agree that State Street Bank, Zweig Series Trust,
Euclid Mutual Funds (the "Trusts"), Zweig Securities Corp. or their officers or
employees, will not be liable for any loss, expense or cost for acting upon any
instructions or inquiries believed to be genuine. I acknowledge that unless I
have elected not to have telephone exchange privileges in Section 9, the account
will be subject to the telephone exchange privileges described in the current
prospectus and agree the Trusts, the Distributor and Transfer Agent will not be
liable for any loss in acting on written or telephone instructions reasonably
believed by them to be authentic. I certify under penalty of perjury that the
Social Security Number above is my correct number, and that I have not been
notified by the IRS that I may be subject to back-up withholding.
- --------------------------------------------------------------------------------
YOUR SIGNATURE DATE
Custodian Acceptance. State Street Bank and Trust company will accept
appointment as Custodian of the Depositor's Account. However, this Agreement is
not binding upon the Custodian until the Depositor has received a statement of
the transaction. Receipt by the Depositor of a confirmation of the purchase of
the Fund shares indicated above will serve as notification of State Street Bank
and Trust Company's acceptance of appointment as Custodian of the Depositor's
Account.
STATE STREET BANK AND TRUST COMPANY, CUSTODIAN
By
-----------------------------------------------------------------------
Date
---------------------------------------------------------------------
If the Depositor is a minor under the laws of the Depositor's state of
residence, a parent or guardian must also sign the Adoption Agreement here.
Until the Depositor reaches the age of majority, the parent or guardian will
exercise the powers and duties of the Depositor.
RETAIN A COPY OF THE COMPLETED ADOPTION AGREEMENT FOR YOUR RECORDS.
MAIL ALL FORMS TO: BY COURIER TO:
Zweig/Euclid Mutual Funds Zweig/Euclid Mutual Funds
c/o State Street Bank and c/o State Street Bank and
Trust Company Trust Company
P.O. Box 8505 2 Heritage Drive, 3rd Floor
Boston, MA 02266-8505 Quincy, MA 02171
1-800-628-0441
3
<PAGE>
==============================================
[LOGO] Zweig [LOGO] EUCLID DESIGNATION OF BENEFICIARY
Mutual Funds MUTUAL FUNDS FORM
==============================================
- --------------------------------------------------------------------------------
Name of Participant
------------------------------------------------------
As Participant, I hereby make the following designation of beneficiary in
accordance with the State Street Bank and Trust Company Regular Individual
Retirement Custodial Account or Roth Individual Retirement Custodial Account: In
the event of my death, pay any interest I may have under my Account to the
following Primary Beneficiary or Beneficiaries that survive me. Make payment in
the proportions specified below (or in equal proportions if no proportions are
specified). If any Primary Beneficiary predeceases me, his share is to be
divided among the Primary Beneficiaries who survive me in the relative
proportions assigned to each such surviving Primary Beneficiary.
Primary Beneficiary or Beneficiaries:
<TABLE>
<CAPTION>
Name Relationship Date of Birth Social Security Number Proportion
<S> <C> <C> <C> <C>
- --------------- --------------- --------------- --------------------------- -------------
- --------------- --------------- --------------- --------------------------- -------------
- --------------- --------------- --------------- --------------------------- -------------
</TABLE>
If none of the Primary Beneficiaries survives me, pay any interest I may have
under my Account to the following Alternate Beneficiary or Beneficiaries that
survive me. Make payment in the proportions specified below (or in equal
proportions if no proportions are specified). If any Alternate Beneficiary
predeceases me, his share is to be divided among the Alternate Beneficiaries who
survive me in the relative proportions assigned to each such surviving Alternate
Beneficiary.
Alternate Beneficiary or Beneficiaries:
<TABLE>
<CAPTION>
Name Relationship Date of Birth Social Security Number Proportion
<S> <C> <C> <C> <C>
- --------------- --------------- --------------- --------------------------- -------------
- --------------- --------------- --------------- --------------------------- -------------
- --------------- --------------- --------------- --------------------------- -------------
</TABLE>
I understand that the beneficiaries named herein may be changed or revoked at
any time by filing a new designation in writing with the Custodian. All forms
must be acceptable to the Custodian and dated and signed by the Participant.
- -----------------------------------------------------------
Signature of Participant Date
IMPORTANT: This Designation of Beneficiary may have important tax or estate
planning effects. Also, if you are married and reside in a community property
state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, or
Washington or Wisconsin), you may need to obtain your spouse's consent if you
have not designated your spouse as primary beneficiary for at least half of your
Account. See your lawyer, accountant, or other tax professional for additional
information and advice.
SPOUSAL CONSENT This section should be reviewed if the accountholder is married
and designates a beneficiary other than the spouse. It is the accountholder's
responsibility to determine if this section applies. The accountholder may need
to consult with legal counsel. Neither the Custodian nor the Sponsor are liable
for any consequences resulting from a failure of the accountholder to provide
proper spousal consent.
I am the spouse of the above-named accountholder. I acknowledge that I have
received a full and reasonable disclosure of my spouse's property and financial
obligations. Due to any possible consequences of giving up my community property
interest in the IRA, I have been advised to see a tax professional or legal
advisor. I hereby consent to the beneficiary designation(s) indicated above. I
assume full responsibility for any adverse consequence that may result. No tax
or legal advice was given to me by the Custodian or Sponsor.
- -----------------------------------------------------------
Signature of Spouse Date
- -----------------------------------------------------------
Signature of Witness for Spouse Date
4
<PAGE>
============================================
[LOGO] Zweig [LOGO] EUCLID IRA/Roth IRA Transfer and Direct
Mutual Funds MUTUAL FUNDS IRA/Roth IRA Transfer and Direct Rollover
============================================
- --------------------------------------------------------------------------------
1. ACCOUNT NAME (All items must be completed to process application)
- --------------------------------------------------------------------------------
Name (last, first, middle)
- --------------------------------------------------------------------------------
Social Security Number Date of Birth
2. ADDRESS
- --------------------------------------------------------------------------------
Street or P.O. Box
- --------------------------------------------------------------------------------
City State Zip Code
- --------------------------------------------------------------------------------
Daytime Phone Evening Phone
3. INFORMATION ABOUT YOUR PRESENT IRA/Roth IRA
- --------------------------------------------------------------------------------
Name of institution currently holding your IRA/Roth IRA
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip Code
- --------------------------------------------------------------------------------
Telephone Contact Person
Present IRA/Roth IRA Account Number(s):
#
-------------------------------------------------------------------------------
#
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Type of Account to be Transferred to Zweig/Euclid:
[ ] Regular /Spousal IRA
[ ] Roth IRA - Enter date Roth IRA was originally opened ____________
Was any amount in your existing Roth IRA converted or transferred from an IRA
account? [ ] Yes [ ] No
If yes, date of the most recent coversion or transfer into this Roth IRA: ______
[ ] IRA Rollover Check this box only if you are transferring money received
exclusively as a distribution from an employer-sponsored retirement plan
[ ] SEP-IRA
[ ] SAR-SEP IRA VIA TRANSFER
4. AUTHORIZE YOUR OTHER CUSTODIAN TO TRANSFER YOUR IRA /Roth IRA TO ZWEIG/EUCLID
Resigning Trustee or Custodian:
This transfer request authorizes you to liquidate all or a part totaling $______
of the account listed in Section 3 and to remit the proceeds of the liquidation
in cash immediately or at maturity ______ (date) to my Zweig/Euclid IRA.
I understand that you the existing custodian may assess penalties or fees. If I
am an IRA owner over 70 1/2, I attest that none of the amount to be transferred
will include the required minimum distribution for the current year pursuant to
Section 401(a)(9) of the Internal Revenue Code.
5. CHOOSE YOUR ZWEIG/EUCLID INVESTMENT
[ ] I am opening a new Zweig/Euclid Mutual Fund IRA/Roth IRA. Attached is my
completed IRA/Roth IRA application.
[ ] I already own a Zweig/Euclid Mutual Fund. Please list the name(s) of the
Zweig/Euclid Mutual Fund(s) into which the transfer proceeds are to be
deposited.
A. Fund Name:
-------------------------------------------------------------------
[ ] Class A [ ] Class B [ ] Class C
Fund Account No. (If existing):
-------------------------------------------------
B. Fund Name:
-------------------------------------------------------------------
[ ] Class A [ ] Class B [ ] Class C
Fund Account No. (If existing):
-------------------------------------------------
C. Fund Name:
-------------------------------------------------------------------
[ ] Class A [ ] Class B [ ] Class C
Fund Account No. (If existing):
-------------------------------------------------
Call 1-800-272-2700 to begin Systematic Withdrawal or for Required Mandatory
Distribution (Shareholders 70 1/2 only)
6. SIGNATURE The undersigned certifies to the present IRA/Roth IRA custodian
that the undersigned has estalished a successor Individual Retirement Custodial
Account meeting the requirements of Internal Revenue Code Section 408(a),408(p)
or 408A to which assets will be transferred, and certifies to SSB that the
IRA/Roth IRA from which assets are being transferred meets the requirements of
IRC Section 408(a),408(p) or 408A. I understand that the requirements for a
valid transfer to a Regular IRA, SEP IRA, or Roth IRA are complex and that I
have the responsiblity for complying with all requirements and for the tax
results of any such transfer.
- --------------------------------------------------------------------------------
Your Signature Date
Signature Guarantee: Only if required by current Custodian
Signature Guaranteed By:
--------------------------------------------------------
Name of Bank or Brokerage Firm
--------------------------------------------------------
Signature of Officer and Title
Signature Guarantee Stamp
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO BE COMPLETED BY STATE STREET BANK AND TRUST COMPANY ONLY
Instructions to Current Trustee/Custodian:
Please forward a check as directed in Section 4 made payable to State Street
Bank and Trust Company, FBO
- --------------------------------------------------------------------------------
Please include the following reference number on the check:
#
- --------------------------------------------------------------------------------
Mail the check and accompanying documents, if any, in the postage paid return
envelope provided to:
Zweig/Euclid Mutual Funds c/o State Street Bank and Trust
P.O. Box 8505
Boston, MA 02266-8505
STATE STREET BANK AND TRUST COMPANY accepts its appointment as Custodian as
described above.
- --------------------------------------------------------------------------------
State Street Bank and Trust Company
<PAGE>
State Street Bank and Trust Company
Universal Individual Retirement Account
Disclosure Statement
Part One: Description of Regular IRAs
SPECIAL NOTE
Part One of the Disclosure Statement describes the rules applicable to
Regular IRAs beginning January 1, 1998. IRAs described in these pages are called
"Regular IRAs" to distinguish them from the new "Roth IRAs" first available
starting in 1998. Roth IRAs are described in Part Two of this Disclosure
Statement.
For Regular IRA contributions for 1997 (including contributions made up to
April 15, 1998 but designated as contributions for 1997), there are different
rules for determining the deductibility of your contribution on your federal tax
return. For contributions for 1997, the "active participant" limits on
deductibility (described below) apply if either spouse is an active participant
in an employer-sponsored plan. Also, the adjusted gross income ("AGI") levels
for partially deductible or nondeductible Regular IRA contributions (described
below) are lower for 1997 ($25,000 for single taxpayers, with no deduction if
your AGI is above $35,000; and $40,000 for married taxpayers filing jointly,
with no deduction if your AGI is above $50,000). Also, the exceptions to the 10%
early withdrawal penalty for withdrawals to pay certain higher education or
first-time homebuyer expenses do not apply to withdrawals in 1997.
This Part One of the Disclosure Statement describes Regular IRAs. It does
not describe Roth IRAs, a new type of IRA available starting in 1998.
Contributions to a Roth IRA are not deductible (regardless of your AGI), but
withdrawals that meet certain requirements are not subject to federal income
tax, so that dividends and investment growth on amounts held in the Roth IRA can
escape federal income tax. Please see Part Two of this Disclosure Statement if
you are interested in learning more about Roth IRAs.
Regular IRAs described in this Disclosure Statement may be used as part of
a simplified employee pension (SEP) plan maintained by your employer. Under a
SEP your employer may make contributions to your Regular IRA, and these
contributions may exceed the normal limits on Regular IRA contributions. This
Disclosure Statement does not describe IRAs established in connection with a
SIMPLE IRA program maintained by your employer. Employers provide special
explanatory materials for accounts established as part of a SIMPLE IRA program.
Regular IRAs may be used in connection with a SIMPLE IRA program, but for the
first two years of participation a special SIMPLE IRA (not a Regular IRA) is
required.
YOUR REGULAR IRA
This Part One contains information about your Regular Individual
Retirement Custodial Account with State Street Bank and Trust Company as
Custodian. A Regular IRA gives you several tax benefits. Earnings on the assets
held in your Regular IRA are not subject to federal income tax until withdrawn
by you. You may be able to deduct all or part of your Regular IRA contribution
on your federal income tax return. State income tax treatment of your Regular
IRA may differ from federal treatment; ask your state tax department or your
personal tax advisor for details.
Be sure to read Part Three of this Disclosure Statement for important
additional information, including information on how to revoke your Regular IRA,
investments and prohibited transactions, fees and expenses, and certain tax
requirements.
ELIGIBILITY
What are the eligibility requirements for a Regular IRA?
You are eligible to establish and contribute to a Regular IRA for a year
if:
- You received compensation (or earned income if you are self
employed) during the year for personal services you rendered. If you
received taxable alimony, this is treated like compensation for IRA
purposes.
- You did not reach age 70 1/2 during the year.
Can I Contribute to a Regular IRA for my Spouse?
For each year before the year when your spouse attains age 70 1/2, you can
contribute to a separate Regular IRA for your spouse, regardless of whether your
spouse had any compensation or earned income in that year. This is called a
"spousal IRA." To make a contribution to a Regular IRA for your spouse, you must
file a joint tax return for the year with your spouse. For a spousal IRA, your
spouse must set up a different Regular IRA, separate from yours, to which you
contribute.
CONTRIBUTIONS
When Can I Make Contributions to a Regular IRA?
You may make a contribution to your existing Regular IRA or establish a
new Regular IRA for a taxable year by the due date (not including any
extensions) for your federal income tax return for the year. Usually this is
April 15 of the following year.
6
<PAGE>
How Much Can I Contribute to my Regular IRA?
For each year when you are eligible (see above), you can contribute up to
the lesser of $2,000 or 100% of your compensation (or earned income, if you are
self-employed). However, under the tax laws, all or a portion of your
contribution may not be deductible.
If you and your spouse have spousal Regular IRAs, each spouse may
contribute up to $2,000 to his or her IRA for a year as long as the combined
compensation of both spouses for the year (as shown on your joint income tax
return) is at least $4,000. If the combined compensation of both spouses is less
than $4,000, the spouse with the higher amount of compensation may contribute up
to that spouse's compensation amount, or $2,000 if less. The spouse with the
lower compensation amount may contribute any amount up to that spouse's
compensation plus any excess of the other spouse's compensation over the other
spouse's IRA contribution. However, the maximum contribution to either spouse's
Regular IRA is $2,000 for the year.
If you (or your spouse) establish a new Roth IRA and make contributions to
both your Regular IRA and a Roth IRA, the combined limit on contributions to
both your (or your spouse's) Regular IRA and Roth IRA for a single calendar year
is $2,000.
How Do I Know if my Contribution is Tax Deductible?
The deductibility of your contribution depends upon whether you are an
active participant in any employer-sponsored retirement plan. If you are not an
active participant, the entire contribution to your Regular IRA is deductible.
If you are an active participant in an employer-sponsored plan, your
Regular IRA contribution may still be completely or partly deductible on your
tax return. This depends on the amount of your income (see below).
Similarly, the deductibility of a contribution to a Regular IRA for your
spouse depends upon whether your spouse is an active participant in any
employer-sponsored retirement plan. If your spouse is not an active participant,
the contribution to your spouse's Regular IRA will be deductible. If your spouse
is an active participant, the Regular IRA contribution will be completely,
partly or not deductible depending upon your combined income.
An exception to the preceding rules applies to high-income married
taxpayers, where one spouse is an active participant in an employer-sponsored
retirement plan and the other spouse is not. A contribution to the non-active
participant spouse's Regular IRA will be only partly deductible at an adjusted
gross income level on the joint tax return of $150,000, and the deductibility
will be phased out as described below over the next $10,000 so that there will
be no deduction at all with an adjusted gross income level of $160,000 or
higher.
How do I Determine My or My Spouse's "Active Participant" status?
Your (or your spouse's) Form W-2 should indicate if you (or your spouse)
were an active participant in an employer-sponsored retirement plan for a year.
If you have a question, you should ask your employer or the plan administrator.
In addition, regardless of income level, your spouse's "active
participant" status will not affect the deductibility of your contributions to
your Regular IRA if you and your spouse file separate tax returns for the
taxable year and you lived apart at all times during the taxable year.
What are the Deduction Restrictions for Active Participants?
If you (or your spouse) are an active participant in an employer plan during a
year, the contribution to your Regular IRA (or your spouse's Regular IRA) may be
completely, partly or not deductible depending upon your filing status and your
amount of adjusted gross income ("AGI"). If AGI is any amount up to the lower
limit, the contribution is deductible. If your AGI falls between the lower limit
and the upper limit, the contribution is partly deductible. If your AGI falls
above the upper limit, the contribution is not deductible
FOR ACTIVE PARTICIPANTS - 1998
- --------------------------------------------------------------------------------
If You Are If You Are Married Then Your Regular
Single Filing Jointly IRA Contribution Is:
- --------------------------------------------------------------------------------
Up to Lower Limit Up to Lower Limit Fully
($30,000 for 1998) ($50,000 for 1998) Deductible
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More than the Lower Limit More than the Lower Limit Partly
but less than Upper Limit but less than Upper Limit Deductible
($40,000 for 1998) ($60,000 for 1998)
- --------------------------------------------------------------------------------
Upper Limit or More Upper Limit or More Not Deductible
- --------------------------------------------------------------------------------
The Lower Limit and the Upper Limit will change for 1999 and later years. The
Lower Limit and Upper Limit for these years are shown in the following table.
Substitute the correct Lower Limit and Upper Limit in the table above to
determine deductibility in any particular year. (Note: if you are married but
filing separate returns, your Lower Limit is always zero and your Upper Limit is
always $10,000).
<PAGE>
TABLE OF LOWER AND UPPER LIMITS
- --------------------------------------------------------------------------------
Year Single Married Filing
Jointly
- --------------------------------------------------------------------------------
Lower Limit Upper Limit Lower Limit Upper Limit
- --------------------------------------------------------------------------------
1999 $31,000 $41,000 $51,000 $61,000
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2000 $32,000 $42,000 $52,000 $62,000
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2001 $33,000 $43,000 $53,000 $63,000
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2002 $34,000 $44,000 $54,000 $64,000
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2003 $40,000 $50,000 $60,000 $70,000
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2004 $45,000 $55,000 $65,000 $75,000
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2005 $50,000 $60,000 $70,000 $80,000
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2006 $50,000 $60,000 $75,000 $85,000
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2007 and later $50,000 $60,000 $80,000 $100,000
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How do I Calculate my Deduction if I Fall in the "Partly Deductible" Range?
If your AGI falls in the partly deductible range, you must calculate the portion
of your contribution that is deductible. To do this, multiply your contribution
by a fraction. The numerator is the amount by which your AGI exceeds the lower
limit (for 1998: $30,000 if single, or $50,000 if married filing jointly). The
denominator is $10,000 (note that the denominator for married joint filers is
$20,000 starting in 2007). Subtract this from your contribution and then round
down to the nearest $10. The deductible amount is the greater of the amount
calculated or $200 (provided you contributed at least $200). If your
contribution was less than $200, then the entire contribution is deductible.
For example, assume that you make a $2,000 contribution to your Regular
IRA in 1998, a year in which you are an active participant in your employer's
retirement plan. Also assume that your AGI is $57,555 and you are married,
filing jointly. You would calculate the deductible portion of your contribution
this way:
1. The amount by which your AGI exceeds the lower limit of the partly -
deductible range:
($57,555-$50,000) = $7,555
2. Divide this by $10,000: $7,555 = 0.7555
-------
$10,000
3. Multiply this by your contribution limit:
0.7555 x $2,000 = $1,511
4. Subtract this from your contribution:
($2,000 - $1,551) = $489
5. Round this down to the nearest $10: = $480
6. Your deductible contribution is the greater of this amount or $200.
Even though part or all of your contribution is not deductible, you may still
contribute to your Regular IRA (and your spouse may contribute to your spouse's
Regular IRA) up to the limit on contributions. When you file your tax return
for the year, you must designate the amount of non-deductible contributions to
your Regular IRA for the year. See IRS Form 8606.
How Do I Determine My AGI?
AGI is your gross income minus those deductions which are available to all
taxpayers even if they don't itemize. Instructions to calculate your AGI are
provided with your income tax Form 1040 or 1040A.
What Happens if I Contribute more than Allowed to my Regular IRA?
The maximum contribution you can make to a Regular IRA generally is $2,000
or 100% of compensation or earned income, whichever is less. Any amount
contributed to the IRA above the maximum is considered an "excess contribution."
The excess is calculated using your contribution limit, not the deductible
limit. An excess contribution is subject to excise tax of 6% for each year it
remains in the IRA.
How can I Correct an Excess Contribution?
Excess contributions may be corrected without paying a 6% penalty. To do
so, you must withdraw the excess and any earnings on the excess before the due
date (including extensions) for filing your federal income tax return for the
year for which you made the excess contribution. A deduction should not be taken
for any excess contribution. Earnings on the amount withdrawn must also be
withdrawn. The earnings must be included in your income for the tax year for
which the contribution was made and may be subject to a 10% premature withdrawal
tax if you have not reached age 59 1/2.
What Happens if I Don't Correct the Excess Contribution by the Tax Return Due
Date?
Any excess contribution withdrawn after the tax return due date (including
any extensions) for the year for which the contribution was made will be subject
to the 6% excise tax. There will be an additional 6% excise tax for each year
the excess remains in your account.
Under limited circumstances, you may correct an excess contribution after
tax filing time by withdrawing the excess contribution (leaving the
8
<PAGE>
earnings in the account). This withdrawal will not be includable in income nor
will it be subject to any premature withdrawal penalty if (1) your contributions
to all Regular IRAs do not exceed $2,000 and (2) you did not take a deduction
for the excess amount (or you file an amended return (Form 1040X) which removes
the excess deduction).
How are Excess Contributions Treated if None of the Preceding Rules Apply?
Unless an excess contribution qualifies for the special treatment outlined
above, the excess contribution and any earnings on it withdrawn after tax
filing time will be includable in taxable income and may be subject to a 10%
premature withdrawal penalty. No deduction will be allowed for the excess
contribution for the year in which it is made.
Excess contributions may be corrected in a subsequent year to the extent
that you contribute less than your maximum amount. As the prior excess
contribution is reduced or eliminated, the 6% excise tax will become
correspondingly reduced or eliminated for subsequent tax years. Also, you may be
able to take an income tax deduction for the amount of excess that was reduced
or eliminated, depending on whether you would be able to take a deduction if you
had instead contributed the same amount.
Are the Earnings on My Regular IRA Funds Taxed?
Any dividends on or growth of the investments held in your Regular IRA are
generally exempt from federal income taxes and will not be taxed until withdrawn
by you, unless the tax exempt status of your Regular IRA is revoked (this is
described in Part Three of this Disclosure Statement).
TRANSFERS/ROLLOVERS
Can I Transfer or Roll Over a Distribution I Receive from my Employer's
Retirement Plan into a Regular IRA?
Almost all distributions from employer plans or 403(b) arrangements (for
employees of tax-exempt employers) are eligible for rollover to a Regular IRA.
The main exceptions are
o payments over the lifetime or life expectancy of the participant (or
participant and a designated beneficiary),
o installment payments for a period of 10 years or more,
o required distributions (generally the rules require distributions starting
at age 70 1/2 or for certain employees starting at retirement, if later),
and
o payments of employee after-tax contributions.
If you are eligible to receive a distribution from a tax qualified retirement
plan as a result of, for example, termination of employment, plan
discontinuance, or retirement, all or part of the distribution may be
transferred directly into your Regular IRA. This is a called a "direct
rollover." Or, you may receive the distribution and make a regular rollover to
your Regular IRA within 60 days. By making a direct rollover or a regular
rollover, you can defer income taxes on the amount rolled over until you
subsequently make withdrawals from your IRA.
The maximum amount you may roll over is the amount of employer
contributions and earnings distributed. You may not roll over any after-tax
employee contributions you made to the employer retirement plan. If you are
over age 70 1/2 and are required to take minimum distributions under the tax
laws, you may not roll over any amount required to be distributed to you under
the minimum distribution rules. Also, if you are receiving periodic payments
over your or your and your designated beneficiary's life expectancy or for a
period of at least 10 years, you may not roll over these payments. A rollover to
a regular IRA must be completed within 60 days after the distribution from the
employer retirement plan to be valid.
NOTE: A qualified plan administrator or 403(b) sponsor MUST WITHHOLD 20%
OF YOUR DISTRIBUTION for federal income taxes UNLESS you elect a direct
rollover. Your plan or 403(b) sponsor is required to provide you with
information about direct and traditional rollovers and withholding taxes before
you receive your distribution and must comply with your directions to make a
direct rollover.
The rules governing rollovers are complicated. Be sure to consult your tax
advisor or the IRS if you have a question about rollovers.
Once I Have Rolled Over a Plan Distribution into a Regular IRA, Can I
Subsequently Roll Over into another Employer's Qualified Retirement Plan?
Yes. Part or all of an eligible distribution received from a qualified
plan may be transferred from the Regular IRA holding it to another qualified
plan. However, the IRA must have no assets other than those which were
previously distributed to you from the qualified plan. Specifically, the IRA
cannot contain any contributions by you (or your spouse). Also, the new
qualified plan must accept rollovers. Similar rules apply to Regular IRAs
established with rollovers from 403(b) arrangements.
Can I Make a Traditional Rollover from my Regular IRA to another Regular IRA?
You may make a rollover from one Regular IRA to another Regular IRA you
have or you establish to receive the rollover. Such a rollover must be completed
within 60 days after the withdrawal from your first Regular IRA. After making a
traditional rollover from one Regular IRA to another, you must wait a full year
(365 days) before you can make another such rollover. (However, you can instruct
a Regular IRA custodian to transfer amounts directly to another Regular IRA
custodian; such a direct transfer does not count as a rollover.)
What Happens If I Combine Rollover Contributions With My Normal Contributions
In One IRA?
If you wish to make both a normal annual contribution and a rollover
contribution, you may wish to open two separate Regular IRAs by completing two
Adoption Agreements and two sets of forms. You should consult a tax advisor
before making your annual contribution to the IRA you established with rollover
contributions (or make a rollover contribution to the IRA to which you make your
annual contributions). This is because combining your annual contributions and
rollover contributions originating from an employer plan distribution would
prohibit the future rollover out of the IRA into another qualified plan. If
despite this, you still wish to combine a rollover contribution and the IRA
holding your annual contributions, you should establish the account as a Regular
IRA on the Adoption Agreement (not a Rollover IRA or Direct Rollover IRA) and
make the contributions to that account.
How Do Rollovers Affect my Contribution or Deduction Limits?
Rollover contributions, if properly made, do not count toward the maximum
contribution. Also, rollovers are not deductible and they do not affect your
deduction limits as described above.
What About Converting My Regular IRA to a Roth IRA?
The rules for converting a Regular IRA to a new Roth IRA, or making a
rollover from a Regular IRA to a new Roth IRA, are described in Part Two below.
9
<PAGE>
WITHDRAWALS
When can I make withdrawals from my Regular IRA?
You may withdraw from your Regular IRA at any time. However, withdrawals
before age 59 1/2 may be subject to a 10% penalty tax in addition to regular
income taxes (see below).
When must I start making withdrawals?
If you have not withdrawn your entire IRA by the April 1 following the
year in which you reach 70 1/2, you must make minimum withdrawals in order to
avoid penalty taxes. The rule allowing certain employees to postpone
distributions from an employer qualified plan until actual retirement (even if
this is after age 70 1/2) does not apply to Regular IRAs.
The minimum withdrawal amount is determined by dividing the balance in
your Regular IRA (or IRAs) by your life expectancy or the combined life
expectancy of you and 10 your designated beneficiary. The minimum withdrawal
rules are complex. Consult your tax advisor for assistance.
The penalty tax is 50% of the difference between the minimum withdrawal
amount and your actual withdrawals during a year. The IRS may waive or reduce
the penalty tax if you can show that your failure to make the required minimum
withdrawals was due to reasonable cause and you are taking reasonable steps to
remedy the problem.
How Are Withdrawals From My Regular IRA Taxed?
Amounts withdrawn by you are includable in your gross income in the
taxable year that you receive them, and are tax able as ordinary income. Lump
sum withdrawals from a Regular IRA are not eligible for averaging treatment
currently available to certain lump sum distributions from qualified employer
retirement plans.
Since the purpose of a Regular IRA is to accumulate funds for retirement,
your receipt or use of any portion of your Regular IRA before you attain age 59
1/2 generally will be considered as an early withdrawal and subject to a 10%
penalty tax.
The 10% penalty tax for early withdrawal will not apply if:
o The distribution was a result of your death or disability.
o The purpose of the withdrawal is to pay certain higher education
expenses for yourself or your spouse, child, or grandchild. Qualifying
expenses include tuition, fees, books, supplies and equipment required
for attendance at a post-secondary educational institution. Room and board
expenses may qualify if the student is attending at least half-time.
o The withdrawal is used to pay eligible first-time homebuyer expenses.
These are the costs of purchasing, building or rebuilding a principal
rdence (including customary settlement, financing or closing costs). The
purchaser may be you, your spouse, or a child, grandchild, parent or
grandparent of you or your spouse. An individual is considered a
"first-time homebuyer" if the individual (or the individual's spouse, if
married) did not have an ownership interest in a principal residence
during the two-year period immediately preceding the acquisition in
question. The withdrawal must be used for eligible expenses within 120
days after the withdrawal. (If there is an unexpected delay, or
cancellation of the home acquisition, a withdrawal may be redeposited as a
rollover). There is a lifetime limit on eligible first-time homebuyer
expenses of $10,000 per individual.
o The distribution is one of a scheduled series of substantially equal
periodic payments for your life or life expectancy (or the joint lives or
life expectancies of you and your beneficiary). If there is an adjustment
to the scheduled series of payments, the 10% penalty tax may apply. The
10% penalty will not apply if you make no change in the series of payments
until the end of five years or until you reach age 59 1/2, whichever is
later. If you make a change before then, the penalty will apply. For
example, if you begin receiving payments at age 50 under a withdrawal
program providing for substantially equal payments over your life
expectancy, and at age 58 you elect to receive the remaining amount in
your Regular IRA in a lump-sum, the 10% penalty tax will apply to the lump
sum and to the amounts previously paid to you before age 59 1/2.
o The distribution does not exceed the amount of your deductible medical
expenses for the year (generally speaking, medical expenses paid during a
year are deductible if they are greater than 7.5% of your adjusted gross
income for that year). The distribution does not exceed the amount you
paid for health insurance coverage for yourself, your spouse and
dependents. This exception applies only if you have been unemployed and
received federal or state unemployment compensation payments for at least
12 weeks; this exception applies to distributions during the year in
which you received the unemployment compensation and during the following
year, but not to any distributions received after you have been reemployed
for at least 60 days.
How are Nondeductible Contributions Taxed When They are Withdrawn?
A withdrawal of nondeductible contributions (not including earnings) will
be tax-free. However, if you made both deductible and nondeductible
contributions to your Regular IRA, then each distribution will be treated as
partly a return of your nondeductible contributions (not taxable) and partly a
distribution of deductible contributions and earnings (taxable). The nontaxable
amount is the portion of the amount withdrawn which bears the same ratio as your
total nondeductible Regular IRA contributions bear to the total balance of all
your Regular IRAs (including rollover IRAs and SEPs, but not including Roth
IRAs).
For example, assume that you made the following Regular IRA contributions:
Year Deductible Nondeductible
---- ---------- -------------
1995 $2,000
1996 $2,000
1997 $1,000 $1,000
1998 $1,000
------ ------
$5,000 $2,000
10
<PAGE>
In addition assume that your Regular IRA has total investment earnings through
1998 of $1,000. During 1998 you withdraw $500. Your total account balance as of
12-31-98 is $7,500 as shown below.
Deductible Contributions $5,000
Nondeductible Contributions $2,000
Earnings On IRA $1,000
Less 1998 Withdrawal $ 500
------
Total Account Balance as of 12/31/98 $7,500
To determine the nontaxable portion of your 1998 withdrawal, the total
1998 withdrawal ($500) must be multiplied by a fraction. The numerator of the
fraction is the total of all nondeductible contributions remaining in the
account before the 1998 withdrawal ($2,000). The denominator is the total
account balance as of 12-31-98 ($7,500) plus the 1998 withdrawal ($500) or
$8,000. The calculation is:
Total Remaining
Nondeductible Contributions $2,000 x $500 = $ 125
--------------------------- ------
Total Account Balance $8,000
Thus, $125 of the $500 withdrawal in 1998 will not be included in your
taxable income. The remaining $375 will be taxable for 1998. In addition, for
future calculations the remaining nondeductible contribution total will be
$2,000 minus $125, or $1,875.
A loss in your Regular IRA investment may be deductible. You should
consult your tax advisor for further details on the appropriate calculation for
this deduction if applicable.
Is there a penalty tax on certain large withdrawals or accumulations in my IRA?
Earlier tax laws imposed a "success" penalty equal to 15% of withdrawals
from all retirement accounts (including IRAs, 401(k) or other employer
retirement plans, 403(b) arrangements and others) in a year exceeding a
specified amount (initially $150,000 per year). Also, there was a 15% estate tax
penalty on excess accumulations remaining in IRAs and other tax-favored
arrangements upon your death. These 15% penalty taxes have been repealed.
Important: Please see Part Three below which contains important information
applicable to all State Street Bank and Trust Company IRAs.
Part Two: Description of Roth IRAs
SPECIAL NOTE
Part Two of the Disclosure Statement describes the rules generally
applicable to Roth IRAs beginning January 1, 1998.
Roth IRAs are a new kind of IRA available for the first time in 1998.
Contributions to a Roth IRA for 1997 are not permitted. Contributions to a Roth
IRA are not tax-deductible, but withdrawals that meet certain requirements are
not subject to federal income taxes. This makes the dividends on and growth of
the investments held in your Roth IRA tax-free for federal income tax purposes
if the requirements are met.
Regular IRAs, which have existed since 1975, are still available.
Contributions to a Regular IRA may be tax-deductible. Earnings and gains on
amounts while held in a Regular IRA are tax-deferred. Withdrawals are subject to
federal income tax (except for prior after-tax contributions which may be
recovered without additional federal income tax).
This Part Two does not describe Regular IRAs. If you wish to review
information about Regular IRAs, please see Part One of this Disclosure
Statement.
This Disclosure Statement also does not describe IRAs established in
connection with a SIMPLE IRA program or a Simplified Employee Pension (SEP) plan
maintained by your employer. Roth IRAs may not be used in connection with a
SIMPLE IRA program or a SEP plan.
YOUR ROTH IRA
Your Roth IRA gives you several tax benefits. While contributions to a
Roth IRA are not deductible, dividends on and growth of the assets held in your
Roth IRA are not subject to federal income tax. Withdrawals by you from your
Roth IRA are excluded from your income for federal income tax purposes if
certain requirements (described below) are met. State income tax treatment of
your Roth IRA may differ from federal treatment; ask your state tax department
or your personal tax advisor for details.
Be sure to read Part Three of this Disclosure Statement for important additional
information, including information on how to revoke your Roth IRA, investments
and prohibited transactions, fees and expenses and certain tax requirements.
ELIGIBILITY
What are the eligibility requirements for a Roth IRA?
Starting with 1998, you are eligible to establish and contribute to a Roth
IRA for a year if you received compensation (or earned income if you are self
employed) during the year for personal services you rendered. If you received
taxable alimony, this is treated like compensation for IRA purposes.
In contrast to a Regular IRA, with a Roth IRA you may continue making
contributions after you reach age 70 1/2.
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Can I Contribute to Roth IRA for my Spouse?
Starting with 1998, if you meet the eligibility requirements you can not
only contribute to your own Roth IRA, but also to a separate Roth IRA for your
spouse out of your compensation or earned income, regardless of whether your
spouse had any compensation or earned income in that year. This is called a
"spousal Roth IRA." To make a contribution to a Roth IRA for your spouse, you
must file a joint tax return for the year with your spouse. For a spousal Roth
IRA, your spouse must set up a different Roth IRA, separate from yours, to which
you contribute.
Of course, if your spouse has compensation or earned income, your spouse
can establish his or her own Roth IRA and make contributions to it in accordance
with the rules and limits described in this Part Two of the Disclosure
Statement.
CONTRIBUTIONS
When Can I Make Contributions to a Roth IRA?
You may make a contribution to your Roth IRA or establish a new Roth IRA
for a taxable year by the due date (not including any extensions) for your
federal income tax return for the year. Usually this is April 15 of the
following year. For example, you will have until April 15, 1999 to establish and
make a contribution to a Roth IRA for 1998.
Caution: Since Roth IRAs are available starting January 1, 1998, you may
not make a contribution by April 15, 1998 to a Roth IRA for 1997.
How Much Can I Contribute to my Roth IRA?
For each year when you are eligible (see above), you can contribute up to
the lesser of $2,000 or 100% of your compensation (or earned income, if you are
self-employed).
Annual contributions may be made only to a Roth IRA annual contribution
account which does not contain converted or transferred funds from a Regular
IRA.
Your Roth IRA limit is reduced by any contributions for the same year to a
Regular IRA. For example, assuming you have at least $2,000 in compensation or
earned income, if you contribute $500 to your Regular IRA for 1998, your maximum
Roth IRA contribution for 1998 will be $1,500.
If you and your spouse have spousal Roth IRAs, each spouse may contribute
up to $2,000 to his or her Roth IRA for a year as long as the combined
compensation of both spouses for the year (as shown on your joint income tax
return) is at least $4,000. If the combined compensation of both spouses is less
than $4,000, the spouse with the higher amount of compensation may contribute up
to that spouse's compensation amount, or $2,000 if less. The spouse with the
lower compensation amount may contribute any amount up to that spouse's
compensation plus any excess the other spouse's compensation over the other
spouse's Roth IRA contribution. However, the maximum contribution to either
spouse's Roth IRA is $2,000 for the year.
As noted above, the spousal Roth IRA limits are reduced by any
contributions for the same calendar year to a Regular IRA maintained by you or
your spouse.
For taxpayers with high income levels, the contribution limits may be
reduced (see below).
Are Contributions to a Roth IRA Tax Deductible?
Contributions to a Roth IRA are not deductible. This is a major difference
between Roth IRAs and Regular IRAs. Contributions to a Regular IRA may be
deductible on your federal income tax return depending on whether or not you are
an active participant in an employer-sponsored plan and on your income level.
Are the Earnings on my Roth IRA Funds Taxed?
Any dividends on or growth of investments held in your Roth IRA are
generally exempt from federal income taxes and will not be taxed until withdrawn
by you, unless the tax exempt status of your Roth IRA is revoked. If the
withdrawal qualifies as a tax-free withdrawal (see below), amounts reflecting
earnings or growth of assets in your Roth IRA will not be subject to federal
income tax.
Which is Better, a Roth IRA or a Regular IRA?
This will depend upon your individual situation. A Roth IRA may be better
if you are an active participant in an employer-sponsored plan and your adjusted
gross income is too high to make a deductible IRA contribution (but not too high
to make a Roth IRA contribution). Also, the benefits of a Roth IRA vs. a Regular
IRA may depend upon a number of other factors including: your current income tax
bracket vs. your expected income tax bracket when you make withdrawals from your
IRA, whether you expect to be able to make nontaxable withdrawals from your Roth
IRA (see below), how long you expect to leave your contributions in the IRA, how
much you expect the IRA to earn in the meantime, and possible future tax law
changes.
Consult a qualified tax or financial advisor for assistance on this
question.
Are there Any Restrictions on Contributions to my Roth IRA?
Taxpayers with very high income levels may not be able to contribute to a
Roth IRA at all, or their contribution may be limited to an amount less than
$2,000. This depends upon your filing status and the amount of your adjusted
gross income (AGI). The following table shows how the contribution limits are
restricted:
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ROTH IRA CONTRIBUTION LIMITS
- --------------------------------------------------------------------------------
If You Are If You Are Then You May Make
Single Taxpayer Married Filing Jointly
- --------------------------------------------------------------------------------
Up to $95,000 Up to $150,000 Full Contribution
- --------------------------------------------------------------------------------
More thank $95,000 More than $150,000 Reduced Contribution
but less than $110,000 but less than $160,000 (see explanation below)
- --------------------------------------------------------------------------------
$110,000 and up $160,000 and up Zero (No Contribution)
- --------------------------------------------------------------------------------
Note: If you are a married taxpayer filing separately, your maximum Roth
IRA contribution limit phases out over the first $15,000 of adjusted gross
income. If your AGI is $15,000 or more you may not contribute to a Roth IRA for
the year. (Note: Pending legislation in Congress may reduce this number from
$15,000 to $10,000. Consult your tax advisor or the IRS for the latest
developments.)
How do I Calculate my Limit if I Fall in the "Reduced Contribution" Range?
If your AGI falls in the reduced contribution range, you must calculate
your contribution limit. To do this, multiply your normal contribution limit
($2,000 or your compensation if less) by a fraction. The numerator is the amount
by which your AGI exceeds the lower limit of the reduced contribution range
($95,000 if single, or $150,000 if married filing jointly). The denominator is
$15,000 (single taxpayers) or $10,000 (married filing jointly). Subtract this
from your normal limit and then round down to the nearest $10. The contribution
limit is the greater of the amount calculated or $200.
For example, assume that your AGI for the year is $157,555 and you are
married, filing jointly. You would calculate your Roth IRA contribution limit
this way:
1. The amount by which your AGI exceeds the lower limit of the reduced
contribution deductible range:
($157,555-$150,000) = $7,555
2. Divide this by $10,000: $7,555
-------
$10,000 = 0.7555
3. Multiply this by $2,000 (or your compensation for the year, if less):
0.7555 x $2,000 = $1,511
4. Subtract this from your $2,000 limit:
($2,000 - $1,551) = $489
5. Round this down to the nearest $10 = $480
6. Your contribution limit is the greater of this amount or $200.
Remember, your Roth IRA contribution limit of $2,000 is reduced by any
contributions for the same year to a Regular IRA. If you fall in the reduced
contribution range, the reduction formula applies to the Roth IRA contribution
limit left after subtracting your contribution for the year to a Regular IRA.
How Do I Determine My AGI?
AGI is your gross income minus those deductions which are available to all
taxpayers even if they don't itemize. Instructions to calculate your AGI are
provided with your income tax Form 1040 or 1040A.
There are two additional rules when calculating AGI for purposes of Roth
IRA contribution limits. First, if you are making a deductible contribution for
the year to a Regular IRA, your AGI is reduced by the amount of the deduction.
Second, if you are converting a Regular IRA to a Roth IRA in a year (see below),
the amount includable in your income as a result of the conversion is not
considered AGI when computing your Roth IRA contribution limit for the year.
(Note: a bill pending in Congress might affect the first rule -- consult your
tax advisor or the IRS for the latest developments.)
What Happens if I Contribute more than Allowed to my Roth IRA?
The maximum contribution you can make to a Roth IRA generally is $2,000 or
100% of compensation or earned income, whichever is less. As noted above, your
maximum is reduced by the amount of any contribution to a Regular IRA for the
same year and may be further reduced if you have high AGI. Any amount
contributed to the Roth IRA above the maximum is considered an "excess
contribution." An excess contribution is subject to excise tax of 6% for each
year it remains in the Roth IRA.
How can I Correct an Excess Contribution?
Excess contributions may be corrected without paying a 6% penalty. To do
so, you must withdraw the excess and any earnings on the excess before the due
date (including extensions) for filing your federal income tax return for the
year for which you made the excess contribution. Earnings on the amount
withdrawn must also be withdrawn. The earnings must be included in your income
for the tax year for which the contribution was made and may be subject to a 10%
premature withdrawal tax if you have not reached age 59 1/2 (unless an exception
to the 10% penalty tax applies).
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What Happens if I Don't Correct the Excess Contribution by the Tax Return Due
Date?
Any excess contribution withdrawn after the tax return due date (including
any extensions) for the year for which the contribution was made will be subject
to the 6% excise tax. There will be an additional 6% excise tax for each year
the excess remains in your account.
Unless an excess contribution qualifies for the special treatment outlined
above, the excess contribution and any earnings on it withdrawn after tax filing
time will be includable in taxable income and may be subject to a 10% premature
withdrawal penalty.
You may reduce the excess contributions by making a withdrawal equal to
the excess. Earnings need not be withdrawn. To the extent that no earnings are
withdrawn, the withdrawal will not be subject to income taxes or possible
penalties for premature withdrawals before age 59 1/2. Excess contributions may
also be corrected in a subsequent year to the extent that you contribute less
than your Roth IRA contribution limit for the subsequent year. As the prior
excess contribution is reduced or eliminated, the 6% excise tax will become
correspondingly reduced or eliminated for subsequent tax years.
CONVERSION OF EXISTING REGULAR IRA
Can I convert an Existing Regular IRA into a Roth IRA?
Yes, starting in 1998 you can convert an existing Regular IRA into a Roth
IRA if you meet the adjusted gross income (AGI) limits described below.
Conversion may be accomplished either by establishing a Roth IRA and then
transferring the amount in your Regular IRA you wish to convert to the new Roth
IRA. Or, if you want to convert an existing Regular IRA with State Street Bank
as custodian to a Roth IRA, you may give us directions to convert.
You are eligible to convert a Regular IRA to a Roth IRA if, for the year
of the conversion, your AGI is $100,000 or less. The same limit applies to
married and single taxpayers, and the limit is not indexed to cost-of-living
increases. Married taxpayers are eligible to convert a Regular IRA to a Roth IRA
only if they file a joint income tax return; married taxpayers filing separately
are not eligible to convert.
Note: No contributions other than Roth IRA conversion contributions made
during the same tax year may be deposited in a single Roth IRA conversion
account.
Caution: You should be extremely cautious in converting an existing IRA
into a Roth IRA early in a year if there is any possibility that your AGI for
the year will exceed $100,000. Although a bill pending in Congress would permit
you to transfer amounts back to your Regular IRA if your AGI exceeds $100,000,
under the current rules, if you have already converted during a year and you
turn out to have more than $100,000 of AGI, there may be adverse tax results for
you. Consult your tax advisor or the IRS for the latest developments.
What are the Tax Results from Converting?
The taxable amount in your Regular IRA you convert to a Roth IRA will be
considered taxable income on your federal income tax return for the year of the
conversion. All amounts in a Regular IRA are taxable except for your prior
non-deductible contributions to the Regular IRA.
If you make the conversion during 1998, the taxable income is spread over
four years. In other words, you would include one quarter of the taxable amount
on your federal income tax return for 1998, 1999, 2000 and 2001.
Should I convert my Regular IRA to a Roth IRA?
Only you can answer this question, in consultation with your tax or
financial advisors. A number of factors, including the following, may be
relevant. Conversion may be advantageous if you expect to leave the converted
funds on deposit in your Roth IRA for at least five years and to be able to
withdraw the funds under circumstances that will not be taxable (see below). The
benefits of converting will also depend on whether you expect to be in the same
tax bracket when you 14 withdraw from your Roth IRA as you are now. Also,
conversion is based upon an assumption that Congress will not change the tax
rules for withdrawals from Roth IRAs in the future, but his cannot be
guaranteed.
TRANSFERS/ROLLOVERS
Can I Transfer or Roll Over a Distribution I Receive from my Employer's
Retirement Plan into a Roth IRA?
Distributions from qualified employer-sponsored retirement plans or 403(b)
arrangements (for employees of tax-exempt employers) are not eligible for
rollover or direct transfer to a Roth IRA. However, in certain circumstances it
may be possible to make a direct rollover of an eligible distribution to a
Regular IRA and then to convert the Regular
Can I Make a Rollover from my Roth IRA to another Roth IRA?
You may make a rollover from one Roth IRA to another Roth IRA you have or
you establish to receive the rollover. Such a rollover must be completed within
60 days after the withdrawal from your first Roth IRA. After making a rollover
from one Roth IRA to another, you must wait a full year (365 days) before you
can make another such rollover. (However, you can instruct a Roth IRA custodian
to transfer amounts directly to another Roth IRA custodian; such a direct
transfer does not count as a rollover.)
How Do Rollovers Affect my Roth IRA Contribution Limits?
Rollover contributions, if properly made, do not count toward the maximum
contribution. Also, you may make a rollover from one Roth IRA to another even
during a year when you are not eligible to contribute to a Roth IRA (for
example, because your AGI for that year is too high).
WITHDRAWALS
When can I make withdrawals from my Roth IRA?
You may withdraw from your Roth IRA at any time. If the withdrawal meets
the requirements discussed below, it is tax-free. This means that you pay no
federal income tax even though the withdrawal includes earnings or gains on your
contributions while they were held in your Roth IRA.
When must I start making withdrawals?
There are no rules on when you must start making withdrawals from your
Roth IRA or on a minimum required withdrawal amounts for any particular year
during your lifetime. Unlike Regular IRAs, you are not required to start making
withdrawals from a Roth IRA by the April 1 following the
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year in which you reach age 70 1/2.
After your death, there are IRS rules on the timing and amount of
distributions. In general, the amount in your Roth IRA must be distributed by
the end of the year following teh year of your death that are paid over the life
expectancy of the beneficiary satisfy the rules. Also, if your surviving spouse
is your designated beneficiary, the spouse may defer the start of distribution
until you would have reached age 70 1/2 had you lived.
What are the requirements for a tax-free withdrawal?
To be tax-free, a withdrawal from your Roth IRA must meet two
requirements. First, the Roth IRA must have been open for 5 or more years before
the withdrawal. Second, at least one of the following conditions must be
satisfied:
o You are age 59 1/2 or older when you made the withdrawal.
o The withdrawal is made by your beneficiary after you die.
o You are disabled (as defined in IRS rules) when you make the
withdrawal.
o You are using the withdrawal to cover eligible first time homebuyer
expenses. These are the costs of purchasing, building or rebuilding
a principal residence (including customary settlement, financing or
closing costs). The purchaser may be you, your spouse or a child,
grandchild, parent or grandparent of you or your spouse. An
individual is considered a "first-time homebuyer" if the individual
(or the individual's spouse, if married) did not have an ownership
interest in a principal residence during the two-year period
immediately preceding the acquisition in question. The withdrawal
must be used for eligible expenses within 120 days after the
withdrawal (if there is an unexpected delay, or cancellation of the
home acquisition, a withdrawal may be redeposited as a rollover).
There is a lifetime limit on eligible first-time homebuyer expenses
of $10,000 per individual.
For a Roth IRA that you set up with amounts rolled over or converted from
a Regular IRA, the 5 year period begins with the year in which the conversion or
rollover was made. (Note: a bill pending in Congress might affect this rule --
consult you tax advisor or the IRS for the latest developments.)
For a Roth IRA that you started with a normal contribution, the 5 year
period starts with the year for which you make the initial normal contribution.
How Are Withdrawals From My Roth IRA Taxed if the Tax-Free Requirements are not
Met?
If the qualified withdrawal requirements are not met, a withdrawal
consisting of your own prior contribution amounts to your Roth IRA will not be
considered taxable income in the year you receive it, nor will the 10% penalty
apply. To the extent that the nonqualified withdrawal consists of dividends or
gains while your contributions were held in your Roth IRA, the withdrawal is
includable in your gross income in the taxable year you receive it, and may be
subject to the 10% withdrawal penalty. All amounts withdrawn from your Roth IRA
are considered withdrawals of your contributions until you have withdrawn the
entire amount you have contributed. After that, all amounts withdrawn are
considered taxable withdrawals of dividends and gains.
Note that, for purposes of determining what portion of any distribution is
includable in income, all of your Roth IRA accounts are considered as one single
account. Amounts withdrawn from any one Roth IRA account are deemed to be
withdrawn from contributions first. Since all your Roth IRAs are considered to
be one account for this purpose, withdrawals from Roth IRA accounts are not
considered to be from earnings or interest until an amount equal to all
contributions made to all of an individual's Roth IRA accounts is withdrawn. The
following example illustrates this:
A single individual contributes $1,000 a year to his State Street Bank and
Trust Company Roth IRA account and $1,000 a year to the Brand X Roth IRA account
over a period of ten years. At the end of 10 years his account balances are as
follows:
- --------------------------------------------------------------------------------
Principal Contributions Earnings
- --------------------------------------------------------------------------------
State Street Bank Roth IRA $10,000 $10,000
- --------------------------------------------------------------------------------
Brand X Roth IRA $10,000 $10,000
- --------------------------------------------------------------------------------
Total $20,000 $20,000
- --------------------------------------------------------------------------------
At the end of 10 years, this person has $40,000 in both Roth IRA accounts,
of which $20,000 represents his contributions (aggregated) and $20,000
represents his earnings (aggregated). This individual, who is 40, withdraws
$15,000 from his Brand X Roth IRA (not a qualified withdrawal). We look to the
aggregate amount of all principal contributions - in this case $20,000 - to
determine if the withdrawal is from contributions, and thus non-taxable. In this
example, there is no ($0) taxable income as a result of this withdrawal because
the $15,000 withdrawal is less than the total amount of aggregated contributions
($20,000). If this individual then withdrew $15,000 from his State Street Bank
Roth IRA, $5,000 would not be taxable (the remaining aggregate contributions)
and $10,000 would be treated as taxable income for the year of the withdrawal,
subject to regular income taxes and the 10% premature withdrawal penalty (unless
an exception applies).
Note: If passed, a bill currently pending in Congress will change the
rules and the results discussed above. Under the proposed legislation, in
general, separate Roth IRAs established for annual contributions and conversions
for separate years are not aggregated as explained above to determine the tax on
withdrawals. See your tax advisor for more information and the latest
developments.
Taxable withdrawals of dividends and gains from a Roth IRA are treated as
ordinary income. Withdrawals of taxable amounts from a Roth IRA are not eligible
for averaging treatment currently available to certain lump sum distributions
from qualified employer-sponsored retirement plans, nor are such
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withdrawals eligible for taxable gains tax treatment.
Your receipt of any taxable withdrawal from your Roth IRA before you
attain age 59 1/2 generally will be considered as an early withdrawal and
subject to a 10% penalty tax.
The 10% penalty tax for early withdrawal will not apply if any of the
following exceptions applies:
- The withdrawal was a result of your death or disability.
- The withdrawal is one of a scheduled series of substantially equal
periodic payments for your life or life expectancy (or the joint lives or
life expectancies of you and your beneficiary).
If there is an adjustment to the scheduled series of payments, the 10%
penalty tax will apply. For example, if you begin receiving payments at
age 50 under a withdrawal program providing for substantially equal
payments over your life expectancy, and at age 58 you elect to withdraw
the remaining amount in your Roth IRA in a lump-sum, the 10% penalty tax
will apply to the lump sum and to the amounts previously paid to you
before age 59 1/2 to the extent they were includable in your taxable
income.
- The withdrawal is used to pay eligible higher education expenses. These
are expenses for tuition, fees, books, and supplies required to attend an
institution for post-secondary education. Room and board expenses are also
eligible for a student attending at least half-time. The student may be
you, your spouse, or your child or grandchild. However, expenses that are
paid for with a scholarship or other educational assistance payment are
not eligible expenses.
- The withdrawal is used to cover eligible first time homebuyer expenses
(as described above in the discussion of tax-free withdrawals).
- The withdrawal does not exceed the amount of your deductible medical
expenses for the year (generally speaking, medical expenses paid during a
year are deductible if they are greater than 7.5% of your adjusted gross
income for that year).
- The withdrawal does not exceed the amount you paid for health insurance
coverage for yourself, your spouse and dependents. This exception applies
only if you have been unemployed and received federal or state
unemployment compensation payments for at least 12 weeks; this exception
applies to distributions during the year in which you received the
unemployment compensation and during the following year, but not to any
distributions received after you have been reemployed for at least 60
days.
What About the 15 percent Penalty Tax?
The rule imposing a 15% penalty tax on very large withdrawals from
tax-favored arrangements (including IRAs, 403(b) arrangements and qualified
employer-sponsored plans), or on excess amounts remaining in such tax-favored
arrangements at your death, has been repealed. This 15% tax no longer applies.
Important: The discussion of the tax rules for Roth IRAs in this Disclosure
Statement is based upon the best available information. However, Roth IRAs are
new under the tax laws, and the IRS has not issued regulations or rulings on the
operation and tax treatment of Roth IRA accounts. Also, if enacted, legislation
now pending in Congress will change some of the rules. Therefore, you should
consult your tax advisor for the latest developments or for advice about how
maintaining a Roth IRA will affect your personal tax or financial situation.
Also, please see Part Three below which contains important information
applicable to all State Street Bank and Trust Company IRAs.
Part Three: Rules for All IRAs (Regular and Roth)
GENERAL INFORMATION
IRA Requirements
All IRAs must meet certain requirements. Contributions generally must be
made in cash. The IRA trustee or custodian must be a bank or other person who
has been approved by the Secretary of the Treasury. Your contributions may not
be invested in life insurance or collectibles or be commingled with other
property except in a common trust or investment fund. Your interest in the
account must be nonforfeitable at all times. You may obtain further information
on IRAs from any district office of the Internal Revenue Service.
May I Revoke My IRA?
You may revoke a newly established Regular or Roth IRA at any time within
seven days after the date on which you receive this Disclosure Statement. A
Regular or Roth IRA established more than seven days after the date of your
receipt of this Disclosure Statement may not be revoked.
To revoke your Regular or Roth IRA, mail or deliver a written notice of
revocation to the Custodian at the address which appears at the end of this
Disclosure Statement. Mailed notice will be deemed given on the date that it is
postmarked (or, if sent by certified or registered mail, on the date of
certification or registration). If you revoke your Regular or Roth IRA within
the seven-day period, you are entitled to a return of the entire amount you
originally contributed into your Regular or Roth IRA, without adjustment for
such items as sales charges, administrative expenses or fluctuations in market
value.
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INVESTMENTS
How Are My IRA Contributions Invested?
You control the investment and reinvestment of contributions to your
Regular or Roth IRA. Investments must be in one or more of the Fund(s) available
from time to time as listed in the Adoption Agreement for your Regular or Roth
IRA or in an investment selection form provided with your Adoption Agreement or
from the Fund Distributor or Service Company. You direct the investment of your
IRA by giving your investment instructions to the Distributor or Service Company
for the Fund(s). Since you control the investment of your Regular or Roth IRA,
you are responsible for any losses; neither the Custodian, the Distributor nor
the Service Company has any responsibility for any loss or diminution in value
occasioned by your exercise of investment control. Transactions for your Regular
or Roth IRA will generally be at the applicable public offering price or net
asset value for shares of the Fund(s) involved next established after the
Distributor or the Service Company (whichever may apply) receives proper
investment instructions from you; consult the current prospectus for the Fund(s)
involved for additional information.
Before making any investment, read carefully the current prospectus for
any Fund you are considering as an investment for your Regular IRA or Roth IRA.
The prospectus will contain information about the Fund's investment objectives
and policies, as well as any minimum initial investment or minimum balance
requirements and any sales, redemption or other charges.
Because you control the selection of investments for your Regular or Roth
IRA and because mutual fund shares fluctuate in value, the growth in value of
your Regular or Roth IRA cannot be guaranteed or projected.
Are There Any Restrictions on the Use of my IRA Assets?
The tax-exempt status of your Regular or Roth IRA will be revoked if you
engage in any of the prohibited transactions listed in Section 4975 of the tax
code. Upon such revocation, your Regular or Roth IRA is treated as distributing
its assets to you. The taxable portion of the amount in your IRA will be subject
to income tax (unless, in the case of a Roth IRA, the requirements for a
tax-free withdrawal are satisfied). Also, you may be subject to a 10% penalty
tax on the taxable amount as a premature withdrawal if you have not yet reached
the age of 59 1/2.
Any investment in a collectible (for example, rare stamps) by your Regular
or Roth IRA is treated as a withdrawal; the only exception involves certain
types of government-sponsored coins or certain types of precious metal bullion.
What Is A Prohibited Transaction?
Generally, a prohibited transaction is any improper use of the assets in
your Regular or Roth IRA. Some examples of prohibited transactions are:
- Direct or indirect sale or exchange of property between you and your
Regular or Roth IRA.
- Transfer of any property from your Regular or Roth IRA to yourself or
from yourself to your Regular or Roth IRA.
Your Regular or Roth IRA could lose its tax exempt status if you use all
or part of your interest in your Regular or Roth IRA as security for a loan or
borrow any money from your Regular or Roth IRA. Any portion of your Regular or
Roth IRA used as security for a loan will be treated as a distribution in the
year in which the money is borrowed. This amount may be taxable and you may also
be subject to the 10% premature withdrawal penalty on the taxable amount.
FEES AND EXPENSES
Custodian's Fees
A $10.00 annual maintenance fee per account, per investment selection,
will be billed. The maximum fee per annum will not exceed $20.00 per social
security number.
General Fee Policies
= Fees may be paid by you directly, or the Custodian may deduct them from your
Regular or Roth IRA.
= Fees may be changed upon 30 days written notice to you.
= The full annual maintenance fee will be charged for any calendar year during
which you have a Regular or Roth IRA with us. This fee is not prorated for
periods of less than one full year.
= The Custodian may charge you for its reasonable expenses for services not
covered by its fee schedule.
Other Charges
= There may be sales or other charges associated with the purchase or redemption
of shares of a Fund in which your Regular IRA or Roth IRA is invested. Before
investing, be sure to read carefully the current prospectus of any Fund you are
considering as an investment for your Regular IRA or Roth IRA for a description
of applicable charges.
TAX MATTERS
What IRA Reports does the Custodian Issue?
The Custodian will report all withdrawals to the IRS and the recipient on
the appropriate form. For reporting purposes, a direct transfer of assets to a
successor custodian or trustee is not considered a withdrawal.
The Custodian will report to the IRS the year-end value of your account
and the amount of any rollover (including conversions of a Regular IRA to
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a Roth IRA) or regular contribution made during a calendar year, as well as the
tax year for which a contribution is made. Unless the Custodian receives an
indication from you to the contrary, it will treat any amount as a contribution
for the tax year in which it is received. It is most important that a
contribution between January and April 15th for the prior year be clearly
designated as such.
What Tax Information Must I Report to the IRS?
You must file Form 5329 with the IRS for each taxable year for which you
made an excess contribution or you take a premature withdrawal that is subject
to the 10% penalty tax, or you withdraw less than the minimum amount required
from your Regular IRA. If your beneficiary fails to make required minimum
withdrawals from your Regular or Roth IRA after your death, your beneficiary may
be subject to an excise tax and be required to file Form 5329.
For Regular IRAs, you must also report each nondeductible contribution to
the IRS by designating it a nondeductible contribution on your tax return. Use
Form 8606. In addition, for any year in which you make a nondeductible
contribution or take a withdrawal, you must include additional information on
your tax return. The information required includes: (1) the amount of your
nondeductible contributions for that year; (2) the amount of withdrawals from
Regular IRAs in that year; (3) the amount by which your total nondeductible
contributions for all the years exceed the total amount of your distributions
previously excluded from gross income; and (4) the total value of all your
Regular IRAs as of the end of the year. If you fail to report any of this
information, the IRS will assume that all your contributions were deductible.
This will result in the taxation of the portion of your withdrawals that should
be treated as a nontaxable return of your nondeductible contributions.
Which Withdrawals Are Subject to Withholding?
Roth IRA
Federal income tax will be withheld at a flat rate of 10% of any taxable
withdrawal from your Roth IRA, unless you elect not to have tax withheld.
Withdrawals from a Roth IRA are not subject to the mandatory 20% income tax
withholding that applies to most distributions from qualified plans or 403(b)
accounts that are not directly rolled over to another plan or IRA.
Regular IRA
Federal income tax will be withheld at a flat rate of 10% from any
withdrawal from your Regular IRA, unless you elect not to have tax withheld.
Withdrawals from a Regular IRA are not subject to the mandatory 20% income tax
withholding that applies to most distributions from qualified plans or 403(b)
accounts that are not directly rolled over to another plan or IRA.
ACCOUNT TERMINATION
You may terminate your Regular IRA or Roth IRA at any time after its
establishment by sending a completed withdrawal form (or other withdrawal
instructions in a form acceptable to the Custodian), or a transfer authorization
form, to:
STATE STREET BANK AND TRUST COMPANY
P.O. BOX 8505
BOSTON, MA 02266-8505
Your Regular IRA or Roth IRA with State Street Bank will terminate upon
the first to occur of the following:
- The date your properly executed withdrawal form or instructions (as
described above) withdrawing your total Regular IRA or Roth IRA balance is
received and accepted by the Custodian or, if later, the termination date
specified in the withdrawal form.
- The date the Regular IRA or Roth IRA ceases to qualify under the tax
code. This will be deemed a termination.
- The transfer of the Regular IRA or Roth IRA to another
custodian/trustee.
- The rollover of the amounts in the Regular IRA or Roth IRA to another
custodian/trustee.
Any outstanding fees must be received prior to such a termination of your
account.
The amount you receive from your IRA upon termination of the account will
be treated as a withdrawal, and thus the rules relating to Regular IRA or Roth
IRA withdrawals will apply. For example, if the IRA is terminated before you
reach age 59 1/2, the 10% early withdrawal penalty may apply to the taxable
amount you receive.
IRA DOCUMENTS
Regular IRA
The terms contained in Articles I to VII of Part One of the State Street
Bank and Trust Company Universal Individual Retirement Custodial Account
document have been promulgated by the IRS in Form 5305-A for use in establishing
a Regular IRA Custodial Account that meets the requirements of Code Section
408(a) for a valid Regular IRA. This IRS approval relates only to the form of
Articles I to VII and is not an approval of the merits of the Regular IRA or of
any investment permitted by the Regular IRA.
Roth IRA
The terms contained in Articles I to VII of Part Two of the State Street
Bank and Trust Company Universal Individual Retirement Account Custodial
Agreement have been promulgated by the IRS in Form 5305-RA for use in
establishing a Roth IRA Custodial Account that meets the requirements of Code
Section 408A for a valid Roth IRA. This IRS approval relates only to the form of
Articles I to VII and is not an approval of the merits of the Roth IRA
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or of any investment permitted by the Roth IRA.
Based on our legal advice relating to current tax laws and IRS meetings,
State Street Bank believes that the use of a Universal Individual Retirement
Account Information Kit such as this, containing information and documents for
both a Regular IRA or a Roth IRA, will be acceptable to the IRS. However, if the
IRS makes a ruling, or if Congress enacts legislation, regarding the use of
different documentation, State Street Bank will forward to you new documentation
for your Regular IRA or a Roth IRA (as appropriate) for you to read and, if
necessary, an appropriate new Adoption Agreement to sign. By adopting a Regular
IRA or a Roth IRA using these materials, you acknowledge this possibility and
agree to this procedure if necessary. In all cases, to the extent permitted
State Street Bank will treat your IRA as being opened on the date your account
was opened using the Adoption Agreement in this Kit.
ADDITIONAL INFORMATION
For additional information you may write to the following address or call
the following telephone number.
ZWEIG/EUCLID MUTUAL FUNDS
900 THIRD AVENUE
31ST FLOOR
NEW YORK, NY 10022
1-800-272-2700
State Street Bank and Trust Company Universal Individual Retirement
Account Custodial Agreement
Part One: Provisions applicable to Regular IRAs Provisions
The following provisions of Articles I to VII are in the form promulgated by the
Internal Revenue Service in Form 5305-A for use in establishing an individual
retirement custodial account.
Article I.
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c)(but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993 include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8) or 408(d)(3) of the Code or an
employer contribution to a simplified employee pension plan as described in
section 408(k).
Article II.
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
Article III.
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5) of the Code).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m) except as otherwise permitted by section 408(m)(3)
which provides an exception for certain gold and silver coins and coins issued
under the laws of any state.
Article IV.
1. Notwithstanding any provisions of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to
begin to the Depositor under paragraph 3, or to the surviving spouse under
paragraph 4, other than in the case of a life annuity, life expectancies shall
be recalculated annually. Such election shall be irrevocable as to the Depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or
begin to be, distributed by the Depositor's required beginning date, the April 1
following the calendar year end in which the Depositor reaches age 70 1/2. By
that date, the Depositor may elect, in a manner acceptable to the
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Custodian, to have the balance in the custodial account distributed in:
(a) A single-sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the
Depositor.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated
beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor
expectancy of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her
interest has begun, distribution must continue to be made in
accordance with paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election
of the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over
the life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following
the year of the Depositor's death. If, however, the
beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of
the year in which the Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on
the Depositor's required beginning date, even though payments may
actually have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving
spouse, no additional cash contributions or rollover contributions
may be accepted in the account.
5. In the case of distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment for
each year, divide the Depositor's entire interest in the custodial account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy of
the Depositor and the Depositor's designated beneficiary, or the life expectancy
of the designated beneficiary, whichever applies.) In the case of distributions
under paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and designated
beneficiary as of their birthdays in the year the Depositor reaches age 70 1/.
In the case of a distribution in accordance with paragraph 4(b)(ii), determine
life expectancy using the attained age of the designated beneficiary as of the
beneficiary's birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
Article V.
1. The Depositor agrees to provide the Custodian with information
necessary for the Custodian to prepare any reports required under section 408(i)
and Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor as prescribed by the Internal Revenue Service.
Article VI.
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and the related
regulations will be invalid.
Article VII.
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the persons whose signatures appear on the Adoption
Agreement.
Part Two: Provisions applicable to Roth IRAs
Article I
1. If this Roth IRA is not designated as a Roth Conversion IRA, then,
except in the case of a rollover contribution described in section 408A(e),
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the Custodian will accept only cash contributions and only up to a maximum
amount of $2,000 for any tax year of the Depositor.
2. If this Roth IRA is designated as a Roth Conversion IRA, no
contributions other than IRA Conversion Contributions made during the same tax
year will be accepted.
Article IA
The $2,000 limit described in Article I is gradually reduced to $0 between
certain levels of adjusted gross income (AGI). For a single Depositor, the
$2,000 annual contribution is phased out between AGI of $95,000 and $110,000;
for a married Depositor who files jointly, between AGI of $150,000 and $160,000;
and for a married Depositor who files separately, between $0 and $10,000. In
case of a conversion, the Custodian will not accept IRA Conversion Contributions
in a tax year if the Depositor's AGI for that tax year exceeds $100,000 or if
the Depositor is married and files a separate return. Adjusted gross income is
defined in section 408A(c)(3) and does not include IRA Conversion Contributions.
Article II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
Article III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m)) except as otherwise permitted by section
408(m)(3), which provides an exception for certain gold, silver, and platinum
coins, coins issued under the laws of any state, and certain bullion.
Article IV
1. If the Depositor dies before his or her entire interest is distributed
to him or her and the Depositor's surviving spouse is not the sole beneficiary,
the entire remaining interest will, at the election of the Depositor or, if the
Depositor has not so elected, at the election of the beneficiary or
beneficiaries, either:
(a) Be distributed by December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(b) Be distributed over the life expectancy of the designated
beneficiary starting no later than December 31 of the year following
the year of the Depositor's death.
If distributions do not begin by the date described in (b), distribution
method (a) will apply.
2. In the case of distribution method 1(b) above, to determine the minimum
annual payment for each year, divide the Depositor's entire interest in the
trust as of the close of business on December 31 of the preceding year by the
life expectancy of the designated beneficiary using the attained age of the
designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence and subtract 1 for each subsequent year.
3. If the Depositor's spouse is the sole beneficiary on the Depositor's
date of death, such spouse will then be treated as the Depositor.
Article V
1. The Depositor agrees to provide the Custodian with information
necessary for the Custodian to prepare any reports required under sections
408(i) and 408A(d)(3)(E), and Regulations section 1.408-5 and 1.408-6, and under
guidance published by the Internal Revenue Service.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor as prescribed by the Internal Revenue Service.
Article VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through IV and this sentence will be controlling. Any
additional articles that are not consistent with section 408A, the related
regulations, and other published guidance will be invalid.
Article VII
This agreement will be amended from time to time to comply with the
provisions of the Code, related regulations, and other published guidance. Other
amendments may be made with the consent of the persons whose signatures appear
below.
Part Three: Provisions applicable to both Regular IRAs and Roth IRAs
Article VIII.
1. As used in this Article VIII the following terms have the following
meanings: "Account" or "Custodial Account" means the individual retirement
account established using the terms of either Part One or Part Two and, in
either event, Part Three of this State Street Bank and Trust Company Universal
Individual Retirement Account Custodial Agreement and the Adoption Agreement
signed by the Depositor. The Account may be a Regular Individual Retirement
Account or a Roth Individual Retirement Account, as specified by the Depositor.
See Section 24 below.
"Custodian" means State Street Bank and Trust Company.
"Fund" means any registered investment company which is advised, sponsored
or distributed by Sponsor or its affiliates; provided, however, that such a
mutual fund or registered investment company must be legally offered for sale in
the state of the Depositor's residence.
"Distributor" means the entity which has a contract with the Fund(s) to
serve as distributor of the shares of such Fund(s). In any case where there is
no Distributor, the duties assigned hereunder to the Distributor may be
performed by the Fund(s) or by an entity that has a contract to perform
management or investment advisory services for the Fund(s).
"Service Company" means any entity employed by the Custodian or the
Distributor, including the transfer agent for the Fund(s), to perform various
administrative duties of either the Custodian or the Distributor.
In any case where there is no Service Company, the duties assigned
hereunder to the Service Company will be performed by the Distributor (if any)
or by an entity specified in the second preceding paragraph.
"Sponsor" means Zweig/Glaser Advisers.
2. The Depositor may revoke the Custodial Account established hereunder by
mailing or delivering a written notice of revocation to the Custodian within
seven days after the Depositor receives the Disclosure Statement related to the
Custodial Account. Mailed notice is treated as given to the Custodian on date of
the postmark (or on the date of Post Office certification or registration in the
case of notice sent by certified or registered mail). Upon timely revocation,
the Depositor's initial contribution will be returned, without adjustment for
administrative expenses, commissions or sales charges, fluctuations in market
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value or other changes.
The Depositor may certify in the Adoption Agreement that the Depositor
received the Disclosure Statement related to the Custodial Account at least
seven days before the Depositor signed the Adoption Agreement to establish the
Custodial Account, and the Custodian may rely upon such certification.
3. All contributions to the Custodial Account shall be invested and
reinvested in full and fractional shares of one or more Funds. Such investments
shall be made in such proportions and/or in such amounts as Depositor from time
to time in the Adoption Agreement or by other written notice to the Service
Company (in such form as may be acceptable to the Service Company) may direct.
The Service Company shall be responsible for promptly transmitting all
investment directions by the Depositor for the purchase or sale of shares of one
or more Funds hereunder to the Funds' transfer agent for execution. However, if
investment directions with respect to the investment of any contribution
hereunder are not received from the Depositor as required or, if received, are
unclear or incomplete in the opinion of the Service Company, the contribution
will be returned to the Depositor, or will be held uninvested (or invested in a
money market fund if available) pending clarification or completion by the
Depositor, in either case without liability for interest or for loss of income
or appreciation. If any other directions or other orders by the Depositor with
respect to the sale or purchase of shares of one or more Funds for the Custodial
Account are unclear or incomplete in the opinion of the Service Company, the
Service Company will refrain from carrying out such investment directions or
from executng any such sale or purchase, without liability for loss of income or
for appreciation or depreciation of any asset, pending receipt of clarification
or completion from the Depositor.
All investment directions by Depositor will be subject to any minimum
initial or additional investment or minimum balance rules applicable to a Fund
as described in its prospectus.
All dividends and capital gains or other distributions received on the
shares of any Fund held in the Depositor's Account shall be (unless received in
additional shares) reinvested in full and fractional shares of such Fund (or of
any other Fund offered by the Sponsor, if so directed).
4. Subject to the minimum initial or additional investment, minimum
balance and other exchange rules applicable to a Fund, the Depositor may at any
time direct the Service Company to exchange all or a specified portion of the
shares of a Fund in the Depositor's Account for shares and fractional shares of
one or more other Funds. The Depositor shall give such directions by written
notice acceptable to the Service Company, and the Service Company will process
such directions as soon as practicable after receipt thereof (subject to the
second paragraph of Section 3 of this Article VIII).
5. Any purchase or redemption of shares of a Fund for or from the
Depositor's Account will be effected at the public offering price or net asset
value of such Fund (as described in the then effective prospectus for such Fund)
next established after the Service Company has transmitted the Depositor's
investment directions to the transfer agent for the Fund(s).
Any purchase, exchange, transfer or redemption of shares of a Fund for or
from the Depositor's Account will be subject to any applicable sales, redemption
or other charge as described in the then effective prospectus for such Fund.
6. The Service Company shall maintain adequate records of all purchases or
sales of shares of one or more Funds for the Depositor's Custodial Account. Any
account maintained in connection herewith shall be in the name of the Custodian
for the benefit of the Depositor. All assets of the Custodial Account shall be
registered in the name of the Custodian or of a suitable nominee. The books and
records of the Custodian shall show that all such investments are part of the
Custodial Account.
The Custodian shall maintain or cause to be maintained adequate records
reflecting transactions of the Custodial Account. In the discretion of the
Custodian, records maintained by the Service Company with respect to the
Account hereunder will be deemed to satisfy the Custodian's recordkeeping
responsibilities therefor. The Service Company agrees to furnish the Custodian
with any information the Custodian requires to carry out the Custodian's
recordkeeping responsibilities.
7. Neither the Custodian nor any other party providing services to the
Custodial Account will have any responsibility for rendering advice with respect
to the investment and reinvestment of Depositor's Custodial Account, nor shall
such parties be liable for any loss or diminution in value which results from
Depositor's exercise of investment control over his Custodial Account.
Depositor shall have and exercise exclusive responsibility for and control over
the investment of the assets of his Custodial Account, and neither Custodian nor
any other such party shall have any duty to question his directions in that
regard or to advise him regarding the purchase, retention or sale of shares of
one or more Funds for the Custodial Account.
8. The Depositor may in writing appoint an investment advisor with respect
to the Custodial Account on a form acceptable to the Custodian and the Service
Company. The investment advisor's appointment will be in effect until written
notice to the contrary is received by the Custodian and the Service Company.
While an investment advisor's appointment is in effect, the investment advisor
may issue investment directions or may issue orders for the sale or purchase of
shares of one or more Funds to the Service Company, and the Service Company will
be fully protected in carrying out such investment directions or orders to the
same extent as if they had been given by the Depositor.
The Depositor's appointment of any investment advisor will also be deemed
to be instructions to the Custodian and the Service Company to pay such
investment advisor's fees to the investment advisor from the Custodial Account
hereunder without additional authorization by the Depositor or the Custodian.
9. Distribution of the assets of the Custodial Account shall be made at
such time and in such form as Depositor (or the Beneficiary if Depositor is
deceased) shall elect by written order to the Custodian. Depositor acknowledges
that any distribution of a taxable amount from the Custodial Account (except for
distribution on account of Depositor's disability or death, return of an
"excess contribution" referred to in Code Section 4973, or a "rollover" from
this Custodial Account) made earlier than age 59 1/2 may subject Depositor to an
"additional tax on early distributions" under Code Section 72(t) unless an
exception to such additional tax is applicable. For that purpose, Depositor will
be considered disabled if Depositor can prove, as provided in Code Section
72(m)(7), that Depositor is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which can
be expected to result in death or be of long-continued and indefinite duration.
It is the responsibility of the Depositor (or the Beneficiary) by appropriate
distribution instructions to the Custodian to insure that any applicable
distribution requirements of Code Section 401(a)(9) and Article IV above are
met. If the Depositor (or Beneficiary) does not direct the Custodian to make
distributions from the Custodial Account by the time that such distributions are
required to commence in accordance with such distribution requirements, the
Custodian (and Service Company) shall assume that the Depositor (or Beneficiary)
is meeting the minimum distribution requirements from another individual
retirement arrangement maintained by the Depositor (or Beneficiary) and the
Custodian and Service Company shall be fully protected in so doing. The
Depositor (or the Depositor's surviving spouse) may elect to comply with the
distribution requirements in Article IV using the recalculation of life
expectancy method, or may elect that the life expectancy of the Depositor and/or
the Depositor's surviving spouse, as applicable, will not be recalculated; any
such election may be in such form as the Depositor (or surviving spouse)
provides (including the calculation of minimum distribution amounts in
accordance with a method that does not provide for recalculation of the life
expectancy of one or both of the Depositor and surviving spouse and instructions
for withdrawals to the Custodian in accordance with such method).
Notwithstanding paragraph 2 of Article IV, unless an election to have life
expectancies recalculated annually is made by the time distributions are
required to begin, life expectancies shall not be recalculated. Neither the
Custodian nor any other party providing services to the Custodial Account
assumes any responsibility for the tax treatment of any distribution from the
Custodial Account; such responsibility rests solely with the person ordering the
distribution.
10. The Custodian assumes (and shall have) no responsibility to
make any distribution except upon the written order of Depositor (or Beneficiary
if Depositor is deceased) containing such information as the Custodian may
reasonably request. Also, before making any distribution or honoring any
assignment of the Custodial Account, Custodian shall be furnished with any and
all applications, certificates, tax waivers, signature guarantees and other
documents (including proof of any legal representative's authority) deemed
necessary or advisable by Custodian, but Custodian shall not be responsible for
complying with
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any order or instruction which appears on its face to be genuine, or for
refusing to comply if not satisfied it is genuine, and Custodian has no duty of
further inquiry. Any distributions from the Account may be mailed, first-class
postage prepaid, to the last known address of the person who is to receive such
distribution, as shown on the Custodian's records, and such distribution shall
to the extent threof completely discharge the Custodian's liability for such
payment.
11. (a) The term "Beneficiary" means the person or persons designated as
such by the "designating person" (as defined below) on a form acceptable to the
Custodian for use in connection with the Custodial Account, signed by the
designating person, and filed with the Custodian. The form may name
individuals, trusts, estates, or other entities as either primary or contingent
beneficiaries. However, if the designation does not effectively dispose of the
entire Custodial Account as of the time distribution is to commence, the term
"Beneficiary" shall then mean the designating person's estate with respect to
the assets of the Custodial Account not disposed of by the designation form. The
form last accepted by the Custodian before such distribution is to commence,
provided it was received by the Custodian (or deposited in the U.S. Mail or with
a reputable delivery service) during the designating person's lifetime, shall be
controlling and, whether or not fully dispositive of the Custodial Account,
thereupon shall revoke all such forms previously filed by that person. The term
"designating person" means Depositor during his/her lifetime; after Depositor's
death, it also means Depositor's spouse, but only if the spouse elects to treat
the Custodial Account as the spouse's own Custodial Account in accordance with
applicable provisions of the Code.
(b) When and after distributions from the Custodial Account to
Depositor's Beneficiary commence, all rights and obligations assigned to
Depositor hereunder shall inure to, and be enjoyed and exercised by, Beneficiary
instead of Depositor.
12. (a) The Depositor agrees to provide information to the Custodian at
such time and in such manner as may be necessary for the Custodian to prepare
any reports required under Section 408(i) or Section 408A(d)(3)(E) of the Code
and the regulations thereunder or otherwise.
(b) The Custodian or the Service Company will submit reports to the
Internal Revenue Service and the Depositor at such time and manner and
containing such information as is prescribed by the Internal Revenue Service.
(c) The Depositor, Custodian and Service Company shall furnish to
each other such information relevant to the Custodial Account as may be required
under the Code and any regulations issued or forms adopted by the Treasury
Department thereunder or as may otherwise be necessary for the administration
of the Custodial Account.
(d) The Depositor shall file any reports to the Internal Revenue
Service which are required of him by law (including Form 5329), and neither the
Custodian nor Service Company shall have any duty to advise Depositor concerning
or monitor Depositor's compliance with such requirement.
13. (a) Depositor retains the right to amend this Custodial Account
document in any respect at any time, effective on a stated date which shall be
at least 60 days after giving written notice of the amendment (including its
exact terms) to Custodian by registered or certified mail, unless Custodian
waives notice as to such amendment. If the Custodian does not wish to continue
serving as such under this Custodial Account document as so amended, it may
resign in accordance with Section 17 below.
(b) Depositor delegates to the Custodian the Depositor's right so to
amend, provided (i) the Custodian does not change the investments available
under this Custodial Agreement and (ii) the Custodian amends in the same manner
all agreements comparable to this one, having the same Custodian, permitting
comparable investments, and under which such power has been delegated to it;
this includes the power to amend retroactively if necessary or appropriate in
the opinion of the Custodian in order to conform this Custodial Account to
pertinent provisions of the Code and other laws or successor provisions of law,
or to obtain a governmental ruling that such requirements are met, to adopt a
prototype or master form of agreement in substitution for this Agreement, or as
otherwise may be advisable in the opinion of the Custodian. Such an amendment
by the Custodian shall be communicated in writing to Depositor, and Depositor
shall be deemed to have consented thereto unless, within 30 days after such
communication to Depositor is mailed, Depositor either (i) gives Custodian a
written order for a complete distribution or transfer of the Custodial Account,
or (ii) removes the Custodian and appoints a successor under Section 17 below.
Pending the adoption of any amendment necessary or desirable to
conform this Custodial Account document to the requirements of any amendment to
any applicable provision of the Internal Revenue Code or regulations or rulings
thereunder, the Custodian and the Service Company may operate the Depositor's
Custodial Account in accordance with such requirements to the extent that the
Custodian and/or the Service Company deem necessary to preserve the tax benefits
of the Account.
(c) Notwithstanding the provisions of subsections (a) and (b)
above, no amendment shall increase the responsibilities or duties of Custodian
without its prior written consent.
(d) This Section 13 shall not be construed to restrict the
Custodian's right to substitute fee schedules in the manner provided by Section
16 below, and no such substitution shall be deemed to be an amendment of this
Agreement.
14. (a) Custodian shall terminate the Custodial Account if this
Agreement is terminated or if, within 30 days (or such longer time as Custodian
may agree) after resignation or removal of Custodian under Section 17, Depositor
or Sponsor, as the case may be, has not appointed a successor which has
accepted such appointment. Termination of the Custodial Account shall be
effected by distributing all assets thereof in a single payment in cash or in
kind to Depositor, subject to Custodian's right to reserve funds as provided in
Section 17.
(b) Upon termination of the Custodial Account, this custodial
account document shall have no further force and effect (except for Sections
15(f), 17(b) and (c) hereof which shall survive the termination of the Custodial
Account and this document), and Custodian shall be relieved from all further
liability hereunder or with respect to the Custodial Account and all assets
thereof so distributed.
15. (a) In its discretion, the Custodian may appoint one or more
contractors or service providers to carry out any of its functions and may
compensate them from the Custodial Account for expenses attendant to those
functions. In the event of such appointment, all rights and privileges of the
Custodian under this Agreement shall pass through to such contractors or service
providers who shall be entitled to enforce them as if a named party.
(b) The Service Company shall be responsible for receiving all
instructions, notices, forms and remittances from Depositor and for dealing
with or forwarding the same to the transfer agent for the Fund(s).
(c) The parties do not intend to confer any fiduciary duties on
Custodian or Service Company (or any other party providing services to the
Custodial Account), and none shall be implied. Neither shall be liable (or
assumes any responsibility) for the collection of contributions, the proper
amount, time or tax treatment of any contribution to the Custodial Account or
the propriety of any contributions under this Agreement, or the purpose, time,
amount (including any minimum distribution amounts), tax treatment or propriety
of any distribution hereunder, which matters are the sole responsibility of
Depositor and Depositor's Beneficiary.
(d) Not later than 60 days after the close of each calendar year
(or after the Custodian's resignation or removal), the Custodian or Service
Company shall file with Depositor a written report or reports reflecting the
transactions effected by it during such period and the assets of the Custodial
Account at its close. Upon the expiration of 60days after such a report is sent
to Depositor (or Beneficiary), the Custodian or Service Company shall be forever
released and discharged from all liability and accountability to anyone with
respect to transactions shown in or reflected by such report except with respect
to any such acts or transactions as to which Depositor shall have filed written
objections with the Custodian or Service Company within such 60day period.
(e) The Service Company shall deliver, or cause to be delivered, to
Depositor all notices, prospectuses, financial statements and other reports to
shareholders, proxies and proxy soliciting materials relating to the shares of
the Funds(s) credited to the Custodial Account. No shares shall be voted, and no
other action shall be taken pursuant to such documents, except upon receipt of
adequate written instructions from Depositor.
(f) Depositor shall always fully indemnify Service Company,
Distributor, the Fund(s), Sponsor and Custodian and save them harmless from any
and all liability whatsoever which may arise either (i) in connection with this
Agreement and the matters which it contemplates, except that which arises
directly out of the Service Company's, Distributor's, Fund's, Sponsor's or
Custodian's bad faith, gross negligence or willful misconduct, (ii) with respect
to making or failing to make any distribution, other than for failure to make
distribution in accordance with an order therefor
23
<PAGE>
which is in full compliance with Section 10, or (iii) actions taken or omitted
in good faith by such parties. Neither Service Company nor Custodian shall be
obligated or expected to commence or defend any legal action or proceeding in
connection with this Agreement or such matters unless agreed upon by that party
and Depositor, and unless fully indemnified for so doing to that party's
satisfaction.
(g) The Custodian and Service Company shall each be responsible
solely for performance of those duties expressly assigned to it in this
Agreement, and neither assumes any responsibility as to duties assigned to
anyone else hereunder or by operation of law.
(h) The Custodian and Service Company may each conclusively rely
upon and shall be protected in acting upon any written order from Depositor or
Beneficiary, or any investment advisor appointed under Section 8, or any other
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed, and so long as it acts in
good faith, in taking or omitting to take any other action in reliance thereon.
In addition, Custodian will carry out the requirements of any apparently valid
court order relating to the Custodial Account and will incur no liability or
responsibility for so doing.
16. (a) The Custodian, in consideration of its services under this
Agreement, shall receive the fees specified on the applicable fee schedule. The
fee schedule originally applicable shall be the one specified in the Adoption
Agreement or Disclosure Statement, as applicable. The Custodian may substitute a
different fee schedule at any time upon 30days' written notice to Depositor. The
Custodian shall also receive reasonable fees for any services not contemplated
by any applicable fee schedule and either deemed by it to be necessary or
desirable or requested by Depositor.
(b) Any income, gift, estate and inheritance taxes and other taxes
of any kind whatsoever, including transfer taxes incurred in connection with the
investment or reinvestment of the assets of the Custodial Account, that may be
levied or assessed in respect to such assets, and all other administrative
expenses incurred by the Custodian in the performance of its duties (including
fees for legal services rendered to it in connection with the Custodial Account)
shall be charged to the Custodial Account. If the Custodian is required to pay
any such amount, the Depositor (or Beneficiary) shall promptly upon notice
thereof reimburse the Custodian.
(c) All such fees and taxes and other administrative expenses
charged to the Custodial Account shall be collected either from the amount of
any contribution or distribution to or from the Account, or (at the option of
the person entitled to collect such amounts) to the extent possible under the
circumstances by the conversion into cash of sufficient shares of one or more
Funds held in the Custodial Account (without liability for any loss incurred
thereby). Notwithstanding the foregoing, the Custodian or Service Company may
make demand upon the Depositor for payment of the amount of such fees, taxes and
other administrative expenses. Fees which remain outstanding after 60 days may
be subject to a collection charge.
17. (a) Upon 30 days' prior written notice to the Custodian, Depositor
or Sponsor, as the case may be, may remove it from its office hereunder. Such
notice, to be effective, shall designate a successor custodian and shall be
accompanied by the successor's written acceptance. The Custodian also may at any
time resign upon 30days' prior written notice to Sponsor, whereupon the Sponsor
shall notify the Depositor (or Beneficiary) and shall appoint a successor to the
Custodian. In connection with its resignation hereunder, the Custodian may, but
is not required to, designate a successor custodian by written notice to the
Sponsor or Depositor (or Beneficiary), and the Sponsor or Depositor (or
Beneficiary) will be deemed to have consented to such successor unless the
Sponsor or Depositor (or Beneficiary) designates a different successor custodian
and provides written notice thereof together with such a different successor's
written acceptance by such date as the Custodian specifies in its original
notice to the Sponsor or Depositor (or Beneficiary) (provided that the Sponsor
or Depositor (or Beneficiary) will have a minimum of 30 days to designate a
different successor).
(b) The successor custodian shall be a bank, insured credit union,
or other person satisfactory to the Secretary of the Treasury under Code Section
408(a)(2). Upon receipt by Custodian of written acceptance by its successor of
such successor's appointment, Custodian shall transfer and pay over to such
successor the assets of the Custodial Account and all records (or copies
thereof) of Custodian pertaining thereto, provided that the successor custodian
agrees not to dispose of any such records without the Custodian's consent.
Custodian is authorized, however, to reserve such sum of money or property as it
may deem advisable for payment of all its fees, compensation, costs, and
expenses, or for payment of any other liabilities constituting a charge on or
against the assets of the Custodial Account or on or against the Custodian, with
any balance of such reserve remaining after the payment of all such items to be
paid over to the successor custodian.
(c) Any Custodian shall not be liable for the acts or omissions of
its predecessor or its successor.
18. References herein to the "Internal Revenue Code" or "Code" and
sections thereof shall mean the same as amended from time to time, including
successors to such sections.
19. Except where otherwise specifically required in this Agreement, any
notice from Custodian to any person provided for in this Agreement shall be
effective if sent by first-class mail to such person at that person's last
address on the Custodian's records.
20. Depositor or Depositor's Beneficiary shall not have the right or power
to anticipate any part of the Custodial Account or to sell, assign, transfer,
pledge or hypothecate any part thereof. The Custodial Account shall not be
liable for the debts of Depositor or Depositor's Beneficiary or subject to any
seizure, attachment, execution or other legal process in respect thereof except
to the extent required by law. At no time shall it be possible for any part of
the assets of the Custodial Account to be used for or diverted to purposes other
than for the exclusive benefit of the Depositor or his/her Beneficiary except to
the extent required by law.
21. When accepted by the Custodian, this Agreement is accepted in and
shall be construed and administered in accordance with the laws of the state
where the principal offices of the Custodian are located. Any action involving
the Custodian brought by any other party must be brought in a state or federal
court in such state.
If in the Adoption Agreement, Depositor designates that the Custodial
Account is a Regular IRA, this Agreement is intended to qualify under Code
Section 408(a) as an individual retirement Custodial Account and to entitle
Depositor to the retirement savings deduction under Code Section 219 if
available. If in the Adoption Agreement Depositor designates that the Custodial
Account is a Roth IRA, this Agreement is intended to qualify under Code Section
408A as a Roth individual retirement Custodial Account and to entitle Depositor
to the tax-free withdrawal of amounts from the Custodial Account to the extent
permitted in such Code section.
If any provision hereof is subject to more than one interpretation or any
term used herein is subject to more than one construction, such ambiguity shall
be resolved in favor of that interpretation or construction which is consistent
with the intent expressed in whichever of the two preceding sentences is
applicable.
However, the Custodian shall not be responsible for whether or not such
intentions are achieved through use of this Agreement, and Depositor is referred
to Depositor's attorney for any such assurances.
22. Depositor should seek advice from Depositor's attorney regarding the
legal consequences (including but not limited to federal and state tax matters)
of entering into this Agreement, contributing to the Custodial Account, and
ordering Custodian to make distributions from the Account. Depositor
acknowledges that Custodian and Service Company (and any company associated
therewith) are prohibited by law from rendering such advice.
23. If any provision of any document governing the Custodial Account
provides for notice, instructions or other communications from one party to
another in writing, to the extent provided for in the procedures of the
Custodian, Service Company or another party, any such notice, instructions or
other communications may be given by telephonic, computer, other electronic or
other means, and the requirement for written notice will be deemed satisfied.
24. The legal documents governing the Custodial Account are as follows:
(a) If in the Adoption Agreement the Depositor designated the Custodial Account
as a Regular IRA under Code Section 408(a), the provisions of Part One
24
<PAGE>
and Part Three of this Agreement and the provisions of the Adoption Agreement
are the legal documents governing the Depositor's Custodial Account.
(b) If in the Adoption Agreement the Depositor designated the Custodial Account
as a Roth IRA under Code Section 408A, the provisions of Part Two and Part Three
of this Agreement and the provisions of the Adoption Agreement are the legal
documents governing the Depositor's Custodial Account.
(c) In the Adoption Agreement the Depositor must designate the Custodian Account
as either a Roth IRA or a Regular IRA, and a separate account will be
established for such IRA. One Custodial Account may not serve as a Roth IRA and
a Regular IRA (through the use of subaccounts or otherwise).
25. Articles I through VII of Part One of this Agreement are in the form
promulgated by the Internal Revenue Service as Form 5305-A. It is anticipated
that, if and when the Internal Revenue Service promulgates changes to Form
5305-A, the Custodian will amend this Agreement correspondingly.
Articles I through VII of Part Two of this Agreement are in the form
promulgated by the Internal Revenue Service as Form 5305-RA. It is anticipated
that, if and when the Internal Revenue Service promulgates changes to Form
5305-RA, the Custodian will amend this Agreement correspondingly.
The Internal Revenue Service has endorsed the use of documentation
permitting a Depositor to establish either a Regular IRA or Roth IRA (but not
both using a single Adoption Agreement), and this Kit complies with the
requirements of the IRS guidance for such use. If the Internal Revenue Service
subsequently determines that such an approach is not permissible, or that the
use of a "combined" Adoption Agreement does not establish a valid Regular IRA or
a Roth IRA (as the case may be), the Custodian will furnish the Depositor with
replacement documents and the Depositor will if necessary sign such replacement
documents. Depositor acknowledge and agrees to such procedures and to cooperate
with Custodian to preserve the intended tax treatment of the Account.
26. If the Depositor maintains an Individual Retirement Account under Code
section 408(a), Depositor may convert or transfer such other IRA to a Roth IRA
under Code section 408A using the terms of this Agreement and the Adoption
Agreement by completing and executing the Adoption Agreement and giving suitable
directions to the Custodian and the custodian or trustee of such other IRA.
Alternatively, the Depositor may convert or transfer such other IRA to a Roth
IRA by use of a reply card or by telephonic, computer or electronic means in
accordance with procedures adopted by the Custodian or Service Company intended
to meet the requirements of Code section 408A, and the Depositor will be deemed
to have executed the Adoption Agreement and adopted the provisions of this
Agreement and the Adoption Agreement in accordance with such procedures.
27. The Depositor acknowledges that he or she has received and read the
current prospectus for each Fund in which his or her Account is invested and the
Individual Retirement Account Disclosure Statement related to the Account. The
Depositor represents under penalties of perjury that his or her Social Security
number (or other Taxpayer Identification Number) as stated in the Adoption
Agreement is correct.
25
<PAGE>
[LOGO] Zweig [LOGO] EUCLID
Mutual Funds MUTUAL FUNDS
900 Third Avenue
New York, NY 10022
1-800-272-2700
or visit us on the World Wide Web.
Our address is http://www.zweig.com
Fund shares are not deposits or obligations of, or insured or guaranteed by,
the U.S. Government, any financial institution, the Federal Deposit Insurance
Corporation, or any other agency, entity or person.
This brochure must be preceded or accompanied by a current prospectus for Zweig
Series Trust or Euclid Mutual Funds. The prospectus contains more complete
information including charges and expenses. Please read it carefully before you
invest or send money.
(C) Zweig Securities Corp. Member NASD.
*This brochure is
printed on recycled paper euclidroth98
Exhibit 14b
Zweig EUCLID
Mutual Funds MUTUAL FUNDS
==================
INSTRUCTIONS
==================
- --------------------------------------------------------------------------------
EMPLOYEE INSTRUCTIONS FOR OPENING YOUR ZWEIG/EUCLID SIMPLE IRA
- --------------------------------------------------------------------------------
These instructions and the forms and materials with the instructions are
suitable ONLY for establishing a SIMPLE IRA to receive contributions under an
employer SIMPLE IRA plan or a rollover or transfer of assets directly from
another SIMPLE IRA.
A SIMPLE IRA is an individual retirement account established by a participant in
an employer SIMPLE IRA plan. Only two types of contributions to a SIMPLE IRA are
permitted.
o Salary reduction contributions by you under your employer's SIMPLE IRA plan
and matching or nonmatching contributions to your account by your employer.
o A rollover or a direct transfer from another SIMPLE IRA established by you
as part of an employer SIMPLE IRA plan that you want to transfer to this
SIMPLE IRA for investments in funds sponsored by ZWEIG OR EUCLID MUTUAL
FUNDS
- --------------------------------------------------------------------------------
PLEASE FOLLOW THESE INSTRUCTIONS IF YOU
WISH TO ESTABLISH A SIMPLE IRA:
- --------------------------------------------------------------------------------
1. Read carefully the SIMPLE IRA Disclosure Statement, the SIMPLE Individual
Retirement Custodial Account document, the Adoption Agreement, and the
prospectus(es) for any Fund(s) you are considering. Consult your lawyer,
accountant, or other tax adviser if you have any questions about how opening a
SIMPLE IRA will affect your financial and tax situation.
In addition to the SIMPLE IRA Disclosure Statement included in these materials,
as part of its SIMPLE IRA plan, your employer should give you a notice
summarizing certain key features of the employer's SIMPLE IRA plan (including
particularly the level of employer contributions) and a summary description
containing more information about the employer's SIMPLE IRA plan. Be sure to
read this information carefully as well.
2. Complete the Adoption Agreement for your SIMPLE IRA
o Complete the participant information in part 1 and 2 of the Adoption
Agreement.
o In Part 3 check the box that shows the type of SIMPLE IRA you are opening.
If you are establishing a SIMPLE IRA account to receive a transfer from
another account under your employer's SIMPLE IRA plan, your employer must
sign in Part 3 to verify the date the first contribution to your other
SIMPLE IRA account was made. This is important for tax reporting purposes.
o Complete Part 4.
o In Part 5, indicate your investment choices. If you have elected as part of
your employer's SIMPLE IRA plan to have contributions to your Zweig/Euclid
Mutual Fund's SIMPLE IRA account transferred to another IRA with a different
trustee or custodian, the contributions will be held in the fund specified
in the Adoption Agreement pending transfer.
o Sign and date the Adoption Agreement at the end.
3. If you are transferring assets directly from an existing SIMPLE IRA with
another investment fund to this IRA, complete the SIMPLE IRA Transfer of Assets
Form.
4. Complete and sign the Designation of Beneficiary.
6. Check to be sure you have properly completed all necessary forms. Your SIMPLE
IRA cannot be accepted without the properly completed documents.
7. Enclose your check.
Send the completed forms and check(s) to:
Zweig/Euclid Mutual Funds
c/o State Street Bank and Trust Company
P.O. Box 8505
Boston, MA 02266-8505
If by courier send to:
Zweig/Euclid Mutual Funds
c/o State Street Bank and Trust Company
2 Heritage Drive, Third Floor
Quincy, MA 02171
- --------------------------------------------------------------------------------
1
<PAGE>
Zweig EUCLID
Mutual Funds MUTUAL FUNDS
=======================
ADOPTION AGREEMENT
=======================
- --------------------------------------------------------------------------------
I, the person signing this Adoption Agreement, establish an Individual
Retirement Account with State Street Bank and Trust Company as custodian, to
operate in conjunction with a SIMPLE IRA plan established by my employer or to
receive a transfer from another SIMPLE IRA. I agree to the terms of my account,
which are contained in the document entitled "State Street Bank and Trust
Company Employee SIMPLE Individual Retirement Custodial Account " and this
Adoption Agreement. My account will be effective upon acceptance by State Street
Bank and Trust Company.
--------------------
1. ACCOUNT NAME BFDS Social Code 762
--------------------
________________________________________________________________________
Name ( last, first, middle)
________________________________________________________________________
Social Security Number
________________________________________________________________________
Date of Birth
2. ADDRESS AND SHAREHOLDER INFORMATION
________________________________________________________________________
Street or P.O. Box
________________________________________________________________________
City, State and Zip code
________________________________________________________________________
Daytime Telephone Number
3. TYPE OF SIMPLE IRA ACCOUNT
Check (a) or (b)
|_| Check here if you are establishing this Account in con-nection with a Simple
IRA plan maintained by your employer.
|_| Check here if this is a transfer from another Simple IRA which was part of a
Simple IRA plan maintained by your employer. Complete the SIMPLE IRA Transfer of
Assets Form and reply to the following questions.
o Amount transferred $__________________
o Date of first contribution to your prior simple IRA__________
o Employer's Signature _______________________________
____________________________________________________
Title
4. EMPLOYER INFORMATION
________________________________________________________________________
Name
________________________________________________________________________
Address
________________________________________________________________________
Address
________________________________________________________________________
City, State, Zip Code
________________________________________________________________________
Employer Tax Identification Number
________________________________________________________________________
Name and Telephone Number of Contact Person at Employer
The Zweig/Euclid Mutual Fund SIMPLE IRA is a Non-DFI (Designated Financial
Institution) Plan. Under a non-DFI plan, each eligible employee establishes a
SIMPLE IRA with the financial institution of his or her choice. Contributions
are transferred by the employer to each eligible employee's SIMPLE IRA. Plase
contact your employer to be sure that a non-DFI plan has been established.
5. INVESTMENT INFORMATION
The minimum investment is $250 per fund. Checks should be made payable to State
Street Bank and Trust Company. Third party checks will not be accepted. Please
be sure to write the fund name(s) and your social security number on the check.
A. Fund Name: _______________________________________________________
|_| Class A |_| Class B |_| Class C
Investment Amount: $ ___________________
B. Fund Name: _______________________________________________________
|_| Class A |_| Class B |_| Class C
Investment Amount: $ ___________________
C. Fund Name: _______________________________________________________
|_| Class A |_| Class B |_| Class C
Investment Amount: $ ___________________
I acknowledge that I have sole responsibility for my investment choices and that
I have received and read a current Zweig Series Trust or Euclid Mutual Funds
prospectus.
(over for signatures please)
- --------------------------------------------------------------------------------
2
<PAGE>
Zweig EUCLID
Mutual Funds MUTUAL FUNDS
=======================
ADOPTION AGREEMENT
Page 2
=======================
- --------------------------------------------------------------------------------
6. DEALERS AND ADVISERS ONLY
If certification below is executed, duplicate statements will be sent to the
address indicated below. Please be sure to enter the correct Financial
Professional Number and Branch Number.
________________________________________________________________________
Financial Professional's Name
________________________________________________________________________
Financial Professional's Number
________________________________________________________________________
Dealer/Adviser's Name
________________________________________________________________________
Dealer/Adviser's Telephone Number
________________________________________________________________________
Dealer/Adviser's Address
________________________________________________________________________
Dealer/Adviser's Branch Number
7. CERTIFICATION AND SIGNATURES
Participant has received and read the "Employee IRA Disclosure Statement"
relating to this Account (including the custodian's fee schedule), the Custodial
Account Document, and the "Instructions" pertaining to this Adoption Agreement.
Participant has also received and read the summary description and notice from
the employer relating to the em-ployer's SIMPLE IRA Plan.
Participant acknowledges receipt of the Custodial Account Document and IRA
Disclosure Statement at least 7 days be-fore the date incribed below and
acknowledges that Participant has no right of revocation.
Participant acknowledges that he/she must provide accurate information in the
Adoption Agreement, and that he/she may incur extra taxes and/or penalties if
the information is not accurate. Accordingly, participant certifies the accuracy
of such information (including particularly the date specified in Item 3(b)
above).
________________________________________________________________________
Signature of Participant Date
8. CUSTODIAN ACCEPTANCE
(to be completed by new custodian)
State Street Bank and Trust Company accepts appointment as Custodian of the
Participant's Account. However, this Agreement is not binding upon the Custodian
until the Participant has received a statement of the transaction. Receipt by
the Participant of a confirmation of the purchase of the fund shares indicated
above will serve as notification of State Street Bank and Trust Company's
acceptance of appointment as Custodian of the Participant's Account.
STATE STREET BANK AND TRUST COMPANY,
CUSTODIAN
________________________________________________________________________
By:
________________________________________________________________________
Date:
ooooo
RETAIN A PHOTOCOPY OF THE COMPLETED
ADOPTION AGREEMENT FOR YOUR RECORDS
ooooo
- --------------------------------------------------------------------------------
3
<PAGE>
Zweig EUCLID
Mutual Funds MUTUAL FUNDS
===========================
SIMPLE IRA
TRANSFER OF ASSETS FORM
===========================
- --------------------------------------------------------------------------------
--------------------
1. ACCOUNT NAME BFDS Social Code 763
--------------------
________________________________________________________________________
Name (last, first, middle)
________________________________________________________________________
Social Security Number
________________________________________________________________________
Date of Birth
2. ADDRESS AND SHAREHOLDER INFORMATION
________________________________________________________________________
Street or P.O. Box
________________________________________________________________________
City, State, and Zip code
________________________________________________________________________
Daytime Telephone Number
3. INFORMATION ABOUT YOUR PRESENT SIMPLE IRA CUSTODIAN OR TRUSTEE
________________________________________________________________________
Name of Institution currently holding your Simple IRA
________________________________________________________________________
Address
________________________________________________________________________
City, State, Zip Code
________________________________________________________________________
Telephone
________________________________________________________________________
Contact person
________________________________________________________________________
Account Number
Please transfer assets of my present SIMPLE IRA to State Street Bank and Trust
Company. All assets should be transferred as cash according to the following
instructions:
|_| Transfer the total amount in my account
|_| Transfer only $________________
4. INVESTMENT INSTRUCTIONS TO STATE STREET
BANK AND TRUST COMPANY (Check one box)
|_| I am opening a new Zweig/Euclid SIMPLE IRA. Attached
is my completed Adoption Agreement.
|_| I already maintain a Zweig/Euclid Simple IRA.
Please list the names of the Zweig or Euclid Mutual Funds into which the
transfer proceeds are to be deposited.
A.Fund Name:
|_| Class A |_| Class B |_| Class C
Investment Amount $ ___________________
Fund Acct. No. (if existing) _________________
B.Fund Name:
|_| Class A |_| Class B |_| Class C
Investment Amount $ ___________________
Fund Acct. No. (if existing) _________________
C.Fund Name:
|_| Class A |_| Class B |_| Class C
Investment Amount $ ___________________
Fund Acct. No. (if existing) _________________
I acknowledge that I have sole responsibility for my investment choices and that
I have received a current prospectus for each Fund I select. Please read the
prospectus(es) of the Fund(s) you select before investing.
5. SIGNATURE OF PARTICIPANT
The undersigned certifies to the present SIMPLE IRA custodian or trustee that
the undersigned has established a successor SIMPLE Individual Retirement
Custodial Account meeting the requirements of Internal Revenue Code Section
408(p) to which assets will be transferred, and certifies to State Street Bank
and Trust Company that the SIMPLE IRA from which assets are being transferred
meets the requirements of Internal Revenue Code Section 408(p).
________________________________________________________________________
Signature of Participant Date
6. SIGNATURE GUARANTEE (only if required by cur-rent SIMPLE IRA Sponsor)
________________________________________________________________________
Signatured guaranteed by:
________________________________________________________________________
Eligible Financial Institution
________________________________________________________________________
Signature of Officer and Title
7. INSTRUCTIONS TO CURRENT CUSTODIAN
Please forward a check as directed in Part 3 made payable to State Street Bank
and Trust company, FBO
________________________________________________________________________
Please include the following reference number on the check:
#________________________________________________________________________
8. ACCEPTANCE BY NEW CUSTODIAN (Completed by State Street Bank and Trust
Company)
State Street Bank and Trust Company agrees to accept transfer of the above
amount for deposit to the Participant's State Street Bank and Trust Company
SIMPLE Individual Retirement Custodial Account, and requests the liquidation and
transfer of assets as indicated above.
Date: ________________________________________________________________________
By: ________________________________________________________________________
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4
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Zweig EUCLID
Mutual Funds MUTUAL FUNDS
==============================
DESIGNATION OF BENEFICIARY
FORM
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Name of Participant ______________________________________________________
As Participant, I hereby make the following designation of beneficiary in
accordance with the State Street Bank and Trust Company Employee SIMPLE
Individual Retirement Custodial Account:
In the event of my death, pay any interest I may have under my Account to the
following Primary Beneficiary or Beneficiaries that survive me. Make payment in
the proportions specified below (or in equal proportions if no proportions are
specified). If any Primary Beneficiary predeceases me, his share is to be
divided among the Primary Beneficiaries who survive me in the relative
proportions assigned to each such surviving Primary Beneficiary.
Primary Beneficiary or Beneficiaries:
Name Relationship Date of Birth Social Security Number Proportion
___________ _______________ ______________ ______________________ __________
___________ _______________ ______________ ______________________ __________
___________ _______________ ______________ ______________________ __________
___________ _______________ ______________ ______________________ __________
If none of the Primary Beneficiaries survives me, pay any interest I may have
under my Account to the following Alternate Beneficiary or Beneficiaries that
survive me. Make payment in the proportions specified below (or in equal
proportions if no proportions are specified). If any Alternate Beneficiary
predeceases me, his share is to be divided among the Alternate Beneficiaries who
survive me in the relative proportions assigned to each such surviving Alternate
Beneficiary.
Alternate Beneficiary or Beneficiaries:
Name Relationship Date of Birth Social Security Number Proportion
___________ _______________ ______________ ______________________ __________
___________ _______________ ______________ ______________________ __________
___________ _______________ ______________ ______________________ __________
___________ _______________ ______________ ______________________ __________
I understand that the beneficiaries named herein may be changed or revoked at
any time by filing a new designation in writing with the Custodian. All forms
must be acceptable to the Custodian and dated and signed by the Participant.
Signature of Participant Date
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IMPORTANT: This Designation of Beneficiary may have important tax or estate
planning effects. Also, if you are married and reside in a community property
state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, or
Washington), you may need to obtain your spouse's consent if you have not
designated your spouse as primary beneficiary for at least half of your Account.
See your lawyer, accountant,or other tax professional for additional information
and advice.
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DISCLOSURE STATEMENT
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IMPORTANT
This disclosure statement describes the rules applicable to SIMPLE Individual
Retirement Accounts. These are IRAs established to operate as part of an
employer SIMPLE IRA plan established by your employer. This disclosure statement
does not describe regular IRAs that you can establish and make contributions to
within IRS limits. State Street Bank and Trust Company, the SIMPLE IRA
Custodian, also has a different kit of materials that may be used to establish a
regular IRA.
Be sure to establish the correct kind of IRA.
SIMPLE IRA PLAN INFORMATION FROM YOUR EMPLOYER
As part of operating a SIMPLE IRA plan, your employer is required to give you
two kinds of information (these may be combined in a single pamphlet or notice).
First, your employer should give you a "summary description" of the main
features of the employer's SIMPLE IRA plan, including information about any
eligibility requirements your employer imposes. This summary description may
include a photocopy of IRS Form 5305-SIMPLE or 5304-SIMPLE as completed by your
employer to establish its SIMPLE IRA plan, or it may be in a different format.
Also, your employer should give you a copy of a notice stating how much the
employer will contribute to participants' SIMPLE IRAs for the plan year.
ESTABLISHING YOUR IRA
This disclosure statement contains information about your SIMPLE Individual
Retirement Custodial Account with State Street Bank and Trust Company as
Custodian. Your IRA gives you several tax benefits. Within IRS limits,
contributions under your employer's SIMPLE IRA plan to your IRA are not taxable
income to you until withdrawn. Earnings on the assets held in your IRA are not
subject to federal income tax until withdrawn by you. State income tax treatment
of your IRA may differ from federal treatment; ask your state tax department or
your personal tax advisor for details.
All IRAs must meet certain requirements. Contributions generally must be made in
cash. The IRA trustee or custodian must be a bank or other person who has been
approved by the Secretary of the Treasury. Your contributions may not be
invested in life insurance or collectibles or be commingled with other property
except in a common trust or investment fund. Your interest in the account must
be nonforfeitable at all times. You may obtain further information on IRAs from
any district office of the Internal Revenue Service.
To the extent required by the IRS under its rules for SIMPLE IRAs, you are
permitted to revoke a newly established IRA at any time within any IRS time
limits. If permitted, to revoke your IRA, mail or deliver a written notice of
revocation to the Custodian at the address which appears at the end of this
Disclosure Statement. Mailed notice will be deemed given on the date that it is
postmarked (or, if sent by certified or registered mail, on the date of
certification or registration). If you revoke your IRA within the seven-day
period, the amount contributed into your IRA will be returned as provided under
the IRS rules.
FEES
A $10.00 annual maintenance fee per account, per investment selection, will be
billed to you or deducted from your account (if not paid properly) by State
Street Bank and Trust Company, as Custodian. The maximum annual maintenance fee
per annum will not exceed $20.00 per social security number.
General Fee Policies
o Fees may be paid by you directly or the Custodian may deduct them from your
IRA.
o Fees may be changed upon 30 days written notice to you.
o The full annual maintenance fee will be charged for any calendar year during
which you have an IRA with us. This fee is not prorated for periods of less
than one full year.
o The Custodian may charge you for its reasonable expenses for services not
covered by its fee schedule.
Other Charges
There may be sales or other charges associated with the purchase or redemption
of shares of a Fund in which your IRA is invested. Be sure to read carefully the
current prospectus of any Fund you are considering as an investment for your IRA
for a description of applicable charges.
ELIGIBILITY
Which employers may have SIMPLE IRA plans?
SIMPLE IRA plans are only for small employers. This is defined as an employer
with 100 or fewer employees in the previous calendar year who had $5,000 or more
in total pay from the employer. (There are certain additional rules; these are
described in the summary description of its SIMPLE IRA plan that your employer
should give you.)
Your employer determines if it is eligible to establish a SIMPLE IRA plan.
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An employer may have a SIMPLE IRA plan only if it has no other retirement plan
at any time when the SIMPLE IRA plan is in operation. "Retirement plans" for
this purpose include profit sharing, 401(k) retirement and other kinds of plans
that receive tax benefits.
Which employees participate in the SIMPLE IRA?
Generally speaking, all of the employer's employees must participate in the
SIMPLE IRA plan. However, the employer may decide to exclude:
o an employee who did not receive at least $5,000 in pay from the employer in
at least two prior calendar years (not necessarily consecutive);
o an employee who is not reasonably expected to receive at least $5,000 in pay
from the employer for the current calendar year;
o union employees, provided that there was good faith bargaining over the
issue of retirement benefits;
o employees who are non-resident aliens and receive no U.S. source income.
The summary description of its SIMPLE IRA plan that your employer should give
you will indicate whether these groups of employees will be included or excluded
from the employer's SIMPLE IRA plan.
CONTRIBUTIONS
Two kinds of contributions are permitted: (i) employee contributions and (ii)
employer contributions, which may be either matching or nonmatching
contributions.
How Much Can I Contribute to my SIMPLE IRA?
If you are an eligible employee, you may elect to have a percentage of your pay
contributed by the employer to your SIMPLE IRA, as long as the amount does not
exceed $6,000 for a calendar year. The $6,000 limit is indexed for future
cost-of-living increases.
You elect the desired percentage of pay to contribute on a salary reduction
agreement (your employer will have a form for you to use). Salary reductions may
be made only from pay you earn after signing the salary reduction agreement.
Your salary reduction contributions must be transferred to your SIMPLE IRA as
soon as the employer can reasonably do so. The outside deadline is the 30th day
of the month following the month when you would have received the pay amount
except for the salary reduction.
How much will my employer contribute?
For each year that it operates its SIMPLE IRA plan, your employer must make
contributions on behalf of participants. The employer may choose either matching
or nonmatching contributions for a particular calendar year.
If the employer makes matching contributions, you must make salary reduction
contributions from your own pay in order to receive pay matching contribution
from your employer. Your employer will match your contributions, dollar for
dollar, up to a cap of 1% to 3% of your pay for the calendar year. Your employer
decides the cap (subject to certain IRS requirements).
If your employer decides to make nonmatching contributions, it must contribute
2% of your pay for the calendar year (provided that you receive $5,000 or more
in pay from the employer for the calendar year). For this purpose only, the pay
is subject to an IRS limit. The limit is $160,000 for 1997 (this amount is
indexed for future cost-of-living changes).
The employer must notify you of the contribution approach it has elected for a
particular calendar year. Employer contributions must be transferred to your
SIMPLE IRA no later than the due date (including any extension) for the employer
to file its federal income tax return for the year.
TRANSFERS/ROLLOVERS
Can I Transfer my Simple IRA to another IRA?
Yes. The IRS rules for SIMPLE IRAs say that you may transfer to another SIMPLE
IRA, or to a regular IRA you have established. However, during the first two
years after your participation in the SIMPLE IRA plan begins, you may transfer
only to another SIMPLE IRA (not a regular IRA).
The transfer rules depend on whether your employer has established its SIMPLE
IRA plan with a "designated financial institution" or not. The summary
description (or other information) provided to you by your employer should
indicate whether your employer's SIMPLE IRA plan uses a designated financial
institution or not).
With a designated financial institution, all contributions are initially paid to
that institution. However, you have the right to elect to have contributions to
your SIMPLE IRA account with the designated financial institution transferred to
another SIMPLE IRA you have established where the contributions will be invested
in accordance with your directions. If your election is made during the 60-day
period when you elect your salary reduction contributions to the plan for a
calendar year, then contributions for that calendar year will be transferred
without a transfer fee or other cost or penalty. Pending transfer from the
designated financial institution to the SIMPLE IRA you have established to
receive transferred contributions, the contributions for you may be invested in
a specified investment, such as a money market fund or a deposit account, and
you will have no choice of investments. Other transfers may be made to another
SIMPLE IRA or regular IRA, but they will be subject to normal fees of the
Custodian as well as to redemption or other charges imposed by the mutual fund
in which contributions are invested (as described in its prospectus). More
information on this subject is found in the summary description of your
employer's SIMPLE IRA plan.
Your employer may decide to operate its SIMPLE IRA plan without a designated
financial institution. In this case, each eligible employee sets up a SIMPLE IRA
with a financial institution of his or her choice. Contributions on your behalf
will be sent to your SIMPLE IRA account, wherever you have set it up, and
invested according to your instructions.
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Can I Make a Regular Rollover from my SIMPLE IRA to another IRA?
You may make a regular rollover from one IRA (including a SIMPLE IRA) to
another. However, such a rollover may be done only once in any 365-day period.
This rule applies to each individual IRA.
INVESTMENTS
How Are Contributions to my SIMPLE IRA Invested?
You control the investment and reinvestment of contributions to this SIMPLE IRA.
Investments must be in one or more of the Fund(s) available from time to time as
listed in the Adoption Agreement for your SIMPLE IRA or in an investment
selection form included with your SIMPLE IRA Adoption Agreement. You direct the
investment of your SIMPLE IRA by giving your investment instructions to the
Distributor or Service Company for the Fund(s). Since you control the investment
of your SIMPLE IRA, you are responsible for any losses; neither the Custodian,
the Distributor nor the Service Company has any responsibility for any loss or
diminution in value occasioned by your exercise of investment control.
Transactions for your SIMPLE IRA will generally be effected at the applicable
public offering price or net asset value for shares of the Fund(s) involved next
established after the Distributor or the Service Company (whichever may apply)
receives proper investment instructions from you; consult the current prospectus
for the Fund(s) involved for additional information.
Before making any investment, read carefully the current prospectus for any Fund
you are considering as an investment for your SIMPLE IRA. The prospectus will
contain information about the Fund's investment objectives and policies, as well
as any minimum initial investment or minimum balance requirements and any sales,
redemption or other charges.
Because you control the selection of investments for your SIMPLE IRA and because
mutual fund shares fluctuate in value, the growth in value of your SIMPLE IRA
cannot be guaranteed or projected.
Are There Any Restrictions on the Use of my SIMPLE IRA Assets?
The tax-exempt status of your SIMPLE IRA will be revoked if you engage in any of
the prohibited transactions listed in Section 4975 of the tax code. The fair
market value of your SIMPLE IRA will be includible in your taxable income in the
year in which such prohibited transaction takes place. The fair market value of
your SIMPLE IRA may also be subject to a penalty tax as a premature withdrawal
if you have not yet reached the age of 59 1/2.
Any investment in a collectible (for example, rare stamps) by your SIMPLE IRA is
treated as a taxable withdrawal; the only exception involves certain types of
government-sponsored coins.
What Is A Prohibited Transaction?
Generally, a prohibited transaction is any improper use of the assets in your
SIMPLE IRA. Some examples of prohibited transactions are:
o Direct or indirect sale or exchange of property between you and your SIMPLE
IRA.
o Transfer of any property from your SIMPLE IRA to yourself or from yourself
to your SIMPLE IRA.
Your SIMPLE IRA could lose its tax exempt status if you use all or part of your
interest in your SIMPLE IRA as security for a loan or borrow any money from your
SIMPLE IRA. Any portion of your SIMPLE IRA used as security for a loan will be
taxed as ordinary income in the year in which the money is borrowed. If you are
under age 59 1/2, this amount will also be subject to a penalty tax as a
premature distribution.
WITHDRAWALS
When can I make withdrawals from my SIMPLE IRA?
You may withdraw from your SIMPLE IRA at any time. However, withdrawals before
age 59 1/2 may be subject to a penalty tax in addition to regular income taxes
(see below).
When must I start making withdrawals?
If you have not withdrawn your entire SIMPLE IRA by the April 1 following the
year in which you reach 70 1/2, you must make minimum withdrawals in order to
avoid penalty taxes. The rule allowing most employees to postpone distributions
from an employer qualified plan until actual retirement (even if this is after
age 70 1/2) does not apply to SIMPLE IRAs.
The minimum withdrawal amount is determined by dividing the balance in your
SIMPLE IRA (for this purpose all your IRAs -SIMPLE IRAs and regular IRAs - are
added together) by your life expectancy or the combined life expectancy of you
and your designated beneficiary. The minimum withdrawal rules are complex.
Consult your tax advisor for assistance.
The penalty tax is 50% of the difference between the minimum withdrawal amount
and your actual withdrawals during a year. The IRS may waive or reduce the
penalty tax if you can show that your failure to make the required minimum
withdrawals was due to reasonable cause and you are taking reasonable steps to
remedy the problem.
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How Are Withdrawals From My SIMPLE IRA Taxed?
Amounts withdrawn by you are includible in your gross income in the taxable year
that you receive them, and are taxable as ordinary income. Lump sum withdrawals
from SIMPLE IRAs are not eligible for averaging treatment currently available to
certain lump sum distributions from qualified employer retirement plans.
Since the purpose of the SIMPLE IRA is to accumulate funds for retirement, your
receipt or use of any portion of your SIMPLE IRA before you attain age 59 1/2
generally will be considered as an early withdrawal and subject to a penalty
tax. For withdrawals from your SIMPLE IRA during the first two years after the
date of the first contribution to your SIMPLE IRA account under your employer's
SIMPLE IRA plan, the penalty is 25% of the amount withdrawn. After that, the
penalty is 10% of the amount withdrawn.
The penalty tax for early withdrawal will not apply if:
o The distribution was a result of your death or disability.
o The distribution is one of a scheduled series of substantially equal
periodic payments for your life or life expectancy (or the joint lives or
life expectancies of you and your beneficiary).
o If there is an adjustment to the scheduled series of payments, the penalty
tax will apply. For example, if you begin receiving payments at age 50 under
a withdrawal program providing for substantially equal payments over your
life expectancy, and at age 58 you elect to receive the remaining amount in
your IRA in a lump-sum, the penalty tax will apply to the lump sum and to
the amounts previously paid to you before age 59 1/2.
o The distribution does not exceed the amount of your deductible medical
expenses for the year (generally speaking, medical expenses paid during a
year are deductible if they are greater than 7 1/2% of your adjusted gross
income for that year), or
o The distribution does not exceed the amount you paid for health insurance
coverage for yourself, your spouse and dependents. This exception applies
only if you have been unemployed and received federal or state unemployment
compensation payments for at least twelve weeks; this exception applies to
distributions during the year in which you received the unemployment
compensation and during the following year, but not to any distributions
received after you have been reemployed for at least 60 days.
In addition, certain taxpayers with very large accumulations in tax-favored
arrangements (including SIMPLE and regular IRAs, 403(b) arrangements and
employer qualified plans) may be subject to a 15% penalty tax (in addition to
regular income taxes) if distributions during a year from all such arrangements
exceed a certain amount. This amount is $160,000 for 1997 (and is indexed for
future cost-of-living changes). Distributions from all tax-favored arrangements
during a year are counted in determining whether any distributions are above the
floor amount and are subject to the 15% penalty tax. There are special rules for
grandfathered amounts and for lump sum distributions from qualified plans. Under
current law, this 15% penalty tax will not apply during calendar years 1997,
1998 and 1999 (however, a related estate tax 15% penalty tax on certain excess
amounts remaining in tax-favored arrangements upon your death continues to apply
during these years). Consult your tax advisor for additional information on
these penalty tax rules.
A loss in your IRA investment may be deductible. You should consult your tax
advisor for further details on the appropriate calculation for this deduction if
applicable.
TAX MATTERS
What IRA Reports does the Custodian Issue?
The Custodian will report all withdrawals to the IRS and the recipient on the
appropriate form. For reporting purposes, a direct transfer of assets to a
successor custodian or trustee is not considered a withdrawal. The Custodian
will report to the IRS the year-end value of your account and the amount of any
contributions made or other transactions during a calendar year.
What Tax Information Must I Report to the IRS?
You must file Form 5329 with the IRS for each taxable year for which you take a
premature withdrawal, or you withdraw less than the required minimum amount from
your SIMPLE IRA.
Are SIMPLE IRA Withdrawals subject to Withholding?
Federal income tax will be withheld at a flat rate of 10% from any withdrawal
from your SIMPLE IRA, unless you elect not to have tax withheld. Withdrawals
from a SIMPLE IRA are not subject to the mandatory 20% income tax withholding
that applies to most distributions from qualified plans or 403(b) accounts that
are not directly rolled over to another plan or IRA.
Are the Earnings on my SIMPLE IRA Funds Taxed?
Any earnings on investments held in your SIMPLE IRA are generally exempt from
federal income taxes and will not be taxed until withdrawn by you, unless the
tax exempt status of your SIMPLE IRA is revoked.
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ACCOUNT TERMINATION
You may terminate your SIMPLE IRA at any time after its establishment by sending
a complete withdrawal form, or a transfer authorization form, to:
STATE STREET BANK AND TRUST COMPANY
P.O. Box 8505
Boston, MA 02266-8505
Your SIMPLE IRA with State Street Bank will terminate upon the first to occur of
the following:
o The date your properly executed withdrawal form (as described above)
withdrawing your total SIMPLE IRA balance is received and accepted by the
Custodian or, if later, the termination date specified in the withdrawal
form.
o The date the SIMPLE IRA ceases to qualify under the tax code. This will be
deemed a termination.
o The transfer of the SIMPLE IRA to another custodian/trustee.
o The rollover of the amounts in the SIMPLE IRA to another custodian/trustee.
Any outstanding fees must be received prior to such a termination of your
account. The amount you receive from your SIMPLE IRA will be treated as a
withdrawal, and thus the rules relating to SIMPLE IRA withdrawals will apply.
For example, if the SIMPLE IRA is terminated before you reach age 59 1/2, the
early withdrawal penalty may apply on the amount you receive.
IRA DOCUMENTS
The terms contained in Articles I to VII of the State Street Bank and Trust
Company Employee SIMPLE Individual Retirement Custodial Account document have
been promulgated by the IRS in Form 5305-SA for use in establishing an IRA
custodial account that meets the requirements of the tax laws for a valid SIMPLE
IRA. This IRS approval relates only to the form of Articles I to VII and is not
an approval of the merits of the SIMPLE IRA or of any investment permitted by
the SIMPLE IRA. See Section 25 of Article VIII of the document for additional
information.
NOTE: The information in this Disclosure Statement reflects the best information
available at the time of preparation. However, SIMPLE IRAs are governed by
new provisions of the Internal Revenue Code and the IRS has not issued
regulations on SIMPLE IRA plans or answered many of the questions about
SIMPLE IRAs. Consult your professional tax adviser or the IRS on any
questions you have about a SIMPLE IRA or about the most recent IRS
developments.
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STATE STREET BANK AND TRUST COMPANY
EMPLOYEE SIMPLE INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
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The following provisions of Articles I to VII are in the form promulgated by
the Internal Revenue Service in Form 5305-SA for use in establishing an
individual retirement custodial account.
Article I.
The custodian will accept cash contributions made on behalf of the
participant by the participant's employer under the terms of a SIMPLE plan
described in section 408(p). In addition, the custodian will accept transfers or
rollovers from other SIMPLE IRAs of the participant. No other contributions will
be accepted by the custodian.
Article II.
The participant's interest in the balance in the custodial account is
nonforfeitable.
Article III.
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5) of the Code).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m) except as otherwise permitted by section 408(m)(3)
which provides an exception for certain gold and silver coins and coins issued
under the laws of any state).
Article IV.
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the participant's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise comply
with section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin
to the participant under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the participant
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The participant's entire interest in the custodial account must be, or
begin to be, distributed by the participant's required beginning date, the April
1 following the calendar year end in which the participant reaches age 70 1/2.
By that date, the participant may elect, in a manner acceptable to the
Custodian, to have the balance in the custodial account distributed in:
(a) A single-sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the participant.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of
the participant and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the participant's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy
of the participant and his or her designated beneficiary.
4. If the participant dies before his or her entire interest is distributed
to him or her, the entire remaining interest will be distributed as follows:
(a) If the participant dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 3.
(b) If the participant dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
participant or, if the participant has not so elected, at the election
of the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the participant's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the year
of the participant's death. If, however, the beneficiary is the
participant's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
participant would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
participant's required beginning date, even though payments may actually
have been made before that date.
(d) If the participant dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment for
each year,
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divide the participant's entire interest in the Custodial account as of the
close of business on December 31 of the preceding year by the life expectancy of
the participant (or the joint life and last survivor expectancy of the
participant and the participant's designated beneficiary, or the life expectancy
of the designated beneficiary, whichever applies.) In the case of distributions
under paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the participant and designated
beneficiary as of their birthdays in the year the Participant reaches age 70
1/2. In the case of a distribution in accordance with paragraph 4(b)(ii),
determine life expectancy using the attained age of the designated beneficiary
as of the beneficiary's birthday in the year distributions are required to
commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
Article V.
1. The participant agrees to provide the Custodian with information
necessary for the Custodian to prepare any reports required under section 408(i)
and Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the participant as prescribed by the Internal Revenue Service.
3. The Custodian also agrees to provide the participant's employer the
summary description described in section 408(l)(2) unless this SIMPLE IRA is a
transfer SIMPLE IRA.
Article VI.
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and 408(p) and
the related regulations will be invalid.
Article VII.
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the persons whose signatures appear on the Adoption
Agreement.
Article VIII.
1. As used in this Article VIII the following terms have the following
meanings:
"Custodian" means State Street Bank and Trust Company.
"Fund" means a mutual fund or registered investment company which is
specified in the Adoption Agreement, or which is designated by the Distributor
named in the Adoption Agreement, as being available as an investment for the
custodial account; provided, however, that such a mutual fund or registered
investment company must be legally offered for sale in the state of the
Participant's residence in order to be a Fund hereunder.
"Distributor" means the entity which has a contract with the Fund(s) to
serve as distributor of the shares of such Fund(s).
In any case where there is no Distributor, the duties assigned hereunder to
the Distributor may be performed by the Fund(s) or by an entity that has a
contract to perform management or investment advisory services for the Fund(s).
"Service Company" means any entity employed by the Custodian or the
Distributor, including the transfer agent for the Fund(s), to perform various
administrative duties of either the Custodian or the Distributor.
In any case where there is no Service Company, the duties assigned hereunder
to the Service Company will be performed by the Distributor (if any) or by an
entity specified in the second preceding paragraph.
2. To the extent required by regulations or rulings pertaining to SIMPLE IRA
accounts under Code Section 408(p), the participant may revoke the custodial
account established hereunder by mailing or delivering a written notice of
revocation to the Custodian within such time limits as may be specified in such
regulations or rulings. Mailed notice is treated as given to the Custodian on
date of the postmark (or on the date of Post Office certification or
registration in the case of notice sent by certified or registered mail). Upon
timely revocation, the participant's initial contribution will be returned as
provided in such regulations or rulings.
3. All contributions to the custodial account shall be invested and
reinvested in full and fractional shares of one or more Funds. Such investments
shall be made in such proportions and/or in such amounts as participant from
time to time in the Adoption Agreement or by other written notice to the Service
Company (in such form as may be acceptable to the Service Company) may direct
(but subject to the provisions of Section 25).
The Service Company shall be responsible for promptly transmitting all
investment directions by the participant for the purchase or sale of shares of
one or more Funds hereunder to the Funds' transfer agent for execution. However,
if investment directions with respect to the investment of any contribution
hereunder are not received from the participant as required or, if received, are
unclear or incomplete in the opinion of the Service Company, the contribution
will be returned to the participant (or the participant's employer) without
liability for interest or for loss of income or appreciation. If any directions
or other orders by the participant with respect to the sale or purchase of
shares of one or more Funds for the custodial account are unclear or incomplete
in the opinion of the Service Company, the Service Company will refrain from
carrying out such investment directions or from executing any such sale or
purchase, without liability for loss of income or for appreciation or
depreciation of any asset, pending receipt of clarification or completion from
the participant.
All investment directions by participant will be subject to any minimum
initial or additional investment or minimum balance rules applicable to a Fund
as described in its prospectus.
All dividends and capital gains or other distributions received on the
shares of any Fund held in the participant's account shall be retained in the
account and (unless received in additional shares) shall be reinvested in full
and fractional shares of such Fund.
4. Subject to the minimum initial or additional investment, minimum balance
and other exchange rules applicable to a Fund, the participant may at any time
12
<PAGE>
direct the Service Company to exchange all or a specified portion of the shares
of a Fund in the participant's account for shares and fractional shares of one
or more other Funds. The participant shall give such directions by written,
telephonic or other form of notice acceptable to the Service Company, and the
Service Company will process such directions as soon as practicable after
receipt thereof (subject to the first and second paragraphs of Section 3 of this
Article VIII).
5. Any purchase or redemption of shares of a Fund for or from the
participant's account will be effected at the public offering price or net asset
value of such Fund (as described in the then effective prospectus for such Fund)
next established after the Service Company has transmitted the participant's
investment directions to the transfer agent for the Fund(s).
Any purchase, exchange, transfer or redemption of shares of a Fund for or
from the participant's account will be subject to any applicable sales,
redemption or other charge as described in the then effective prospectus for
such Fund.
6. The Service Company shall maintain adequate records of all purchases or
sales of shares of one or more Funds for the participant's custodial account.
Any account maintained in connection herewith shall be in the name of the
Custodian for the benefit of the participant. All assets of the custodial
account shall be registered in the name of the Custodian or of a suitable
nominee. The books and records of the Custodian shall show that all such
investments are part of the custodial account.
The Custodian shall maintain or cause to be maintained adequate records
reflecting transactions of the custodial account. In the discretion of the
Custodian, records maintained by the Service Company with respect to the account
hereunder will be deemed to satisfy the Custodian's recordkeeping
responsibilities therefor. The Service Company agrees to furnish the Custodian
with any information the Custodian requires to carry out the Custodian's
recordkeeping responsibilities.
7. Neither the Custodian nor any other party providing services to the
custodial account will have any responsibility for rendering advice with respect
to the investment and reinvestment of participant's custodial account, nor shall
such parties be liable for any loss or diminution in value which results from
participant's exercise of investment control over his custodial account.
Participant shall have and exercise exclusive responsibility for and control
over the investment of the assets of his custodial account, and neither
Custodian nor any other such party shall have any duty to question his
directions in that regard or to advise him regarding the purchase, retention or
sale of shares of one or more Funds for the custodial account.
8. The participant may appoint an investment advisor with respect to the
custodial account on a form acceptable to the Custodian and the Service Company.
The investment advisor's appointment will be in effect until written notice to
the contrary is received by the Custodian and the Service Company. While an
investment advisor's appointment is in effect, the investment advisor may issue
investment directions or may issue orders for the sale or purchase of shares of
one or more Funds to the Service Company, and the Service Company will be fully
protected in carrying out such investment directions or orders to the same
extent as if they had been given by the participant.
The participant's appointment of any investment advisor will also be deemed
to be instructions to the Custodian and the Service Company to pay such
investment advisor's fees to the investment advisor from the custodial account
hereunder without additional authorization by the participant or the Custodian.
9. Distribution of the assets of the custodial account shall be made at such
time and in such form as Participant (or the Beneficiary if participant is
deceased) shall elect by written order to the Custodian (or other form of
instructions acceptable to the Custodian). Participant acknowledges that any
distribution (except for distribution on account of participant's disability or
death, return of an "excess contribution" referred to in Code Section 408(d), or
a "rollover" from this custodial account) made earlier than age 59 1/2 may
subject participant to an "additional tax on early distributions" under Code
Section 72(t). For that purpose, participant will be considered disabled if
participant can prove, as provided in Code Section 72(m)(7), that participant is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or be of long-continued and indefinite duration. It is the responsibility
of the participant (or the Beneficiary) by appropriate distribution instructions
to the Custodian to insure that the distribution requirements of Code Section
401(a)(9) and Article IV above are met. If the participant (or Beneficiary) does
not direct the Custodian to make distributions from the custodial account by the
time that such distributions are required to commence in accordance with such
distribution requirements, the Custodian (and Service Company) shall assume that
the Participant (or Beneficiary) is meeting the minimum distribution
requirements from another individual retirement arrangement maintained by the
participant (or Beneficiary) and the Custodian and Service Company shall be
fully protected in so doing. The participant (or the participant's surviving
spouse) may elect to comply with the distribution requirements in Article IV
using the recalculation of life expectancy method, or may elect that the life
expectancy of the Participant (and/or the participant's surviving spouse) will
not be recalculated; any such election may be in such form as the participant
(or surviving spouse) provides (including the calculation of minimum
distribution amounts in accordance with a method that does not provide for
recalculation of the life expectancy of one or both of the participant and
surviving spouse and instructions to the Custodian in accordance with such
method). Neither Custodian nor any other party providing services to the
custodial account assumes any responsibility for the tax treatment of any
distribution from the custodial account; such responsibility rests solely with
the person ordering the distribution.
10. Custodian assumes (and shall have) no responsibility to make any
distribution except upon the written order (or other acceptable form of
instructions) of participant (or Beneficiary if participant is deceased)
containing such information as the Custodian may reasonably request. Also,
before making any distribution or honoring any assignment of the custodial
account, Custodian shall be furnished with any and all applications,
certificates, tax waivers, signature guarantees and other documents (including
proof of any legal representative's authority) deemed necessary or advisable by
Custodian, but Custodian shall not be responsible for complying with an order
which appears on its face to be genuine, or for refusing to comply if not
satisfied it is genuine, and Custodian has no duty of further inquiry. Any
distributions from the account may be mailed, first-class postage prepaid, to
the last known address of the person who is to receive such distribution, as
shown on the Custodian's records, and such distribuion shall to the extent
thereof completely discharge the Custodian's liability for such payment.
11. (a) The term "Beneficiary" means the person or persons designated as
such by the "designating person" (as defined below) on a form
acceptable to the Custodian for use in connection with the custodial
account, signed by the designating person, and filed with the
Custodian. The form may name individuals, trusts, estates, or other
entities as either primary or contingent beneficiaries. However, if
the designation does not effectively dispose of the entire custodial
account as of the time distribution is to commence, the term
"Beneficiary" shall then mean the designating person's estate with
respect to the assets of the custodial account not disposed of by
the designation form. The form last accepted by the Custodian before
such distribution is to commence, provided it was received by the
Custodian (or deposited in the U.S. Mail or with a delivery service)
during the designating person's lifetime, shall be controlling and,
whether or not fully dispositive of the custodial account, thereupon
shall revoke all such forms previously filed by that person. The
term "designating person" means participant during his/her lifetime;
after participant's death, it also means participant's spouse if the
spouse begins to receive a portion of the custodial account
(pursuant to such a designation by participant) under a form of
distribution permitted by Article IV. A designation by participant's
spouse shall relate solely to the balance remaining in the spouse's
portion of the custodial account after the death of the spouse.
13
<PAGE>
(b) When and after distributions from the custodial account to
participant's Beneficiary commence, all rights and obligations
assigned to participant hereunder shall inure to, and be enjoyed and
exercised by, Beneficiary instead of participant.
12. (a) The participant agrees to provide information to the Custodian at
such time and in such manner as may be necessary for the Custodian
to prepare any reports required under Section 408(i) of the Code and
the regulations thereunder or otherwise.
(b) The Custodian or the Service Company will submit reports to the
Internal Revenue Service and the participant at such time and manner
and containing such information as is prescribed by the Internal
Revenue Service.
(c) The participant, Custodian and Service Company shall furnish to each
other such information relevant to the custodial account as may be
required under the Code and any regulations issued or forms adopted
by the Treasury Department thereunder or as may otherwise be
necessary for the administration of the custodial account.
(d) The participant shall file any reports to the Internal Revenue
Service which are required of him by law (including Form 5329), and
neither the Custodian nor Service Company shall have any duty to
advise participant concerning or monitor participant's compliance
with such requirement.
13. (a) Participant retains the right to amend this custodial account
document in any respect at any time, effective on a stated date
which shall be at least 60 days after giving written notice of the
amendment (including its exact terms) to Custodian by registered or
certified mail, unless Custodian waives notice as to such amendment.
If the Custodian does not wish to continue serving as such under
this custodial account document as so amended, it may resign in
accordance with Section 17 below.
(b) Participant delegates to the Custodian the participant's right so to
amend, provided the Custodian amends in the same manner all
agreements comparable to this one, having the same Custodian,
permitting comparable investments, and under which such power has
been delegated to it; this includes the power to amend retroactively
if necessary or appropriate in the opinion of the Custodian in order
to conform this custodial account to pertinent provisions of the
Code and other laws or successor provisions of law, or to obtain a
governmental ruling that such requirements are met, to adopt a
prototype or master form of agreement in substitution for this
Agreement, or as otherwise may be advisable in the opinion of the
Custodian. Such an amendment by the Custodian shall be communicated
in writing to participant, and participant shall be deemed to have
consented thereto unless, within 30 days after such communication to
participant is mailed, participant either (i) gives Custodian a
written order for a complete distribution or transfer of the
custodial account, or (ii) removes the Custodian and appoints a
successor under Section 17 below.
Pending the adoption of any amendment necessary or desirable to
conform this custodial account document to the requirements of any
amendment to the Internal Revenue Code or regulations or rulings
thereunder, the Custodian and the Service Company may operate the
participant's custodial account in accordance with such requirements
to the extent that the Custodian and/or the Service Company deem
necessary to preserve the tax benefits of the account.
(c) Notwithstanding the provisions of subsections(a) and (b) above, no
amendment shall increase the responsibilities or duties of Custodian
without its prior written consent.
(d) This Section 13 shall not be construed to restrict the Custodian's
right to substitute fee schedules in the manner provided by Section
16 below, and no such substitution shall be deemed to be an
amendment of this Agreement.
14. (a) Custodian shall terminate the custodial account if this
Agreement is terminated or if, within 30 days (or such longer time
as Custodian may agree) after resignation or removal of Custodian
under Section 17, Participant has not appointed a successor which
has accepted such appointment. Termination of the custodial account
shall be effected by distributing all assets thereof in a single
payment in cash or in kind to participant, subject to Custodian's
right to reserve funds as provided in Section 17.
(b) Upon termination of the custodial account, this custodial account
document shall have no further force and effect, and Custodian shall
be relieved from all further liability hereunder or with respect to
the custodial account and all assets thereof so distributed.
15. (a) In its discretion, the Custodian may appoint one or more
contractors or service providers to carry out any of its functions
and may compensate them from the custodial account for expenses
attendant to those functions.
(b) The Service Company shall be responsible for receiving all
instructions, notices, forms and remittances from participant and
for dealing with or forwarding the same to the transfer agent for
the Fund(s).
(c) The parties do not intend to confer any fiduciary duties on
Custodian or Service Company (or any other party providing services
to the custodial account), and none shall be implied. Neither shall
be liable (or assumes any responsibility) for the collection of
contributions, the proper amount, time or deductibility of any
contribution to the custodial account or the propriety of any
contributions under this Agreement, or the purpose, time, amount
(including any minimum distribution amounts) or propriety of any
distribution hereunder, which matters are the responsibility of
participant and participant's Beneficiary.
(d) Not later than 60 days after the close of each calendar year (or
after the Custodian's resignation or removal), or such shorter time
as may be required under applicable regulations or rulings, the
Custodian and Service Company shall each file with participant a
written report or reports reflecting the transactions effected by it
during such period and the assets of the custodial account at its
close. Upon the expiration of 60 days after such a report is sent to
participant (or Beneficiary), the Custodian and Service Company
shall be forever released and discharged from all liability and
accountability to anyone with respect to transactions shown in or
reflected by such report except with respect to any such acts or
transactions as to which Participant shall have filed written
objections with the Custodian or Service Company within such 60 day
period.
(e) The Service Company shall deliver, or cause to be delivered, to
participant all notices, prospectuses, financial statements and
other reports to shareholders, proxies and proxy soliciting
materials relating to the shares of the Funds(s) credited to the
custodial account. No shares shall be voted, and no other action
shall be taken pursuant to such documents, except upon receipt of
adequate written instructions from Participant.
14
<PAGE>
(f) Participant shall always fully indemnify Service Company,
Distributor, the Fund(s) and Custodian and save them harmless from
any and all liability whatsoever which may arise either (i) in
connection with this Agreement and the matters which it
contemplates, except that which arises directly out of the Service
Company's, Distributor's or Custodian's negligence or willful
misconduct, or (ii) with respect to making or failing to make any
distribution, other than for failure to make distribution in
accordance with an order therefor which is in full compliance with
Section 10. Neither Service Company nor Custodian shall be obligated
or expected to commence or defend any legal action or proceeding in
connection with this Agreement or such matters unless agreed upon by
that party and participant, and unless fully indemnified for so
doing to that party's satisfaction.
(g) The Custodian and Service Company shall each be responsible solely
for performance of those duties expressly assigned to it in this
Agreement, and neither assumes any responsibility as to duties
assigned to anyone else hereunder or by operation of law.
(h) Custodian and Service Company may each conclusively rely upon and
shall be protected in acting upon any written order from participant
or Beneficiary, or any investment advisor appointed under Section 8,
or any other notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed, and so long as it acts in good faith, in taking
or omitting to take any other action in reliance thereon. In
addition, Custodian will carry out the requirements of any
apparently valid court order relating to the custodial account and
will incur no liability or responsibility for so doing.
16. (a) The Custodian, in consideration of its services under this
Agreement, shall receive the fees specified on the applicable fee
schedule. The fee schedule originally applicable shall be the one
specified in the Disclosure Statement furnished to the participant.
The Custodian may substitute a different fee schedule at any time
upon 30 days' written notice to participant. The Custodian shall
also receive reasonable fees for any services not contemplated by
any applicable fee schedule and either deemed by it to be necessary
or desirable or requested by participant.
(b) Any income, gift, estate and inheritance taxes and other taxes of
any kind whatsoever, including transfer taxes incurred in connection
with the investment or reinvestment of the assets of the custodial
account, that may be levied or assessed in respect to such assets,
and all other administrative expenses incurred by the Custodian in
the performance of its duties (including fees for legal services
rendered to it in connection with the custodial account) shall be
charged to the custodial account.
(c) All such fees and taxes and other administrative expenses charged to
the custodial account shall be collected either from the amount of
any contribution or distribution to or from the account, or (at the
option of the person entitled to collect such amounts) to the extent
possible under the circumstances by the conversion into cash of
sufficient shares of one or more Funds held in the custodial account
(without liability for any loss incurred thereby). Notwithstanding
the foregoing, the Custodian or Service Company may make demand upon
the Participant for payment of the amount of such fees, taxes and
other administrative expenses. Fees which remain outstanding after
60 days may be subject to a collection charge.
17. (a) Upon 30 days' prior written notice to the Custodian, participant
may remove it from its office hereunder. Such notice, to be
effective, shall designate a successor custodian and shall be
accompanied by the successor's written acceptance. The Custodian
also may at any time resign upon 30 days' prior written notice to
participant, whereupon the participant shall appoint a successor to
the Custodian (provided that, in connection with its resignation,
the Custodian may designate a successor custodian and so notify the
participant, and participant will be deemed to have consented
thereto unless, within 30 days after the date of such notice, the
participant establishes another individual retirement account and
transfers the amount in his account hereunder to such other
individual retirement account).
(b) The successor custodian shall be a bank, insured credit union, or
other person satisfactory to the Secretary of the Treasury under
Code Section 408(a)(2). Upon receipt by Custodian of written
acceptance by its successor of such successor's appointment,
Custodian shall transfer and pay over to such successor the assets
of the custodial account and all records (or copies thereof) of
Custodian pertaining thereto, provided that the successor custodian
agrees not to dispose of any such records without the Custodian's
consent. Custodian is authorized, however, to reserve such sum of
money or property as it may deem advisable for payment of all its
fees, compensation, costs, and expenses, or for payment of any other
liabilities constituting a charge on or against the assets of the
custodial account or on or against the Custodian, with any balance
of such reserve remaining after the payment of all such items to be
paid over to the successor custodian.
(c) Any Custodian shall not be liable for the acts or omissions of its
predecessor or its successor.
18. References herein to the "Internal Revenue Code" or "Code" and sections
thereof shall mean the same as amended from time to time, including successors
to such sections.
19. Except where otherwise specifically required in this Agreement, any
notice from Custodian to any person provided for in this Agreement shall be
effective if sent by first-class mail to such person at that person's last
address on the Custodian's records.
20. Participant or Participant's Beneficiary shall not have the right or
power to anticipate any part of the custodial account or to sell, assign,
transfer, pledge or hypothecate any part thereof. The custodial account shall
not be liable for the debts of participant or participant's Beneficiary or
subject to any seizure, attachment, execution or other legal process in respect
thereof. At no time shall it be possible for any part of the assets of the
custodial account to be used for or diverted to purposes other than for the
exclusive benefit of the participant or his/her Beneficiary.
21. When accepted by the Custodian, this agreement is accepted in and shall
be construed and administered in accordance with the laws of the Commonwealth of
Massachusetts. Any action involving the Custodian brought by any other party
must be brought in a state or federal court in such Commonwealth.
This Agreement is intended to qualify under Code Section 408(a) as an
individual retirement custodial account and to meet the applicable requirements
of Code Section 408(p), and if any provision hereof is subject to more than one
interpretation or any term used herein is subject to more than one construction,
such ambiguity shall be resolved in favor of that interpretation or construction
which is consistent with that intent.
However, Custodian shall not be responsible for whether or not such
intentions are achieved through use of this Agreement, and Participant is
referred to participant's attorney for any such assurances.
22. Participant should seek advice from participant's attorney regarding the
legal consequences (including but not limited to federal and state tax matters)
of entering
15
<PAGE>
into this Agreement, contributions to the custodial account, and ordering
Custodian to make distributions from the account. Participant acknowledges that
Custodian and Service Company (and any company associated therewith) are
prohibited by law from rendering such advice.
23. Articles I through VII of this Agreement are in the form promulgated by
the Internal Revenue Service as Form 5305-SA. It is anticipated that if and when
the Internal Revenue Service promulgates changes to Form 5305-SA, the Custodian
will amend this Agreement correspondingly.
24. The participant acknowledges that he or she has received and read the
current prospectus for each Fund in which his or her account is invested and the
Individual Retirement Account Disclosure Statement related to the Account. The
participant represents under penalties of perjury that his or her Social
Security number (or other Taxpayer Identification Number) as stated in the
Adoption Agreement is correct.
25. (a) At the direction of the participant, the Custodian will transfer
contributions to the participant's custodial account to another individual
retirement account designated by the participant, the custodian or trustee of
which agrees to accept such transfer, or to an individual retirement annuity
contract, the issuer of which agrees to accept such transfer. If such transfer
is made within two years after the date of the first contribution by the
employer to the participant's SIMPLE IRA account under the employer's SIMPLE IRA
plan, the Custodian will have the right to a representation from the successor
custodian or trustee that the successor IRA is a SIMPLE IRA if required under
applicable law.
If the participant's SIMPLE IRA account operates under an employer SIMPLE
IRA plan that uses the "designated financial institution" rules of Code Section
408(p), the rules in this paragraph will apply. Any transfer instructions by the
participant must be filed with and received by the Custodian during the
following 60-day period. For contributions for the calendar year in which the
employer first establishes its SIMPLE IRA plan, the 60-day period designated by
the employer during which eligible employees (including the participant) may
make salary reduction elections with respect to such calendar year; for
contributions for subsequent calendar years, the period November 2 through
December 31 of the preceding year. Such instructions may be limited to
contributions to the participant's SIMPLE IRA account of the calendar year, or
may be effective with respect to all future contributions to the participant's
SIMPLE IRA account until revoked. Contributions to the electing participant's
SIMPLE IRA account will be transferred to the other IRA specified by the
participant with reasonable frequency (but not less frequently than monthly).
Pending transfer to the other IRA, contributions will be held in the investment
fund specified in the Adoption Agreement for the participant's SIMPLE IRA
account. Any such transfer will be made without cost of penalty to the
participant imposed by the Custodian (other than any annual maintenance fee
charged to all SIMPLE IRA accounts maintained by the Custodian, and any other
fee or costs specifically allowed under regulations or rulings of the Internal
Revenue Service.)
Transfers from the participant's SIMPLE IRA account that are not described
in the preceding paragraphs (including situations where the participant's SIMPLE
IRA operates under an employer SIMPLE IRA plan that does not use the "designated
financial institution" rules) will be made to a successor individual retirement
account or annuity designated by the participant in a written transfer of IRA
assets form or other acceptable written instructions to the Custodian. Any such
other transfer will be subject to normal Custodian fees (including any transfer
or account termination fee) and to normal redemption charges or other fees or
charges imposed by a Fund as described in its then effective prospectus.
The Custodian, the Service Company, the Distributor and the Fund(s) will
have no responsibility for compliance with the requirements of Code Section
408(p) and any other applicable requirements (including whether such transferee
individual retirement account or annuity meets the requirements to be a SIMPLE
IRA or whether the transferee financial institution properly carries out the
participant's investment directions) in connection with such transfer have been
satisfied, or for any penalty taxes that may be payable in connection therewith,
which matters shall be the sole responsibility of the Participant.
(b) This Agreement is intended to establish a valid SIMPLE individual
retirement account operating in conjunction with a SIMPLE IRA plan operated by
the participant's employer, and to meet all applicable requirements of Code
Section 408(p) (and other applicable legal requirements for SIMPLE IRAs). This
Agreement will be interpreted and the custodial account hereunder administered
in a manner that carries out such intent. In addition, if future regulations or
rulings provide guidance concerning the requirements for a valid SIMPLE IRA,
this Agreement will be interpreted and the custodial account hereunder will be
administered in a manner that complies with such regulations or rulings pending
the adoption of any required amendment to this Agreement.
16
<PAGE>
Zweig EUCLID
Mutual Funds MUTUAL FUNDS
==================
INSTRUCTIONS
==================
- --------------------------------------------------------------------------------
EMPLOYER INSTRUCTIONS FOR ESTABLISHING A ZWEIG/EUCLID SIMPLE IRA PLAN
- --------------------------------------------------------------------------------
o Read carefully the enclosed materials about SIMPLE IRA plans, including the
Form 5304-SIMPLE used to establish your SIMPLE IRA plan and the instructions
and information included with the form. Establishing a SIMPLE IRA plan
involves certain legal and financial obligations for the employer. Consult
your lawyer or other tax advisor if you have any questions about the nature
of these obligations or about how maintaining a SIMPLE IRA plan will affect
your business or your tax situation.
o Complete pages 1 and 2 of the Form 5304-SIMPLE ( at the back of this
brochure) to select eligibility provisions for your SIMPLE IRA plan. The
instructions for the Form explain your options concerning eligibility and
contributions.
Article VI of the Form requires that you provide each employee with information
about the procedures for withdrawals of contributions received by the financial
institution that he or she has selected, and the financial institution's name
and address. However, this is not required if the financial institution's
procedures are not available, or if the financial institution provides the
procedures directly to the employee. Normally, the financial institution will
give in-formation directly to the employee about its withdrawal procedures.
Designate the effective date and complete the signature block in Article VII of
the Form. For SIMPLE IRA plans started during 1997, the effective date cannot be
earlier than the date you sign the completed Form 5304-SIMPLE. Also for 1997 you
must start your SIMPLE IRA plan no later than October 1, otherwise you must wait
until 1998. For 1998 and later years, you may start a new SIMPLE IRA plan
effective on any date from January 1 to October 1.
NOTE: If you want to change any of your selections, you must complete and sign a
new Form 5304-SIMPLE and designate the effective date of the changed form. After
you have started a SIMPLE IRA plan, the new Form 5304-SIMPLE containing the
changes must be effective as of January 1.
BE SURE to send a copy of the completed form to State Street Bank and Trust
Company at the address given on the next page.
Part of the process for establishing a SIMPLE IRA plan involves giving all
eligible employees a notice. Complete the model Notification to Eligible
Employees with the correct information for your plan (from your completed Form
5304-SIMPLE). Distribute a copy of the completed notice to each eligible
employee. Generally (except for new SIMPLE IRA plans) the notice must be
distributed at least 60 days before the start of the calendar year.
In addition to the notice, you must give each eligible employee a summary
description of the plan. To do so, photo-copy the first two pages of the
completed and signed Form 5304-SIMPLE; attach these two pages to the back of the
document entitled "FOR EMPLOYEES -- YOUR SIMPLE IRA" to make a summary
description. Make enough copies of the summary description to give a copy to
each eligible employee along with the Notification to Eligible Employees.
You must repeat this process each year by distributing a notice and summary
description to each eligible employee at least 60 days before the start of a
calendar year.
o Each eligible employee who wishes to make salary reduction contributions to
his or her SIMPLE IRA should complete a Salary Reduction Agreement. This
form indicates how much the employee wants to contribute out of his or her
pay to his or her SIMPLE IRA account. Use the Model Salary Reduction
Agreement for Eligible Employees included in the materials for this purpose.
o Each eligible employee who elects to participate must also complete the
Adoption Agreement and the Designation of Beneficiary Form to establish a
Zweig or Euclid Mutual Fund SIMPLE Individual Retirement Custodial Account,
or the appropriate adoption, beneficiary and/or other forms for the SIMPLE
IRA of his/her choice. If an eligible employee establishes a SIMPLE IRA with
another financial institution, the employee will have to give you the
necessary information so that you can send contributions on the employee's
behalf to the trustee, custodian or other issuer of the employee's IRA along
with any identifying account information needed in order for contributions
to be properly credited to the employee's account.
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Zweig EUCLID
Mutual Funds MUTUAL FUNDS
==================
INSTRUCTIONS
(page 2)
==================
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If you will make nonmatching employer contributions under the SIMPLE IRA plan,
an Individual Retirement Ac-count must be established by each eligible employee,
even those who do not choose to make salary reduction contributions. If the
employee does not complete the necessary paperwork, you are entitled to complete
the forms to open a SIMPLE IRA for the employee.
o As employer, you have certain important responsibilities relating to the
operation of your SIMPLE IRA plan. These include the following:
a) Determining whether you meet the requirements to be an eligible employer
to make contributions to a SIMPLE IRA plan for any particular calendar year.
b) Determining which employees are eligible employees to participate in your
SIMPLE IRA plan for any calendar year and insuring that all required
notices, summary descriptions and other information are provided to such
eligible employees within the time frames provided under the SIMPLE IRA plan
rules.
c) Determining that salary reduction contributions by eligible employees are
within all limitations applicable to such contributions, transferring such
contributions to each participant's SIMPLE IRA within the time limits
provided by law, and determining and making employer contributions in the
amounts and by the times required by applicable legal rules.
d) Properly reporting salary reduction contributions by eligible employees
to the IRS on Form W-2.
These requirements (and other responsibilities of the employer) are described in
more detail in the document entitled "For Employers -- SIMPLE Answers to Small
Business Retirement Plan Needs" and in IRS Form 5304-SIMPLE
and its accompanying instructions.
By establishing a SIMPLE IRA plan and executing the Form 5304-SIMPLE or other
document for your SIMPLE IRA plan, you, the employer, agree to indemnify and
hold harmless State Street Bank and Trust Company as custodian from and against
any losses, costs or liabilities arising out of your failure to carry out your
responsibilities as employer or otherwise arising out of the operation of your
SIMPLE IRA plan, except for losses, costs or liabilities arising directly out of
the negligence or willful misconduct of State Street Bank and Trust Company.
Check to be sure that all forms have been
properly completed. Send completed forms to:
Zweig/Euclid Mutual Funds
c/o State Street Bank and Trust Company
P.O. Box 8505
Boston, MA 02266-8505
If by courier send to:
Zweig/Euclid Mutual Funds
c/o State Street Bank and Trust Company
2 Heritage Drive, 3rd Floor
Quincy, MA 02171
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Zweig EUCLID
Mutual Funds MUTUAL FUNDS
======================
FOR EMPLOYERS ONLY
======================
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SIMPLE ANSWERS TO SMALL BUSINESS RETIREMENT PLAN NEEDS
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Saving for retirement -- it's not easy, but we all need to take it seriously.
For small business owners, taking on a retirement plan can be costly and
time-consuming. That is why there is tremendous interest in a new kind of
retirement plan, the SIMPLE IRA, designed for small businesses.
The following will answer your questions about SIMPLE IRAs and help you decide
whether a Zweig Mutual Fund SIMPLE IRA is right for your business.
What is a SIMPLE?
A SIMPLE IRA is basically an employer plan and a series of individual retirement
accounts to receive contributions by or for employees.
The employer plan part of the SIMPLE IRA is set up by your completing and
signing a short IRS form (Form 5304-SIMPLE). We have arranged with State Street
Bank and Trust Company of Boston, MA to provide certain services for your SIMPLE
plan, including acting as custodian of the SIMPLE IRA for employees who choose
to open their SIMPLE IRAs through Zweig or Euclid Mutual Funds.
SIMPLE IRA plans operate on the calendar year. This means that eligibility and
contribution limits are applied on a calendar year basis (these requirements are
described below).
The employee SIMPLE IRAs are very much like any other IRAs, except with higher
contribution limits. The employee SIMPLE IRAs can be established using the
Zweig/Euclid Mutual Fund's SIMPLE IRA materials. Alternatively, employees must
be allowed to open a SIMPLE IRA with a different financial institution, in which
case the employee will complete the material for the SIMPLE IRA that the
employee chooses.
Which employers may have SIMPLE IRA plans?
SIMPLE IRA plans are only for small employers. This is defined as an employer
with 100 or fewer employees in the previous calendar year who had $5,000 or more
in total pay from the employer. Related employers are grouped together when
testing whether the 100 employee limit is satisfied. All employees must be
counted against this limit, even employees that are not eligible to participate
in the employer's SIMPLE IRA plan. Also, certain "leased employees" (these are
employees of another business who provide services to the employer) must be
treated as employees of the employer for SIMPLE IRA plan purposes.
If you go over the 100 employee limit, you may continue to operate your SIMPLE
IRA plan for two years. After that, you must discontinue SIMPLE IRA plan
contributions unless you go back below the 100 employee level.
An employer may have a SIMPLE IRA plan only if it has no other retirement plan
at any time when the SIMPLE IRA plan is in operation. "Retirement plans" for
this purpose include profit sharing, 401(k), retirement and other kinds of plans
that receive special tax benefits.
Which employees participate in the SIMPLE IRA?
Generally speaking, all of the employer's employees must participate in the
SIMPLE IRA plan. If related employers are grouped together when deciding whether
the employers are eligible to have a SIMPLE IRA plan (see above), then all
employees of all the related employers must participate. However, you may
exclude:
o an employee who did not receive at least $5,000 in pay from you in at least
two prior calendar years (not necessarily consecutive);
o an employee who is not reasonably expected to receive at least $5,000 in pay
from you for the current calendar year;
o union employees, provided that there was good faith bargaining over the
issue of retirement benefits;
o employees who are non-resident aliens and receive no U.S. source income.
The Form 5304-SIMPLE has places to indicate whether these groups of employees
will be included or excluded from your SIMPLE IRA plan.
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19
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How do contributions to the SIMPLE IRA work?
Two kinds of contributions are permitted: a) employee contributions
and b) employer contributions, which may be either matching or non-matching
contributions.
Employee Contributions: Each eligible employee may elect to have a percentage of
his/her pay contributed by the employer to the employee's IRA, as long as the
amount does not exceed $6,000 for a calendar year. The $6,000 limit is indexed
for future cost-of-living increases.
Eligible employees elect the desired percentage of pay to contribute on a salary
reduction agreement. A model agreement is included with your SIMPLE IRA plan
materials. Salary reductions may be made only from pay the employee earns after
signing the salary reduction agreement.
Employee salary reduction contributions must be transferred to the trustee,
custodian or other issuer of each participating employee's IRA as soon as you
can reasonably do so. The outside deadline is the 30th day of the month
following the month when the employee would have received the pay amount except
for the salary reduction. However, if you can transfer the amount to the
participant's IRA earlier, you must do so under Department of Labor rules.
Employer Contributions: One of the big benefits of a SIMPLE IRA plan is that
you, the employer, have a great deal of flexibility on contributions to the
SIMPLE IRA plan.
First, you may make matching contributions, so that only employees who actually
participate by contributing from their own pay receive an employer contribution.
With a SIMPLE IRA plan, there are no high-low tests as there are with 401(k)
plans or salary reduction SEP plans, so the fact that low paid employees decide
not to participate does not limit savings and matching opportunities for other
employees.
Alternatively, you may make a non-matching contribution for each employee who
meets your plan's eligibility requirements, whether the employee is contributing
from his/her own pay or not.
Matching Contributions: If you choose matching contributions, you must
contribute $1 for each $1 the employee contributes, up to a cap of 3% of the
employee's pay for the calendar year.
You may elect a lower percentage (not lower than 1% of pay) for the cap, but
only in two years out of any five-year period. In other words, if you have
already elected a lower cap in two years out of the five years ending with the
current calendar year, the matching contribution cap for the current year must
be 3% of pay. If you have used a lower cap in only one year or in no years in
the five years ending with the current year, you may elect a lower cap for the
current calendar year. However, employees must be notified of the lower cap
before the start of the year (see "What do I have to tell employees about the
plan?" below).
Non-matching Contributions: Instead of matching contributions, you may make a
non-matching contribution for each employee who meets your plan's eligibility
requirements and who actually receives at least $5,000 in pay for the calendar
year. The non-matching contribution must be 2% of each eligible employee's pay
for the year. For this purpose only, pay is subject to an IRS limit. The limit
is $160,000 for 1997; this amount is indexed for future cost-of-living changes.
If you want to use the non-matching contributions approach, you must notify
eligible employees before the start of the year) see "What do I have to tell
employees about the plan?" below).
Employer matching or non-matching contributions for an employee must be
transferred to the employee's SIMPLE IRA no later than the due date (including
any extensions) for filing the employer's federal income tax return for the
year.
How are Contributions to SIMPLE IRAs Invested?
As part of the enrollment process, each eligible employee establishes a SIMPLE
IRA using the Zweig/Euclid Mutual Funds SIMPLE IRA materials, or the material
provided by the SIMPLE IRA vendor of the employee's choosing. Contributions on
behalf of each employee participating in the SIMPLE IRA plan are added to
his/her SIMPLE IRA.
If the employee has chosen to open a Zweig/Euclid Mutual Funds SIMPLE IRA,
contributions are invested in the Zweig/Euclid Mutual Funds available for SIMPLE
IRA investments. If the employee has opened his/her SIMPLE IRA through another
financial institution, contributions will be invested in the investment options
available to that SIMPLE IRA. Investment options available through any SIMPLE
IRA are described in the materials given to each employee upon opening his/her
IRA.
For Zweig/Euclid Mutual Funds SIMPLE IRAs, the prospectus for each fund gives
important information about its investment objectives and policies and the sales
charges or other expenses. Employees should read the fund's prospectus, as well
as the other information about the Zweig/Euclid Mutual Fund's IRA, before
investing. These materials also give the information about procedures for
exchanging from one fund to another. Each employee is responsible for deciding
how to in-vest contributions to his/her IRA from among the available funds.
One advantage of a SIMPLE IRA plan is that interest, divi-
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20
<PAGE>
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dends, and other earnings on mutual fund shares held in an employee's SIMPLE IRA
compound without federal income tax. This can mean greater returns than with a
taxable investment earning the same, even after income taxes on withdrawals are
paid.
Of course, with mutual funds and most other investments there is the possibility
of fluctuation in rate of return or in the value of underlying assets.
Therefore, no particular rate of return can be predicted or guaranteed.
Can employees transfer to another IRA or withdraw amounts in their SIMPLE IRA?
Yes, under the SIMPLE IRA rules an employee may elect to transfer to another IRA
account. For two years after the first contribution to his/ her SIMPLE IRA under
the SIMPLE IRA plan, the employee may transfer only to another SIMPLE IRA. After
this two year period, the employee may transfer to another SIMPLE IRA or to a
regular IRA.
In order to transfer, the employee must set up a SIMPLE IRA (or, after two
years, a regular IRA) with the desired IRA sponsor, and notify the existing
trustee or custodian in writing of the employee's election.
Normal fees and charges (including any redemption charges, contingent deferred
sales charges or loads charged by a mutual fund investment, as described in its
prospectus, or custodian account termination fees) may be charged.
Employees may withdraw amounts from their SIMPLE IRAs at any time. Withdrawals
are discussed in the disclosure statement distributed with the Zweig/Euclid
Mutual Funds SIMPLE IRA materials given to each employee. If the employee chose
to establish a SIMPLE IRA with a different financial institution, the withdrawal
rules should be summarized in the materials distributed by that financial
institution.
There is one important difference between SIMPLE IRAs and regular IRAs.
Withdrawals from any IRA before age 59 1/2 are subject to a penalty tax in
addition to regular income taxes unless an exception to the penalty applies. For
withdrawals from a SIMPLE IRA during the first two years after the employee
started participating in the employer's SIMPLE plan, the penalty is 25% of the
amount withdrawn rather than the normal penalty of 10%.
What do I have to tell employees about the plan?
Each year that you operate a SIMPLE IRA plan, you must give all eligible
employees a) a notice of the plan's terms and b) the opportunity to choose to
make salary reduction contributions. The notice must state which contribution
option the employer is choosing for the calendar year, including if you choose
matching contributions the percent-age of pay cap for that calendar year (3% of
pay as the cap or, if allowed a lower percentage). The notice also must inform
eligible employees that they are required to select and open a SIMPLE IRA with
the financial institution of their choice, or else the employer will establish a
SIMPLE IRA for them. The notice must be given at least 60 days before the start
of the calendar year (in other words, on or before November 2 preceding the
start of the year). At the same time, you must give each eligible employee a
copy of a summary description of the SIMPLE plan. This is done by giving each
eligible employee a copy of the short pamphlet entitled "For Employees -- Your
SIMPLE IRA" to which is attached a photocopy of pages one and two of the Form
5304-SIMPLE as completed by you to establish your SIMPLE plan.
Failure to meet these notice requirements makes you liable for a penalty of $50
per day for each day during which the failure continues. The IRS can waive the
penalty if you can demonstrate that the failure was due to reasonable cause.
What are the advantages of a SIMPLE IRA for a small business?
SIMPLE IRA plans were designed to be easy for small employers to operate. The
Zweig/Euclid Mutual Funds SIMPLE IRA package contains all the forms and material
you will need to start your SIMPLE IRA plan.
There are no complex IRS tests or rules that you must follow when operating your
SIMPLE IRA plan. For example, the high-low tests normally applicable to salary
reduction contributions by employees in a 401(k) plan or salary reduction SEP do
not apply. Also, the top-heavy plan rules do not apply.
Since contributions are held in SIMPLE IRAs established by the participating
employees, there is no Form 5500 Annual Report to file. All that you, the
employer, must do is indicate on the employee's Form W-2 whether the employee
was a participant in your SIMPLE IRA plan during the year and the amount of the
employee's salary reduction contributions for the year.
How do I set up a SIMPLE IRA?
In general, to set up a SIMPLE IRA plan, merely follow the sheet of "Employer
Instructions for Establishing a SIMPLE IRA Plan" included in your Zweig/Euclid
Mutual Funds SIMPLE IRA materials.
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21
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You may choose the effective date for your new SIMPLE IRA plan, which may be any
day up to October 1.
The SIMPLE IRA plan must be in effect the first date on which a contribution is
deposited into an employee's IRA.
Usually the notice to eligible employees about the SIMPLE IRA plan must be given
by November 2 of the preceding calendar year. However, for the first year in
which the employer establishes its SIMPLE IRA plan, the 60 day period may be any
60 days as long as the effective date of the SIMPLE IRA plan or the day before
that is included. For example, if you establish a SIMPLE IRA plan effective July
1, 1997, the 60 day period must include either June 30 or July 1, 1997, and you
must give the eligible employees their notices in advance of the start of the 60
day period.
Where Can I Get Additional Information?
Please read the instructions to Form 5304-SIMPLE for more information. Also, the
IRS has issued some questions and answers in Notice 97-6 (available by
contacting the IRS). For answers to specific questions about a SIMPLE IRA plan
for your business, consult your professional tax adviser or the IRS.
For answers to general questions about SIMPLE IRA plans, please call:
Zweig/Euclid Mutual Funds
Shareholder Servicing Department at
1-800-272-2700.
Note: The information in this pamphlet reflects the best in-formation available
at the time of preparation. How-ever, SIMPLE IRA plans are governed by new
provisions of the Internal Revenue Code and the IRS has not issued
regulations on SIMPLE IRA plans or answered many of the questions about
SIMPLE IRA plans. Consult your professional tax adviser or the IRS on any
questions you have about a SIMPLE IRA plan or about the most recent IRS
developments.
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<PAGE>
Zweig EUCLID
Mutual Funds MUTUAL FUNDS
============================
EMPLOYER MODEL
NOTIFICATION TO ELIGIBLE
EMPLOYEES
============================
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Opportunity to Participate in the SIMPLE Plan
You are eligible to make salary reduction contributions to the
__________________________ SIMPLE plan. This notice and the attached summary
description provide you with information that you should consider before you
decide whether to start, continue, or change your salary reduction agree-ment.
Employer Contribution Election
For the _________ calendar year, the employer elects to contribute to your
SIMPLE IRA (employer must select either (1), (2), or (3)):
(1) A matching contribution equal to your salary reduction contributions up
to a limit of 3% of your compensation for the year;
(2) A matching contribution equal to your salary reduction contributions up
to a limit of _____% (employer must insert a number from 1 to 3 and is
subject to certain restrictions) of your compensation for the year; or
(3) A nonelective contribution equal to 2% of your compensation for the year
(limited to $160,000*) if you are an employee who makes at least
$_____________ (employer must insert an amount that is $5,000 or less) in
compensation for the year.
Administrative Procedures
If you decide to start or change your salary reduction agreement, you must
complete the salary reduction agreement and return it to
___________________________________ (employer should designate a place or
individual) by _________________________ (employer should insert a date that is
not less than 60 days after notice is given).
Employee Selection of Financial Institution
You must select the financial institution that will serve as the trustee,
custodian, or issuer of your SIMPLE IRA and notify your employer of your
selection.
* This amount will be adjusted to reflect any annual cost-of-living increases
announced by the IRS.
NOTE: The preceding Employer Model Notification to Eligible Employees uses the
form promulgated by the Internal Revenue Ser-vice in Form 5304-SIMPLE.
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23
<PAGE>
Zweig EUCLID
Mutual Funds MUTUAL FUNDS
============================
EMPLOYER MODEL
SALARY REDUCTION
AGREEMENT FOR ELIGIBLE
EMPLOYEES
============================
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Salary Reduction Election
Subject to the requirements of the SIMPLE plan of ________________________ (name
of employer), I authorize _____% or $ __________________ (which equals _____% of
my current rate of pay) to be withheld from my pay for each pay period and
contributed to my SIMPLE IRA as a salary reduction contribution.
Maximum Salary Reduction
I understand that the total amount of my salary contributions in any calendar
year cannot exceed $6,000.*
Date Salary Reduction Begins
I understand that my salary reduction contributions will start as soon as
permitted under the SIMPLE plan and as soon as administratively feasible or, if
later, ____________________. (Fill in the date you want the salary reduction
contributions to begin. The date must be after you sign this agreement.)
Employee Selection of Financial Institution
I select the following financial institution to serve as the trustee, custodian,
or issuer of my SIMPLE IRA.
_________________________________________________________
Name of financial institution
_________________________________________________________
Address of financial institution
_________________________________________________________
SIMPLE IRA account name and number
I understand that I must establish a SIMPLE IRA to receive any contributions
made on my behalf under this SIMPLE plan. If the information regarding my
SIMPLE IRA is incomplete when I first submit my salary reduction agreement,
I realize that it must be completed by the date contributions must be made
under the SIMPLE plan. If I fail to update my agreement to provide this
information by that date, I understand that my employer may select a
financial institution for my SIMPLE IRA.
Duration of Election
This salary reduction agreement replaces any earlier agreement and will remain
in effect as long as I remain an eligible employee under the SIMPLE plan or
until I pro-vide my employer with a request to end my salary reduction
contributions or provide a new salary reduction agreement as permitted under
this SIMPLE plan.
Signature of employee _________________________________
Date _________________________________
* This amount will be adjusted to reflect any annual cost-of-living increases
announced by the IRS.
NOTE: The preceding Employer Model Salary Reduction Agreement uses the form
promulgated by the Internal Revenue Service in Form 5304-SIMPLE.
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Zweig EUCLID
Mutual Funds MUTUAL FUNDS
======================
-FOR EMPLOYEES-
YOUR SIMPLE IRA
======================
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A SUMMARY DESCRIPTION OF YOUR EMPLOYER'S SIMPLE IRA PLAN
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Your employer offers you a Savings Incentive Match Plan for Employees (SIMPLE)
as a tax-favored method of saving for your retirement. Under the SIMPLE Plan,
your employer will make certain contributions, which may be either matching
contributions (matching your own savings under the Plan up to a limit) or
non-matching, mandatory contributions. Savings contributions by you, plus
employer contributions on your be-half, are added to an individual retirement
account established in your name for purposes of the SIMPLE Plan.
The following information is a notification of your plan participation options
and a description of the SIMPLE plan. This notification is in two parts. The
first part consists of several pages of information about SIMPLE plans and the
related SIMPLE IRAs. The last two pages consist of a copy of the IRS Form
5304-SIMPLE as completed by your employer to choose certain optional provisions
for the employer's SIMPLE Plan. This form is provided to you in order to
indicate the particular provisions that apply to your employer's plan.
Which Employers May Establish and Maintain a SIMPLE Plan?
To establish and maintain a SIMPLE plan for a particular calendar year, an
employer must meet both of the following requirements:
1. In the preceding calendar year, the employer had no more than 100 employees
(including self-employed individuals) who earned $5,000 or more in
compensation from the employer during the year. If the employer has a SIMPLE
plan but later exceeds this 100-employee limit, the employer will be treated
as meeting the limit for the two calendar years following the calendar year
in which the employer last satisfied the limit. If the failure to continue
to satisfy the 100-employee limit is due to an acquisition or similar
transaction involving the business, special rules apply.
2. The employer does not maintain during any part of the calendar year another
qualified plan with respect to which contributions are made, or benefits are
accrued, for service in the calendar year. For this purpose, a qualified
plan includes a qualified 401(k) plan, a pension plan, a profit-sharing
plan, a stock bonus plan, a qualified annuity plan, a tax-sheltered annuity
plan, and a simplified employee pension (SEP) plan.
Certain related employers (trades or businesses under common control) must be
treated as a single employer for purposes of the SIMPLE requirements. In
addition, certain leased employees are required to be treated as employees of
the business and must be counted for the requirements listed above.
What is a SIMPLE Plan?
A SIMPLE plan is a written arrangement that provides employers with a simplified
way to make contributions to provide retirement income for their employees.
Under a SIMPLE plan, employees may choose whether to make salary reduction
contributions to the SIMPLE plan rather than receiving these amounts as part of
their regular compensation. In addition, your employer will contribute matching
or non-matching contributions on behalf of eligible employees (see Employee
Eligibility Requirements and Contributions below ). All contributions under this
plan will be deposited into a SIMPLE individual retirement account established
by each eligible employee with a financial institution selected by the employee.
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Employee Eligibility Requirements (Article I)
Each year for which this SIMPLE plan is effective, your employer must permit
salary reduction contributions to be made by all employees who are reasonably
expected to receive at least $5,000 in compensation during the year, and who
received at least $5,000 in compensation in any 2 preceding years. Your employer
can expand the group of employees who are eligible to participate in this SIMPLE
Plan to include some or all of those earning under $5,000. In addition, your
employer may elect to exclude union employees if there was collective bargaining
over retirement benefits between the employer and the union representing the
employees. To determine which eligibility options your employer has chosen,
consult Article I of the attached Form 5304-SIMPLE.
Salary Reduction Agreements (Article II)
A salary reduction agreement permits you to make a salary reduction election to
have your compensation for each pay period reduced by a percentage (expressed as
a percentage or dollar amount). The total amount of the reduction in your
compensation cannot exceed $6,000(1) for any calendar year.
To make a salary reduction election, simply complete the form of salary
reduction agreement provided by your employer. Also, you use the salary
reduction agreement to specify the name and address of the financial institution
maintaining your SIMPLE IRA account and account identifying information so that
contributions to your account may be forwarded and credited to your IRA
correctly. The salary reduction agreement must be completed and returned to your
employer within the required time frames.
Timing of Salary Reduction Elections
For a calendar year, you may make or modify a salary reduction election during
the 60-day period immediately preceding January 1 of that year. However, for the
year in which you become eligible to make salary reduction contributions, the
period during which you may make or modify the election is a 60-day period that
includes either the date you become eligible or the day before. For example, if
your employer starts its SIMPLE IRA plan effective July 1 of a year and you
become eligible on that day, your 60-day salary reduction election period must
include either June 30 or July 1. In this example, the earliest possible 60-day
period would be May 2 to June 30, and the latest possible 60-day period would be
July 1 to August 29. Your employer may enlarge the 60-day election period or
provide additional opportunities during the year for you to make, cancel, or
change your salary reduction election. Refer to Article II, Item 2b of the
attached Form 5304-SIMPLE to determine any additional modification periods
available to you.
You may terminate your salary reduction election at any time. However, if you
terminate your election outside of the normal election cycle, your employer has
the option to prohibit you from resuming salary reduction elections during the
remainder of the calendar year. Consult Article II, item 2d of the attached Form
5304-SIMPLE to determine if your employer has chosen this option.
Contributions (Article III)
Only contributions described below may be made to this SIMPLE plan. No
additional contributions may be made.
Salary Reduction Contributions
Salary reduction contributions consist of the amount by which you agree to
reduce your compensation. Your employer must contribute the salary reduction
contributions to the financial institution that you have selected for your
SIMPLE IRA.
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Other Contributions
Matching Contributions
In general, your employer must make a matching contribution to your SIMPLE IRA
equal to your salary reduction contributions. However, this matching
contribution cannot exceed 3% of your compensation. See Definition of
Compensation below.
Your employer may elect to reduce the 3% limit to a lower percentage, but not
lower than 1%. This reduction cannot be made for more than two out of five
years, and you must be notified of any reduced limit within a reasonable period
of time before the 60-day election period for the year.
Non-matching Contributions
Instead of making a matching contribution, your employer may, for any year, make
a non-matching, mandatory contribution equal to 2% of compensation for each
eligible employee who has at least $5,000 in compensation for the year.
Non-matching contributions may not be based on more than $160,000(2) of
compensation.
Again, your employer must notify you within a reasonable period of time before
the applicable 60-day election period for such year.
Other Important Information About Your SIMPLE Plan
Timing of Salary Reduction Contributions
Under the Internal Revenue Code, your employer must make the salary reduction
contributions to the financial institution selected by each eligible employee
for his/her SIMPLE IRA no later than the 30th day of the month following the
month in which the amounts would otherwise have been payable to the employee in
cash. The Department of Labor has an additional rule under which salary
reduction contributions must be made to the financial institution maintaining an
employee's SIMPLE IRA by the earliest date on which those contributions can
reasonably be segregated from the employer's general assets, but in no event
later than the 30-day deadline described above.
Definition of Compensation
"Compensation" means total compensation (the amount of total wages, tips, and
other compensation from the employer subject to federal income tax withholding).
Usually, this is the amount shown in box 1 of Form W-2, Wage and Tax Statement.
Compensation also includes the salary reduction contributions made under this
plan, and, if applicable, compensation deferred under a section 457 plan. In
determining an employee's compensation for prior years, the employee's elective
deferrals under a section 401(k) plan, a SARSEP, or a section 403(b) annuity
contract or custodial account are also included in the employee's compensation.
For self-employed individuals, compensation means the net earnings from
self-employment determined under section 1402(a) prior to subtracting any
contributions made pursuant to this SIMPLE plan on behalf of the individual.
Employee Notification
Your employer must notify you prior to the 60-day election period described
above that you can make or change salary reduction elections. In this
notification, your employer must indicate whether it will provide:
1. A matching contribution equal to your salary reduction contributions up to a
limit of 3% of your compensation;
2. A matching contribution equal to your salary reduction contributions subject
to a percentage limit that is between 1 and 3% of your compensation; or
3. A nonelective contribution equal to 2% of your compensation.
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Reporting Requirements
You are not required to file any annual information returns for your SIMPLE
plan, such as Forms 5500, 5500-C/R, or 5500-EZ. However, the Employer must
report to the IRS which eligible employees are active participants in the SIMPLE
plan and the amount of your salary reduction contributions to the SIMPLE plan on
Form W-2. These contributions are subject to social security, medicare, railroad
retirement, and federal unemployment tax.
Establishing Your SIMPLE IRA
As part of your participation in this SIMPLE plan, you must set up an individual
retirement account (IRA) with the financial institution of your choice. Simply
complete the SIMPLE IRA adoption agreement or application (and any other
required documents) provided by the financial institution that you have chosen
to establish your SIMPLE IRA.
All contributions are sent to your SIMPLE IRA. Investments are selected by you
from the investment options available under your chosen SIMPLE IRA. Please read
the disclosure statement provided by the financial institution for important
information about your SIMPLE IRA, and before investing read a copy of the
prospectus or other explanatory information for each investment option you are
interested in for a description of the investment objectives and policies, and
applicable fees and charges.
Transfers
You may transfer all or part of the balance in your SIMPLE IRA with your current
financial institution to another IRA at any time. You simply have to give proper
directions to the current financial institution, including the name and address
of the successor IRA and transfer instructions. Normal fees (such as termination
or transfer fees) and any redemption or other charges applicable to the mutual
fund shares (as described in the applicable prospectus) will be charged.
For the first two years after your SIMPLE IRA is established, you may transfer
only to another SIMPLE IRA. The two year period commences on the day a
contribution is first made to your SIMPLE IRA by your employer. After the end of
this two year period, you may transfer amounts from a SIMPLE IRA to another
SIMPLE IRA or to a regular IRA.
NOTE: The information in this pamphlet reflects the best information available
at the time of preparation. However, SIMPLE IRAs are governed by new
provisions of the Internal Revenue Code and the IRS has not issued
regulations on SIMPLE IRA plans or answered many of the questions about
SIMPLE IRAs. Consult your professional tax adviser or the IRS on any
questions you have about a SIMPLE IRA or about the most recent IRS
developments.
- ----------
1 / This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
2 / This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
- --------------------------------------------------------------------------------
28
Exhibit 14c
SPONSOR'S GUIDE TO
ESTABLISHING AND ADOPTING
THE INVESTMENT COMPANY INSTITUTE
PROTOTYPE PROFIT SHARING/401(k) PLAN
<PAGE>
SPONSOR'S GUIDE TO
ESTABLISHING AND ADOPTING
THE INVESTMENT COMPANY INSTITUTE
PROTOTYPE PROFIT SHARING/401(k) PLAN
INTRODUCTION
This guide is intended to be a reference for sponsors and to enable
them to assist an employer who wishes to adopt the Investment Company Institute
Prototype Profit Sharing/401(k) Plan sponsored by [NAME OF SPONSOR]. A prototype
plan is a plan made available by a sponsoring organization and offered to
various employers for adoption. Each adopting employer may select the funding
medium of the plan from the choices made available by the sponsor.
The prototype plan is a "standardized form plan." Standardized form
plans are designed so that if the plan is adopted by an employer, the plan will
meet the nondiscrimination rules, the benefit and contribution limitations, and
the top-heavy provisions set forth in the Internal Revenue Code. Certain
provisions of a standardized form prototype plan apply uniformly to each
adopting employer; other provisions contain alternative features that are chosen
individually by each adopting employer. Further information regarding selection
of options by adopting employers is found at Tab 9.
An employer who adopts this plan and who does not and has never
before maintained another qualified plan (other than plans being amended by the
adoption of this plan) does not need a separate determination letter from the
Internal Revenue Service to obtain reliance on the plan's tax-qualified status.
An employer who currently maintains any qualified plan other than
this prototype plan (or master or prototype plans that are being amended by
adoption of this plan) cannot rely on any IRS
<PAGE>
-2-
opinion letter obtained by this plan. Such an employer should consult with a tax
advisor and apply for a determination letter with respect to this plan and any
other plans the employer maintains.
In addition, an employer who adopts any other plan after adopting
this prototype plan cannot rely on any IRS opinion letter obtained by this plan.
Such employers should apply for determination letters covering the prototype
plan as well as the plans later adopted.
An employer adopts the Investment Company Institute Prototype Profit
Sharing/401(k) Plan by completing either Adoption Agreement #001 or Adoption
Agreement #002. Information to assist an employer in deciding which adoption
agreement to adopt is found in Tab 9.
The plan is designed for use by corporations, partnerships or sole
proprietorships. This guide explains the features of the plan and sets forth
guidelines and procedures for adopting the plan. The guide discusses the
benefits and limitations under the plan. In addition, the guide explains the
alternative features that may be adopted in the adoption agreements and
instructs the employer, on a provision-by-provision basis, as to how to complete
the applicable adoption agreement.
The guide is designed so sponsors can use the materials it contains
to create a handbook for employers who want to adopt a plan. In most cases, such
a handbook would include the materials at Tabs 1 through 25. Please note,
however, that these materials describe all of the options available under the
plan, including those that the sponsor has elected not to offer.
<PAGE>
SPONSOR'S GUIDE TO
ESTABLISHING AND ADOPTING
THE INVESTMENT COMPANY INSTITUTE
PROTOTYPE PROFIT SHARING/401(k) PLAN
TABLE OF CONTENTS
INTRODUCTION
GENERAL CONSIDERATIONS...................................... TAB 1
TAX-QUALIFIED STATUS OF PROTOTYPE PLANS..................... TAB 2
OPERATING A 401(k) PLAN..................................... TAB 3
GLOSSARY.................................................... TAB 4
PROCEDURES
PROCEDURES FOR ESTABLISHING OR AMENDING A
PROTOTYPE PLAN.............................................. TAB 5
PROCEDURES FOR TRANSFERRING ASSETS BETWEEN TRUSTS........... TAB 6
PROCEDURES FOR DETERMINING METHOD OF INVESTMENT
SELECTION................................................... TAB 7
ADMINISTRATION
NOTICE OF GENERAL ADMINISTRATIVE RESPONSIBILITIES........... TAB 8
ADOPTION AGREEMENTS
PROVISION-BY-PROVISION EXPLANATION AND INSTRUCTIONS
FOR COMPLETING ADOPTION AGREEMENTS.......................... TAB 9
ADOPTION AGREEMENT 001...................................... TAB 10
ADOPTION AGREEMENT 002...................................... TAB 11
<PAGE>
-ii-
PLAN, TRUST AND AMENDMENTS
PROTOTYPE PROFIT SHARING/401(k) PLAN AND AMENDMENTS......... TAB 12
PROTOTYPE PROFIT SHARING/401(k) TRUST ...................... TAB 13
SUMMARY PLAN DESCRIPTIONS
INSTRUCTIONS FOR PREPARING THE MODEL SUMMARY PLAN
DESCRIPTION OF THE PROTOTYPE PROFIT SHARING/401(k) PLAN..... TAB 14
MODEL SUMMARY PLAN DESCRIPTIONS............................. TAB 15
ADMINISTRATIVE FORMS.............................................. TABS 16-25
<PAGE>
GENERAL CONSIDERATIONS
Under defined contribution plans, contributions are made on behalf
of each participant. The plan administrator is required to maintain a separate
bookkeeping account for each participant. This may be accomplished most
conveniently by setting up a separate mutual fund account for each participant.
However, a separate mutual fund account is not required by law. The sum of the
contributions to the participant's account, as adjusted by investment gains or
losses, comprises the participant's retirement income. The employer's obligation
to contribute is determined by the terms of the plan. The amounts the employer
contributes will not increase or decrease on the basis of investment
performance. Under a profit sharing plan, which is one type of defined
contribution plan, the amount and allocation of contributions each year may be
based on a specified formula, or as determined by the employer in its sole
discretion.
Overall Limitations
The maximum annual amount that can be allocated to any employee's
account under all defined contribution plans of an employer is limited to the
lesser of 25 percent of compensation or $30,000 (the $30,000 limit may be
increased to reflect changes in the cost of living after 1994).
Special Rules for Self-Employed
The limits are calculated differently for a self-employed person.
Contributions are based on a percentage of a self-employed individual's earned
income after making the contribution on his own behalf (earned income is reduced
by the amount of the deductible contribution) and after one-half of his social
security taxes (earned income is reduced by the deduction allowed for one-half
of self-employment social security taxes).
<PAGE>
-2-
Because of these adjustments, calculating the contributions for
self-employed individuals can be difficult. The following example illustrates
one method of determining that limit. Assume the self-employed individual wishes
to contribute 15% of compensation for himself and his other employees for 1994.
Assume further that his net profit from self-employment in that business is
$150,000 for that year. First, the employee would calculate his gross
compensation ($150,000) less one-half of his self-employment taxes ($5,932), or
$144,068. (Self-employment taxes equal 12.40% of his social security wages
($60,600) plus 2.90% of his medicare wages ($150,000)). Second, he would
multiply this adjusted compensation by 13.0435% ($144,068 x 13.0435%) to
determine his contribution, which is $18,791. Third, this contribution is then
also deducted from gross compensation ($150,000 - ($5,932 + $18,791)) to produce
his actual compensation of $125,277.
It is this compensation amount that is used to determine whether the
overall limit is satisfied. That is, the contribution cannot exceed the lesser
of 25% of compensation (as calculated above) or $30,000. If compensation is less
than $120,000 then the 25% limit applies but if compensation equals or exceeds
$120,000, then the $30,000 limit applies.
Compensation Limitations
The amount of compensation that is counted is also limited. For 1994
the limit is $150,000. The limit may increase in future years due to
cost-of-living increases. Increases will only be made in increments of $10,000.
This compensation limit applies whenever any calculation involving
compensation is made. For example, in calculating contributions and deduction
limits, only compensation up to this limit may be used.
<PAGE>
-3-
Deduction Limitations
Separate limits are imposed on deductions for plan contributions.
Deductions for contributions to all of an employer's defined contribution plans
are limited to 25 percent of the total compensation paid to all participants
during that year. Of this, 15 percent of the total compensation paid to all plan
participants during a year can generally be deducted as a contribution to a
profit sharing plan.
The rules concerning deductions for contributions on behalf of
self-employed individuals are generally the same as those that apply to common
law employees. However, if contributions to a profit sharing plan on behalf of a
self-employed individual would exceed 13.0435 percent of earned income (before
plan contributions but after one-half of self-employment taxes), a tax advisor
should be consulted to ensure that contributions will be deductible and that the
plan(s) will retain tax-qualified status.
<PAGE>
TAX-QUALIFIED STATUS OF PROTOTYPE PLANS
The Investment Company Institute has received an opinion letter from
the Internal Revenue Service that its prototype profit sharing/401(k) plan
qualifies for special tax treatment. Individual opinion letters will be issued
to sponsors who adopt the plan on a word-for-word basis after submission of
their applications to the IRS. Because this plan contains provisions regarding
coverage, eligibility, vesting schedules, and contribution limits which are
designed to meet tax qualification requirements, the employer meeting the
conditions described below can rely on the sponsor's opinion letter as to the
tax-qualified status of its plan and need not obtain an individual determination
letter.
To rely on the sponsor's favorable opinion letter, the employer must
provide that the plan will:
(1) cover all employees, including employees of Affiliated
Employers, except:
(a) those who have not met the minimum age and service
requirements for participation;
(b) certain union employees; and
(c) certain nonresident aliens.
(2) not favor Key Employees as to eligibility to participate;
(3) vest employees' accounts at least as rapidly as one of the
Top-Heavy vesting schedules; and
<PAGE>
-2-
(4) require the employer to contribute a uniform percentage of
compensation (in making this determination, the plan may consider benefits
provided under the Social Security Act).
If the employer has maintained, now maintains, or later adopts a
qualified plan in addition to this ICI prototype plan (other than plans being
amended by adoption of this plan), it will not be able to rely on the sponsor's
opinion letter and will be required to apply for a separate determination
letter.
<PAGE>
OPERATING A 401(k) PLAN
I. Annual Nondiscrimination Test for Elective Deferrals
In order to satisfy the requirements of section 401(k) plans, the elective
deferrals to the plan must be tested at least annually (and preferably more
frequently) to determine if the elective deferrals meet certain
nondiscrimination tests. These tests are referred to as the actual deferral
percentage or ADP tests.
Before making the calculation, it is first necessary to determine what
contributions are included in the test. For testing purposes, the contributions
include all elective deferrals made by the employee for the year. In addition,
employer matching contributions may be included if the contributions are fully
vested when made. Finally, any qualified nonelective employer contributions will
also be included in the test.
The test is run by taking the deferrals (as listed above) for each
employee as a percentage of compensation. For example, if an employee has $2,000
of elective deferrals in a plan year and $50,000 of compensation, the deferral
percentage for that employee would be: $2,000/$50,000 = 4%. The deferral
percentage for each employee participating in the plan is calculated in this
manner to determine each participant's ADP.
The next step in the calculation is to take these individual ADPs and
average them for the Non-HighlyCompensated Employees participating in the plan.
See the Glossary for definitions of who is HighlyCompensated and who is not.
Once this average for the Non-HighlyCompensated group is determined, perform the
same calculation for the HighlyCompensated group. The maximum amount of ADP, as
an average, permitted for the HighlyCompensated group is determined from the
following chart:
<PAGE>
-2-
If The Non-Highly The Limit On The
Compensated HighlyCompensated
Group's ADP Is Group's ADP Will Be
-------------- -------------------
0% 0 %
1% 2 %
2% 4 %
3% 5 %
4% 6 %
5% 7 %
6% 8 %
7% 9 %
8% 10 %
9% 11.25%
10% 12.50%
15% 18.75%
20% 20 %
It is important to keep in mind that the ADP limits for the
HighlyCompensated group are an average. That is, an individual participant who
is HighlyCompensated can have an ADP in excess of that limit as long as the
average for the entire HighlyCompensated group does not exceed the limits
specified in the chart above.
II. Annual Nondiscrimination Test for Matching Contributions and Employee
Contributions
Any employee contributions or matching contributions made to the plan are
also subject to annual testing under the same formulas applicable to elective
deferrals. The testing mechanism is the same except that the contribution
percentages for individuals utilize the matching contributions and the employee
contributions instead of the elective deferrals and other employer
contributions.
For example, if a participant makes $1,000 of employee contributions and
has credited to his account a matching contribution of $3,000, the total
contribution subject to this test would be $4,000.
<PAGE>
-2-
If that employee had compensation of $50,000, the contribution percentage for
that individual would be 8%.
As in the case of the elective deferrals, these amounts are computed for
the HighlyCompensated and Non-HighlyCompensated group and the limits are
determined in the same fashion. That is, the limits for the HighlyCompensated
group as an average are determined by reference to the average contribution
percentages for the Non-HighlyCompensated group in accordance with the following
chart:
If The Non-Highly The Limit On The
Compensated HighlyCompensated
Group's ACP Is Group's ACP Will Be
-------------- -------------------
0% 0 %
1% 2 %
2% 4 %
3% 5 %
4% 6 %
5% 7 %
6% 8 %
7% 9 %
8% 10 %
9% 11.25%
10% 12.50%
15% 18.75%
20% 20 %
III. Special Coordination Rules
The plan contains special coordination rules with respect to
HighlyCompensated employees who are subject to both the limits on Elective
Deferrals and the limits on matching contributions and employee contributions.
These coordination rules, if applicable, could cause a reduction in
contributions.
<PAGE>
-4-
IV. Seven Thousand Dollar Limit
All contributions to the plan are subject to various special limitations,
including the nondiscrimination rules described above. In addition, however,
elective deferrals by an individual participant are limited to a specified
amount per calendar year regardless of any other applicable limits. This
limitation was $7,000 for 1987, $7,313 in 1988, $7,627 in 1989, $7,979 in 1990,
and is subject to adjustment in subsequent years. This limit only applies to
elective deferrals, not matching contributions or other employer contributions.
V. Excess Contributions
If contributions are made in excess of any of the limits described in
section I, II, III or IV, above, there will be adverse tax consequences and
potential plan qualification problems. As a result, steps should be taken to
preclude excess deferrals and contributions if at all possible and if excess
deferrals occur, prompt action should be taken to eliminate the excess.
If excess deferrals are in excess of the $7,000 per calendar year limit
(described in section IV, above), then the participant will be taxed twice on
the excess part of the elective deferral unless the excess amount is distributed
by the April 15 following the calendar year in which the excess amount is
deferred. The distribution must include any income allocable to the excess
amount as well as the excess amount itself.
Similarly, if amounts are contributed in excess of the ADP limits
(described in section I, above), the ACP limits (described in section II,
above), or the special coordination rules limit, the excess amount plus any
earnings on that excess amount should be distributed within 2 1/2 months
following the close of the plan year in order to minimize the adverse tax
consequences. While the distribution of this amount will be taxable to the
participant, the distribution will not be subject to any penalty taxes or have
other adverse tax consequences.
<PAGE>
-5-
Other correction mechanisms are available under the plan and the details
of the plan provisions should be studied carefully if excess contributions are
made.
<PAGE>
GLOSSARY
Affiliated Employer(s). The Employer and any corporation which is a member
of a controlled group of corporations (as defined in section 414(b) of the
Internal Revenue Code) which includes the Employer, any trade or business
(whether or not incorporated) which is under common control (as defined in
section 414(c) of the Internal Revenue Code) with the Employer, or any service
organization (whether or not incorporated) which is a member of an affiliated
service group (as defined in section 414(m) or (o) of the Internal Revenue Code)
which includes the Employer.
Employer. The corporation, proprietorship, partnership or other
organization which adopts the plan by execution of an adoption agreement.
Equivalency Method. A method for determining Hours of Service.
Family Members. A Family Member is an employee's spouse or a lineal
ancestor or descendant of the employee or the spouse of a lineal ancestor or
descendant. Compensation paid to Family Members of five percent owners and the
top 10 Highly-Compensated Employees is considered as paid to the
Highly-Compensated Employee.
Fiduciary. The plan administrator, the trustee and any other person who
has discretionary authority or discretionary control regarding the operation and
administration of the plan or its assets, including any person who provides
investment advice for a fee. The "named fiduciary" is the plan administrator and
any other person designated in the adoption agreement.
Highly-Compensated Employee. Those employees who (1) are or were five
percent owners; (2) receive compensation in excess of $75,000; (3) receive
compensation in excess of $50,000 and are
<PAGE>
-2-
in the top-paid group and (4) are or have been officers and receive more than 50
percent of the dollar limit for defined benefit plans ($51,291 in 1990).
For purposes of the definition of Highly-Compensated Employee,
compensation means compensation as defined by Code section 415(c)(3), generally
W-2 compensation. However, compensation in excess of $200,000 is not considered.
Moreover, in determining who is highly-compensated in the current year, a
special rule may apply. Except for five percent owners, an employee not
considered highly-compensated in the prior plan year will not be considered
highly-compensated for the current plan year unless the employee is also one of
the top 100 employees by compensation. Thus, an employee who is not
highly-compensated in the prior year is not considered highly-compensated unless
he is a five percent owner or one of the top 100 employees by compensation.
A former employee is treated as a Highly-Compensated Employee if the
employee was highly-compensated when he separated from service or the employee
was highly-compensated at any time after reaching age 55.
Hour of Service. Each hour for which an employee is paid, or entitled to
payment. This includes hours for which back pay is awarded, and hours for which
an employee is paid but performs no duties due to vacation, holiday, illness,
incapacity, layoff, jury duty, military duty, or leave of absence. No more than
501 Hours of Service will be credited on account of any single, continuous
period during which an employee performs no duties. In addition, an
uncompensated authorized leave of absence of up to two years, or military leave
while the employee's reemployment rights are protected by law will be credited
to prevent loss of rights if the employee returns to employment at the end of
his leave of absence or within 90 days after the end of his military leave,
whichever is applicable. Also, solely for purposes of determining whether an
employee has a break in service, Hours of Service will also include absence from
work for maternity or paternity reasons.
<PAGE>
-3-
Joint and Survivor Annuity. An annuity for the life of a plan participant
with a survivor annuity for the life of the participant's spouse which is 50
percent of the amount of the annuity payable during the participant's life.
Key Employee. Any employee, former employee, or beneficiary of an employee
or former employee who, at any time during the plan year including the
determination date or any of the four preceding plan years, is:
(a) an officer of the Employer, if such officer has total annual
compensation from the Employer in excess of $51,291 (for 1990); or
(b) an employee or beneficiary owning one of the 10 largest
interests in the Employer if such individual's compensation exceeds $30,000 (for
1990); or
(c) a more than five percent shareholder or owner of the Employer;
or
(d) a more than one percent shareholder or owner of the Employer, if
such employee has total annual Compensation from the Employer of more than
$150,000.
Non-Key Employee. Any employee or former employee who is not a Key
Employee. In addition, any beneficiary of a Non-Key Employee shall be treated as
a Non-Key Employee.
Officers. If an employer has no officer who earns the requisite amount of
annual compensation ($51,291 for 1990), the highest paid officer of the employer
will be considered an officer for this purpose. Partnerships are deemed to have
officers. However, no more than 50 employees are to be counted as officers for
this purpose (or, if less than 50, no more than the greater of three employees
or 10 percent of the employees).
<PAGE>
-4-
Owner-Employee. An individual who is a sole proprietor, or who is a
partner owning more than ten percent of either the capital or profits interest
of a partnership.
Predecessor Employer. An employer which maintained the current plan prior
to the current employer or employed the current employer's employees.
Predecessor Plan. A plan maintained by the current employer or a
Predecessor Employer prior to adoption of the prototype plan.
Preretirement Survivor Annuity. An annuity, payable as the result of a
participant's death prior to retirement, for the life of the participant's
spouse, which is the actuarial equivalent of the participant's plan account.
Shareholder-Employee. An employee or officer who owns (or is considered as
owning within the meaning of section 318(a)(1) of the Internal Revenue Code)
five percent or more of an S corporation.
Social Security Integration. A combination of employer contributions under
the plan and employer contributions for Social Security in a way that will make
total employer contributions for retirement benefits proportionately equal for
participants at all compensation levels.
Top-Paid Group. To determine those employees comprising the top-paid 20
percent of employees, the employer need only consider the total number of
active, not former, employees. The employer should exclude:
(a) employees with less than six months of service;
<PAGE>
-5-
(b) part-time and seasonal employees working less than 17.5 hours
weekly or six months per year;
(c) employees under age 21; and
(d) employees in a collective bargaining unit.
If desired, a shorter period of service, lower number of hours or months
or lower age may be substituted in items (1), (2) and (3).
Year of Service. A twelve month period during which an employee of the
Employer has completed at least 1,000 Hours of Service (whether or not
continuous) with the Employer. The Employer may, in Adoption Agreement #002,
specify a lesser number of hours.
<PAGE>
PROCEDURES FOR ESTABLISHING OR AMENDING A PROTOTYPE PLAN
There are a number of steps that an employer must take to establish or
amend a prototype plan. For an employer establishing a new plan, the adoption
agreement must be completed and executed prior to the end of the employer's
taxable year. These steps are set out below:
1. Plan Documents. The employer should obtain a complete, up-to-date copy
of the prototype plan document, the trust agreement, and the applicable adoption
agreement. The employer should study the provisions carefully and consult with a
tax advisor or legal counsel before completing the adoption agreement.
2. Complete the Adoption Agreement. The employer must complete an adoption
agreement. To select alternative or optional plan features and complete the
adoption agreement, see Tab 9, which contains Provision-by-Provision
Instructions for Completing the Adoption Agreement. The completed adoption
agreement must be dated and signed by the employer and sent to the plan sponsor
[INSERT NAME AND ADDRESS OF PLAN SPONSOR].
3. Adopt the Plan. A corporate employer should adopt a resolution
authorizing the adoption and implementation of the plan. A model resolution is
contained at Tab 16. A sole proprietor should execute the plan document and a
partnership should adopt the plan using the procedures set forth in its
partnership agreement (or in state law) for executing legal documents.
4. Appoint the Plan Trustee. The employer must name one or more trustees
to oversee the investment of plan assets. The trustees may be individuals or
institutions with trust powers. A corporate employer is not permitted to serve
as trustee. The trustees should acknowledge their acceptance of their duties and
obligations by signing the Adoption Agreement at section XVI of
<PAGE>
-2-
Adoption Agreement #001 and section XVII of Adoption Agreement #002, or in a
separate written document.
5. Appoint the Plan Administrator. The employer, or the trustees appointed
by the employer, must name an administrator to manage the recordkeeping and
reporting activities regarding the plan. The plan administrator may be the
employer, an officer or committee of officers of the employer, or an external
administrative agent. A corporate employer can be the plan administrator. See
Tab 8, Notice of General Administrative Responsibilities.
6. Establish the Trust. The trustees appointed by the employer should open
a trust account with the sponsor. To the extent that plan assets are invested in
shares of the sponsor, the sponsor will establish individual accounts for each
plan participant and provide them with periodic reports. If the plan has assets
other than shares of the sponsor, the trustees must maintain and report on
individual accounts for each participant in the plan. If assets from an existing
plan are to be transferred into the trust, see Tab 6, Procedures for
Transferring Assets Between Trusts.
7. Determine Method of Investment Selection. The employer must choose
among the optional methods of selecting investments under the prototype plan.
See Tab 7, Procedures for Determining Method of Investment Selection.
8. Communicate the Plan to Employees. After the employer has adopted the
plan, the employer should communicate the adoption and principal provisions of
the plan to employees.
The adoption can be communicated by posting or delivering a "Notice to
Interested Parties" to current employees, former employees who are eligible for
benefits, and beneficiaries of deceased employees. If the plan is a new plan,
only current employees need be notified. The employer or the plan administrator
must post the notice between 9 and 23 days after the employer has adopted
<PAGE>
-3-
the plan and between 6 and 20 days after adoption if the notice is mailed to
employees. Model notices and instructions for completing them are at Tab 22.
The principal plan provisions can be communicated to employees by
providing participants with a copy of the summary plan description. See section
10 below.
9. Bonding and Insurance. If a plan covers common law employees, the plan
administrator, any individual trustees, and any person who handles funds or
property belonging to the plan must be covered by a surety bond equal to 10
percent of the plan assets as of the beginning of the plan year (but not less
than $1,000 nor more than $500,000). For example, an employee who signs checks
transferring assets to the trustee should be bonded. This bond normally may be
obtained from an insurance company at a minimal cost. A bond is not required if
the plan only covers the individual and/or spouse who are the sole owners of the
proprietorship or corporation.
The employer may also wish to obtain fiduciary liability insurance
covering the plan administrator and any individual trustees. Fiduciary liability
insurance must be paid for by the employer unless it permits recovery against
individual fiduciaries. It may not be paid from plan assets. Fiduciary liability
insurance is not required by law, however.
10. Prepare the Summary Plan Description. The employer must inform each
participant under the plan of his rights under the plan in a manner that is
understandable to the participants. To do this, the employer should complete the
appropriate Model Summary Plan Description at Tab 15 according to the
instructions provided. The plan administrator should provide a copy of the
completed description within 90 days after participation begins, to each new
participant under the plan. In addition, a copy of the summary plan description
must be filed with the Department of Labor by the plan administrator within 120
days after adoption of the plan.
<PAGE>
-3-
11. Consult a Professional. Because of the many statutory and regulatory
requirements imposed on tax-qualified plans, all actions taken with respect to
establishing such a plan should be reviewed by a tax advisor or legal counsel.
<PAGE>
INVESTMENT COMPANY INSTITUTE
PROTOTYPE PROFIT SHARING/401(k) PLAN
BASIC DOCUMENT #02
<PAGE>
INVESTMENT COMPANY INSTITUTE
PROTOTYPE PROFIT SHARING/401(k) PLAN
BASIC DOCUMENT #02
TABLE OF CONTENTS
Page
ARTICLE 1
GENERAL
1.1 Purpose........................................................... 1
1.2 Trust............................................................. 1
ARTICLE 2
DEFINITIONS
2.1 Account........................................................... 1
2.2 Adoption Agreement................................................ 1
2.3 Affiliated Employers.............................................. 1
2.4 Beneficiary....................................................... 1
2.5 Break in Service.................................................. 2
2.6 Code.............................................................. 2
2.7 Compensation...................................................... 2
2.8 Custodian......................................................... 3
2.9 Determination Date................................................ 3
2.10 Early Retirement Date............................................. 3
2.11 Earned Income..................................................... 3
2.12 Effective Date.................................................... 3
2.13 Elective Deferrals................................................ 3
2.14 Eligibility Computation Period.................................... 4
2.15 Employee.......................................................... 4
2.16 Employee Contributions............................................ 4
2.17 Employer.......................................................... 4
2.18 Employer Contributions............................................ 4
2.19 Entry Dates....................................................... 4
2.20 ERISA............................................................. 4
2.21 Excess Elective Deferrals......................................... 4
2.22 Highly-Compensated Employee....................................... 5
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2.23 Hour of Service................................................... 6
2.24 Integration Level................................................. 9
2.25 Key Employee...................................................... 9
2.26 Leased Employee................................................... 9
2.27 Matching Contributions............................................ 10
2.28 Maximum Profit Sharing Disparity Rate............................. 11
2.29 Non-Key Employee.................................................. 11
2.30 Normal Retirement Age............................................. 11
2.31 Owner-Employee.................................................... 11
2.32 Participant....................................................... 11
2.33 Plan.............................................................. 12
2.34 Plan Administrator................................................ 12
2.35 Plan Year......................................................... 12
2.36 Qualified Matching Contributions.................................. 12
2.37 Qualified Nonelective Contributions............................... 12
2.38 Self-Employed Individual.......................................... 12
2.39 Shares............................................................ 12
2.40 Sponsor........................................................... 12
2.41 Taxable Wage Base................................................. 12
2.42 Total and Permanent Disability.................................... 13
2.43 Trust............................................................. 13
2.44 Trust Agreement................................................... 13
2.45 Trustee........................................................... 13
2.46 Valuation Date.................................................... 13
2.47 Vesting Computation Period........................................ 13
2.48 Year of Service................................................... 13
ARTICLE 3
ELIGIBILITY AND YEARS OF SERVICE
3.1 Eligibility Requirements.......................................... 13
3.2 Participation and Service Upon Reemployment....................... 14
3.3 Predecessor Employers............................................. 14
ARTICLE 4
CONTRIBUTIONS
4.1 Employer Contributions............................................ 15
4.2 Payment........................................................... 15
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4.3 Employee Contributions............................................ 16
4.4 Elective Deferrals................................................ 16
4.5 Rollovers......................................................... 17
4.6 Direct Transfers.................................................. 18
4.7 Limits for Highly-Compensated..................................... 19
4.8 Excess Contributions.............................................. 24
4.9 Excess Elective Deferrals......................................... 28
4.10 Excess Aggregate Contributions.................................... 30
4.11 Hardship Suspensions.............................................. 31
ARTICLE 5
ALLOCATIONS
5.1 Individual Accounts............................................... 31
5.2 Minimum Allocation................................................ 33
5.3 Allocation of Employer Contributions and Forfeitures.............. 34
5.4 Coordination of Social Security Integration....................... 35
5.5 Withdrawals and Distributions..................................... 35
5.6 Determination of Value of Trust Fund and of Net Earnings or Losses 35
5.7 Allocation of Net Earnings or Losses.............................. 36
5.8 Responsibilities of the Plan Administrator........................ 37
ARTICLE 6
LIMITATIONS ON ALLOCATIONS
6.1 Employers Who do not Maintain Other Qualified Plans............... 37
6.2 Employers Who Maintain Other Qualified Master or Prototype Defined
Contribution Plans................................................ 38
6.3 Employers Who, in Addition to This Plan, Maintain Other Qualified
Plans Which Are Defined Contribution Plans Other Than Master
or Prototype Plans ............................................... 40
6.4 Employers, Who in Addition to This Plan, Maintain a Qualified
Defined Benefit Plan............................................... 40
6.5 Definitions....................................................... 40
ARTICLE 7
TRUST FUND
7.1 Receipt of Contributions by Trustee............................... 45
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7.2 Investment Responsibility......................................... 45
7.3 Investment Limitations............................................ 46
ARTICLE 8
VESTING
8.1 Employee Contributions and Elective Deferral Contributions and
Earnings ......................................................... 46
8.2 Rollovers, Transfers and Earnings................................. 47
8.3 Employer Contributions, Matching Contributions and Earnings....... 47
8.4 Amendments to Vesting Schedule.................................... 47
8.5 Determination of Years of Service................................. 48
8.6 Forfeiture of Non-Vested Amounts.................................. 49
8.7 Reinstatement of Benefit.......................................... 49
ARTICLE 9
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
9.1 General........................................................... 50
9.2 Qualified Joint and Survivor Annuity.............................. 50
9.3 Qualified Preretirement Survivor Annuity.......................... 50
9.4 Definitions....................................................... 50
9.5 Notice Requirements............................................... 52
9.6 Safe Harbor Rules................................................. 54
9.7 Transitional Rules................................................ 55
ARTICLE 10
DISTRIBUTION PROVISIONS
10.1 Vesting on Distribution Before Break in Service................... 57
10.2 Restrictions on Immediate Distributions........................... 58
10.3 Commencement of Benefits.......................................... 60
10.4 Early Retirement With Age and Service Requirement................. 60
10.5 Nontransferability of Annuities................................... 60
10.6 Conflicts With Annuity Contracts.................................. 60
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ARTICLE 11
TIMING AND MODES OF DISTRIBUTION
11.1 General Rules..................................................... 61
11.2 Required Beginning Date........................................... 61
11.3 Limits on Distribution Periods.................................... 61
11.4 Determination of Amount to be Distributed Each Year............... 61
11.5 Death Distribution Provisions..................................... 62
11.6 Designation of Beneficiary........................................ 64
11.7 Definitions....................................................... 64
11.8 Transitional Rule................................................. 67
11.9 Optional Forms of Benefit......................................... 68
ARTICLE 12
WITHDRAWALS
12.1 Withdrawal of Nondeductible Voluntary Contributions............... 70
12.2 Withdrawals of Elective Deferrals................................. 70
12.3 Hardship Withdrawals.............................................. 70
12.4 Manner of Making Withdrawals...................................... 71
12.5 Limitations on Withdrawals........................................ 71
ARTICLE 13
LOANS
13.1 General Provisions................................................ 72
13.2 Administration of Loan Program.................................... 73
13.3 Amount of Loan.................................................... 74
13.4 Manner of Making Loans............................................ 74
13.5 Terms of Loan..................................................... 74
13.6 Security for Loan................................................. 75
13.7 Segregated Investment............................................. 75
13.8 Repayment of Loan................................................. 75
13.9 Default on Loan................................................... 75
13.10 Unpaid Amounts.................................................... 76
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ARTICLE 14
INSURANCE
14.1 Insurance......................................................... 76
14.2 Policies.......................................................... 76
14.3 Beneficiary....................................................... 77
14.4 Payment of Premiums............................................... 77
14.5 Limitation on Insurance Premiums.................................. 77
14.6 Insurance Company................................................. 78
14.7 Distribution of Policies.......................................... 79
14.8 Policy Features................................................... 80
14.9 Changed Conditions................................................ 81
14.10 Conflicts......................................................... 81
ARTICLE 15
ADMINISTRATION
15.1 Duties and Responsibilities of Fiduciaries; Allocation
of Fiduciary Responsibility....................................... 81
15.2 Powers and Responsibilities of the Plan Administrator............. 81
15.3 Allocation of Duties and Responsibilities......................... 83
15.4 Appointment of the Plan Administrator............................. 83
15.5 Expenses.......................................................... 84
15.6 Liabilities....................................................... 84
15.7 Claims Procedure.................................................. 84
ARTICLE 16
AMENDMENT, TERMINATION AND MERGER
16.1 Sponsor's Power to Amend.......................................... 86
16.2 Amendment by Adopting Employer.................................... 86
16.3 Vesting Upon Plan Termination..................................... 86
16.4 Vesting Upon Complete Discontinuance of Contributions............. 86
16.5 Maintenance of Benefits Upon Merger............................... 86
16.6 Special Amendments................................................ 87
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ARTICLE 17
MISCELLANEOUS
17.1 Exclusive Benefit of Participants and Beneficiaries............... 87
17.2 Nonguarantee of Employment........................................ 88
17.3 Rights to Trust Assets............................................ 88
17.4 Nonalienation of Benefits......................................... 88
17.5 Aggregation Rules................................................. 88
17.6 Failure of Qualification.......................................... 89
17.7 Applicable Law.................................................... 89
<PAGE>
ARTICLE 1
GENERAL
1.1 Purpose. The Employer hereby establishes this Plan to provide
retirement, death and disability benefits for eligible Employees and their
Beneficiaries. This Plan is a standardized prototype defined contribution profit
sharing plan. The provisions herein and the selections made by the Employer by
execution of the profit sharing Adoption Agreement shall constitute the Plan. It
is intended that the Plan and Trust qualify under sections 401 and 501 of the
Internal Revenue Code of 1986, as amended, and that it comply with the
provisions of the Employee Retirement Income Security Act of 1974, as amended.
1.2 Trust. The Employer has simultaneously adopted a Trust to receive,
invest, and distribute funds in accordance with the Plan.
ARTICLE 2
DEFINITIONS
2.1 Account. The aggregate of the individual bookkeeping subaccounts
established for each Participant, as provided in section 5.1.
2.2 Adoption Agreement. The written agreement or agreements of the
Employer and the Trustee by which the Employer establishes this Plan and adopts
the Trust Agreement forming a part hereof, as the same may be amended from time
to time. The Adoption Agreement contains all the options that may be selected by
the Employer. The information set forth in the Adoption Agreement executed by
the Employer shall be deemed to be a part of this Plan as if set forth in full
herein.
2.3 Affiliated Employers. The Employer and any corporation which is a
member of a controlled group of corporations (as defined in section 414(b) of
the Code) which includes the Employer, any trade or business (whether or not
incorporated) which is under common control (as defined in section 414(c) of the
Code) with the Employer, or any service organization (whether or not
incorporated) which is a member of an affiliated service group (as defined in
section 414(m) or (o) of the Code) which includes the Employer.
2.4 Beneficiary. The person or persons (natural or otherwise) designated
by a Participant in accordance with section 11.6 to receive any undistributed
amounts credited to the Participant's Account under the Plan at the time of the
Participant's death.
2.5 Break in Service. An Eligibility Computation Period or Vesting
Computation Period in which an Employee fails to complete more than five hundred
(500) Hours of Service.
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2.6 Code. The Internal Revenue Code of 1986, as amended from time to time,
or any successor statute.
2.7 Compensation.
(a) Compensation will mean all of each Participant's W-2 earnings.
(b) For any self-employed individual covered under the Plan,
Compensation will mean Earned Income.
(c) Compensation shall include only that Compensation that is
actually paid to the Participant during the Plan Year.
(d) Notwithstanding the above, if elected by the Employer in the
Adoption Agreement, Compensation shall include any amount which is contributed
by the Employer pursuant to a salary reduction agreement and which is not
includable in the gross income of the Employee under sections 125, 402(a)(8),
402(h) or 403(b) of the Code. The effective date of this subsection shall be
elected by the Employer in the Adoption Agreement.
(e) The annual Compensation of each Participant taken into account
under the Plan for any year shall not exceed two hundred thousand dollars
($200,000), as adjusted by the Secretary at the same time and in the same manner
as under section 415(d) of the Code. In determining the Compensation of a
Participant for purposes of this limitation, the rules of section 414(q)(6) of
the Code shall apply, except in applying such rules, the term "family" shall
include only the Spouse of the Participant and any lineal descendants of the
Participant who have not attained age nineteen (19) before the close of the
year. If, as a result of the application of such rules, the adjusted two hundred
thousand dollar ($200,000) limitation is exceeded, then (except for purposes of
determining the portion of Compensation up to the Integration Level to the
extent this Plan provides for permitted disparity), the limitation shall be
prorated among the affected individuals in proportion to each such individual's
Compensation as determined under this section prior to the application of this
limitation.
(f) The effective date of this subsection shall be the first Plan
Year beginning on or after January 1, 1989.
2.8 Custodian. The custodian, if any, designated in the Adoption
Agreement.
2.9 Determination Date. With respect to any Plan Year subsequent to the
first Plan Year, the last day of the preceding Plan Year. For the first Plan
Year of the Plan, the last day of that Plan Year.
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2.10 Early Retirement Date. The first day of the month coincident with or
next following the date upon which the Participant satisfies the early
retirement age and service requirements in the Adoption Agreement; provided,
however, such requirements may not be less than age fifty-five (55), nor more
than fifteen (15) Years of Service.
2.11 Earned Income. The net earnings from self-employment in the trade or
business with respect to which the Plan is established, for which personal
services of the individual are a material income-producing factor. Net earnings
will be determined without regard to items not included in gross income and the
deductions allocable to such items. Net earnings are reduced by contributions to
a qualified plan to the extent deductible under section 404 of the Code. Net
earnings shall be determined with regard to the deduction allowed to the
Employer by section 164(f) of the Code for taxable years beginning after
December 31, 1989.
2.12 Effective Date. The first day of the first Plan Year for which the
Plan is effective as specified in the Adoption Agreement.
2.13 Elective Deferrals. Any employer contributions made to the Plan at
the election of the Participant, in lieu of cash Compensation, and shall include
contributions made pursuant to a salary reduction agreement or other deferral
mechanism. With respect to any taxable year, a Participant's Elective Deferral
is the sum of all such employer contributions made on behalf of such Participant
pursuant to an election to defer under any qualified cash or deferred
arrangement as described in section 401(k) of the Code, any simplified employee
pension cash or deferred arrangement as described in section 402(h)(1)(B), any
eligible deferred compensation plan under section 457, any plan as described
under section 501(c)(18), and any employer contributions made on behalf of a
Participant for the purchase of an annuity contract under section 403(b)
pursuant to a salary reduction agreement.
2.14 Eligibility Computation Period. For purposes of determining Years of
Service and Breaks in Service for eligibility to participate, the initial
Eligibility Computation Period shall be the twelve (12) consecutive month period
beginning with the day the Employee first performs an Hour of Service for the
Employer (employment commencement date). The succeeding twelve (12) consecutive
month periods commence with the first anniversary of the Employee's employment
commencement date.
2.15 Employee. Any person, including a Self-Employed Individual, who is
employed by the Employer maintaining the Plan or any other employer required to
be aggregated with such Employer under sections 414(b), (c), (m) or (o) of the
Code. The term "Employee" shall also include any Leased Employee deemed to be an
Employee of any Employer described above as provided in sections 414(n) or (o)
of the Code.
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2.16 Employee Contributions. Any contribution made to the Plan by or on
behalf of a Participant that is included in the Participant's gross income in
the year in which made and that is maintained under a separate account to which
earnings and losses are allocated.
2.17 Employer. The corporation, proprietorship, partnership or other
organization that adopts the Plan by execution of an Adoption Agreement.
2.18 Employer Contributions. The contribution of the Employer to the Plan
and Trust as set forth in section 4.1 and the Adoption Agreement.
2.19 Entry Dates. The Effective Date shall be the first Entry Date.
Thereafter, the Entry Dates shall be the first day of each Plan Year and the
first day of the seventh month of each Plan Year.
2.20 ERISA. The Employee Retirement Income Security Act of 1974, as
amended.
2.21 Excess Elective Deferrals. Those Elective Deferrals that are
includable in a Participant's gross income under section 402(g) of the Code to
the extent such Participant's Elective Deferrals for a taxable year exceed the
dollar limitation under such Code section. Excess Elective Deferrals shall be
treated as Annual Additions under the Plan.
2.22 Highly-Compensated Employee.
(a) The term "Highly-Compensated Employee" shall include
highly-compensated active Employees and highly-compensated former Employees.
(b) A highly-compensated active Employee includes any Employee who
performs service for the Employer during the determination year and who, during
the look-back year:
(i) received Compensation from the Employer in excess of
seventy-five thousand dollars ($75,000) (as adjusted pursuant to section 415(d)
of the Code);
(ii) received Compensation from the Employer in excess of
fifty thousand dollars ($50,000) (as adjusted pursuant to section 415(d) of the
Code) and was a member of the top-paid group for such year; or
(iii) was an officer of the Employer and received Compensation
during such year that is greater than fifty percent (50%) of the dollar
limitation in effect under section 415(b)(1)(A) of the Code.
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(c) The term "Highly-Compensated Employee" also includes:
(i) Employees who are both described in the preceding
subsection if the term "determination year" is substituted for the term
"look-back year" and the Employee is one of the one hundred (100) Employees who
received the most Compensation from the Employer during the determination year;
and
(ii) Employees who are five percent (5%) owners at any time
during the look-back year or determination year.
(d) (i) If no officer has satisfied the Compensation requirement
of subsection (b)(iii) above during either a determination year or look-back
year, the highest paid officer for such year shall be treated as a
Highly-Compensated Employee.
(ii) For this purpose, the determination year shall be the
Plan year. The look-back year shall be the twelve (12) month period immediate
preceding the determination year.
(e) A highly-compensated former Employee includes any Employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly-compensated active Employee for either the
separation year or any determination year ending on or after the Employee's
fifty-fifth (55th) birthday.
(f) If an Employee is, during a determination year or look-back
year, a family member of either a five percent (5%) owner who is an active or
former Employee or a Highly-Compensated Employee who is one of the ten (10) most
Highly-Compensated Employees ranked on the basis of Compensation paid by the
Employer during such year, then the family member and five percent (5%) owner or
top ten (10) Highly-Compensated Employee shall be aggregated. In such case, the
family member and five percent (5%) owner or top ten (10) Highly-Compensated
Employee shall be treated as a single Employee receiving Compensation and Plan
contributions or benefits equal to the sum of such Compensation and
contributions or benefits of the family member and five percent (5%) owner or
top ten (10) Highly-Compensated Employee. For purposes of this section, family
member includes the Spouse, lineal ascendants and descendants of the Employee or
former Employee and the spouses of such lineal ascendants and descendants.
(g) The determination of who is a Highly-Compensated Employee,
including the determinations of the number and identity of Employees in the
top-paid group, the top one hundred (100) Employees, the number of Employees
treated as officers and the Compensation that is considered, will be made in
accordance with section 414(q) of the Code and the regulations thereunder.
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2.23 Hour of Service.
(a) Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for the Employer. These hours shall be credited to
the Employee only for the computation period or periods in which the duties are
performed; and
(b) Each hour for which an Employee is paid, or entitled to payment,
by the Employer 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, military duty, or leave of absence. No more than five hundred one
(501) Hours of Service shall be credited under this paragraph to an Employee on
account of any single, continuous period during which the Employee performs no
duties (whether or not such period occurs in a single computation period). Hours
under this paragraph will be calculated and credited pursuant to section
2530.200b-2 of the Department of Labor regulations which are incorporated herein
by this reference.
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same Hours of
Service shall not be credited both under paragraph (a) or paragraph (b), as the
case may be, and under this paragraph (c). These hours shall be credited to the
Employee for the computation period or periods to which the award or agreement
pertains rather than the computation period in which the award, agreement, or
payment is made.
(d) Solely for purposes of determining whether an Employee has a
Break in Service, Hours of Service shall also include an uncompensated
authorized leave of absence not in excess of two (2) years, or military leave
while the Employee's reemployment rights are protected by law or such additional
or other periods as granted by the Employer as military leave (credited on the
basis of forty (40) Hours of Service per each week or eight (8) Hours of Service
per working day), provided the Employee returns to employment at the end of his
leave of absence or within ninety (90) days of the end of his military leave,
whichever is applicable.
(e) Hours of Service will be credited for employment with other
members of an affiliated service group (under section 414(m)), a controlled
group of corporations (under section 414(b)), or a group of trades or businesses
under common control (under section 414(c)) of which the adopting Employer is a
member, and any other entity required to be aggregated with the Employer
pursuant to section 414(o) of the Code and the regulations thereunder. Hours of
Service will also be credited for any individual considered an Employee for
purposes of this Plan under section 414(n) or section 414(o) of the Code and the
regulations thereunder.
(f) Solely for purposes of determining whether an Employee has a
Break in Service, Hours of Service shall also include absence from work for
maternity or paternity reasons,
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if the absence begins on or after the first day of the first Plan Year beginning
after 1984. During this absence, the Employee shall be credited with the Hours
of Service which would have been credited but for the absence, or, if such hours
cannot be determined, with eight (8) hours per day. An absence from work for
maternity or paternity reasons means an absence:
(i) by reason of the pregnancy of an Employee;
(ii) by reason of the birth of a child of the Employee;
(iii) by reason of the placement of a child with the Employee
in connection with adoption; or
(iv) for purposes of caring for such a child for a period
immediately following such birth or placement.
These Hours of Service shall be credited in the computation period following the
computation period in which the absence begins, except as necessary to prevent a
Break in Service in the computation period in which the absence begins. However,
no more than five hundred one (501) Hours of Service will be credited for
purposes of any such maternity or paternity absence from work.
(g) The Employer may elect to compute Hours of Service by the use of
one of the service equivalencies in the Adoption Agreement. Only one method may
be selected. If selected, the service equivalency must be applied to all
Employees covered under the Plan.
(h) If the Employer amends the method of crediting service from the
elapsed time method described in section 1.410(a)-7 of the Treasury regulations
to the Hours of Service computation method by the adoption of this Plan, or an
Employee transfers from a plan under which service is determined on the basis of
elapsed time, the following rules shall apply for purposes of determining the
Employee's service under this Plan up to the time of amendment or transfer:
(i) the Employee shall receive credit, as of the date of
amendment or transfer, for a number of Years of Service equal to the number of
one (1) year periods of service credited to the Employee as of the date of the
amendment or transfer; and
(ii) the Employee shall receive credit in the applicable
computation period which includes the date of amendment or transfer, for a
number of Hours of Service determined by applying the weekly service equivalency
specified in paragraph (g) to any fractional part of a year credited to the
Employee under this paragraph (h) as of the date of amendment or
<PAGE>
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transfer. The use of the weekly service equivalency shall apply to all Employees
who formerly were credited with service under the elapsed time method.
2.24 Integration Level. The Taxable Wage Base or such lesser amount
elected by the Employer in the Adoption Agreement.
2.25 Key Employee.
(a) Any Employee or former Employee (and the Beneficiaries of such
Employee) who at any time during the determination period was an officer of the
Employer if such individual's annual Compensation exceeds fifty percent (50%) of
the dollar limitation under section 415(b)(1)(A) of the Code; an owner (or
considered an owner under section 318 of the Code) of one of the ten (10)
largest interests in the Employer if such individual's Compensation exceeds one
hundred percent (100%) of the dollar limitation under section 415(c)(1)(A) of
the Code; a five percent (5%) owner of the Employer; or a one percent (1%) owner
of the Employer who has annual Compensation of more than one hundred fifty
thousand dollars ($150,000).
(b) For purposes of this section, annual Compensation means
compensation as defined in section 415(c)(3) of the Code, but including amounts
contributed by the Employer pursuant to a salary reduction agreement which are
excludable from the Employee's gross income under sections 125, 402(a)(8),
402(h) or 403(b) of the Code.
(c) For purposes of this section, determination period is the Plan
Year containing the Determination Date and the four (4) preceding Plan Years.
2.26 Leased Employee.
(a) Any person (other than an Employee of any of the Affiliated
Employers) who, pursuant to an agreement between any of the Affiliated Employers
and any other person ("leasing organization"), has performed service for any of
the Affiliated Employers (or for any of the Affiliated Employers and related
persons determined in accordance with section 414(n)(6) of the Code) on a
substantially full-time basis for a period of at least one (1) year and such
services are of a type historically performed by employees in the Affiliated
Employer's business field. Contributions or benefits provided a Leased Employee
by the leasing organization which are attributable to services performed for the
Affiliated Employer shall be treated as provided by the Affiliated Employer.
(b) A Leased Employee shall not be considered an Employee of an
Affiliated Employer if:
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(i) such employee is covered by a money purchase pension plan
providing:
(1) a nonintegrated employer contribution rate of at
least ten percent (10%) of compensation (as defined in section 415(c)(3) of the
Code), but including amounts contributed pursuant to a salary reduction
agreement which are excludable from the employee's gross income under sections
125, 402(a)(8), 402(h) or 403(b) of the Code;
(2) immediate participation; and
(3) full and immediate vesting.
and
(ii) Leased Employees do not constitute more than twenty
percent (20%) of the Affiliated Employer's non-Highly-Compensated workforce.
(c) The determination of whether a person is a Leased Employee will
be made pursuant to section 414(n) of the Code.
2.27 Matching Contributions. A contribution by the Employer made to this
or any other defined contribution plan on behalf of a Participant on account of
an Employee Contribution made by such Participant, or on account of a
Participant's Elective Deferral, under a plan maintained by the Employer.
2.28 Maximum Profit Sharing Disparity Rate. The lesser of:
(a) two and seven-tenths percent (2.7%);
(b) the applicable percentage determined in accordance with the
table below:
If the Integration Level is
The Applicable
More Than But Not More Than Percentage Is:
------------ ----------------- --------------
$0 X 2.7%
X */ of TWB 80% of TWB 1.3%
80% of TWB Y **/ 2.4%
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*/ X = the greater of $10,000 or 20% of the Taxable Wage Base.
**/ Y = any amount more than 80% of the Taxable Wage Base but less than 100%
of the Taxable Wage Base.
If the Integration Level used is equal to the Taxable Wage Base, the applicable
percentage is two and seven-tenths percent (2.7%).
2.29 Non-Key Employee. Any Employee or former Employee who is not a Key
Employee. In addition, any Beneficiary of a Non-Key Employee shall be treated as
a Non-Key Employee.
2.30 Normal Retirement Age. Unless otherwise specified in the Adoption
Agreement, Normal Retirement Age shall be age sixty-five (65). If the Employer
enforces a mandatory retirement age, the Normal Retirement Age is the lesser of
that mandatory age or the age specified in the Adoption Agreement.
2.31 Owner-Employee. An individual who is a sole proprietor, or who is a
partner owning more than ten percent (10%) of either the capital or profits
interest of a partnership.
2.32 Participant. A person who has met the eligibility requirements of
section 3.1 and whose Account hereunder has been neither completely forfeited
nor completely distributed.
2.33 Plan. The prototype defined contribution profit sharing plan provided
under this basic plan document.
2.34 Plan Administrator. The person, persons, or entity appointed by the
Employer pursuant to ARTICLE 15 to manage and administer the Plan.
2.35 Plan Year. Unless otherwise specified in the Adoption Agreement, the
Plan Year shall be the twelve (12) month period ending with the last day of
December each year.
2.36 Qualified Matching Contributions. Matching Contributions that are
subject to the distribution and nonforfeitability requirements under section
401(k) of the Code when made.
2.37 Qualified Nonelective Contributions. Contributions (other than
Matching Contributions or Qualified Matching Contributions) made by the Employer
and allocated to Participants' accounts that the Participants may not elect to
receive in cash until distributed from the Plan; that are nonforfeitable when
made; that are distributable only in accordance with distribution provisions
that are applicable to Elective Deferrals and Qualified Matching Contributions
and that are made by the Employer pursuant to section 4.7(c).
<PAGE>
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2.38 Self-Employed Individual. An individual who has Earned Income for the
taxable year from the trade or business for which the Plan is established, or an
individual who would have had Earned Income for the taxable year but for the
fact that the trade or business had no net profits for the taxable year.
2.39 Shares. Shares of stock in any regulated investment company
registered under the Investment Company Act of 1940 that are made available for
investment purposes as an investment option under this Plan.
2.40 Sponsor. The sponsor designated in the Adoption Agreement that has
made this Plan available to the Employer.
2.41 Taxable Wage Base. The maximum amount of earnings that may be
considered wages for a year under section 3121(a)(1) of the Code in effect as of
the beginning of the Plan Year.
2.42 Total and Permanent Disability. The inability of the Participant to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment, which condition, in the opinion of a
physician chosen by the Plan Administrator, can be expected to last for a
continuous period of not less than twelve (12) months.
2.43 Trust. The fund maintained by the Trustee for the investment of Plan
assets in accordance with the terms and conditions of the Trust Agreement.
2.44 Trust Agreement. The agreement between the Employer and the Trustee
under which the assets of the Plan are held, administered, and managed. The
provisions of the Trust Agreement shall be considered an integral part of this
Plan as if set forth fully herein.
2.45 Trustee. The individual or corporate Trustee or Trustees under the
Trust Agreement as they may be constituted from time to time.
2.46 Valuation Date. The last day of each Plan Year and such other dates
as may be determined by the Plan Administrator, as provided in section 5.6 for
valuing the Trust assets.
2.47 Vesting Computation Period. The Plan Year.
2.48 Year of Service. An Eligibility Computation Period, Vesting
Computation Period, or Plan Year, whichever is applicable, during which an
Employee has completed at least one thousand (1,000) Hours of Service (whether
or not continuous). The Employer may, in the Adoption Agreement, specify a fewer
number of hours.
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ARTICLE 3
ELIGIBILITY AND YEARS OF SERVICE
3.1 Eligibility Requirements.
(a) Each Employee of the Affiliated Employers shall become a
Participant in the Plan as of the first Entry Date after the date on which the
Employee has satisfied the minimum age and service requirements specified in the
Adoption Agreement.
(b) The Employer may elect in the Adoption Agreement to exclude from
participation:
(i) Employees included in a unit of employees covered by a
collective bargaining agreement between the Employer and Employee
representatives, if retirement benefits were the subject of good faith
bargaining. For this purpose, the term "Employee representatives" does not
include any organization more than half of whose members are Employees who are
owners, officers, or executives of the Employer; and
(ii) nonresident aliens who receive no earned income from the
Employer which constitutes income from sources within the United States.
3.2 Participation and Service Upon Reemployment. Upon the reemployment of
any Employee, the following rules shall determine his eligibility to participant
in the Plan and his credit for prior service.
(a) Participation. If the reemployed Employee was a Participant in
the Plan during his prior period of employment, he shall be eligible upon
reemployment to resume participation in the Plan. If the reemployed Employee was
not a Participant in the Plan, he shall be considered a new Employee and
required to meet the requirements of section 3.1 in order to be eligible to
participate in the Plan, subject to the reinstatement of credit for prior
service under paragraph (b) below.
(b) Credit for Prior Service. In the case of any Employee who is
reemployed before or after incurring a Break in Service, any Hour of Service and
Year of Service credited to the Employee at the end of his prior period of
employment shall be reinstated as of the date of his reemployment.
3.3 Predecessor Employers. If specified in the Adoption Agreement, Years
of Service with a predecessor employer will be treated as service for the
Employer for eligibility purposes;
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provided, however, if the Employer maintains the plan of a predecessor employer,
Years of Service with such employer will be treated as service with the Employer
without regard to any election.
ARTICLE 4
CONTRIBUTIONS
4.1 Employer Contributions.
(a) Discretionary Contributions. For each Plan Year, the Employer
shall contribute to the Trust an amount as may be determined by the Employer in
accordance with the formula set forth in the Adoption Agreement.
(b) Matching Contributions. For each Plan Year, the Employer shall
contribute to the Trust an amount as may be determined by the Employer in
accordance with the matching contribution formula specified in the Adoption
Agreement.
(c) Eligible Participants. Subject to the Minimum Allocation rules
of section 5.2 and the exclusions specified in this section, each Participant
shall be eligible to share in the Employer Contribution. An Employer may elect
in the Adoption Agreement that Participants who terminate employment during the
Plan Year with not more than five hundred (500) Hours of Service and who are not
Employees as of the last day of the Plan Year (other than Participants who die,
retire or become totally and Permanently Disabled during the Plan Year) shall
not be eligible to share in the Employer Contribution. An Employer may further
elect in the Adoption Agreement to allocate a contribution on behalf of a
Participant who completes fewer than five hundred (500) Hours of Service and is
otherwise ineligible to share in the Employer Contribution. If the Employer
fails to specify in the Adoption Agreement the number of Hours of Service
required to share in the Employer Contribution, the number shall be five hundred
(500) Hours of Service.
(d) Contribution Limitation. In no event shall any Employer
Contribution (plus any Elective Deferrals) exceed the maximum amount deductible
from the Employer's income under section 404 of the Code, or the maximum
limitations under section 415 of the Code provided in ARTICLE 6.
4.2 Payment. All Employer Contributions to the Trust for any Plan Year
shall be made either in one lump-sum or in installments in U.S. currency, by
check or in Shares within the time prescribed by law, including extensions
granted by the Internal Revenue Service, for filing the Employer's federal
income tax return for the taxable year with or within which such Plan Year ends.
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4.3 Employee Contributions.
(a) If the Adoption Agreement so provides and the Employer elects, a
Participant may make voluntary nondeductible contributions ("Employee
Contributions") to the Trust in each Plan Year, in accordance with rules that
the Plan Administrator may establish from time to time. Employee Contributions
are fully vested and nonforfeitable.
(b) (i) The Employee Contributions of a Participant shall be
limited in accordance with the provisions of this section, section 4.7, and any
other applicable provisions of the Plan. The Plan Administrator may refuse to
accept any or all prospective Employee Contributions to be contributed by a
Participant.
(ii) Employee Contributions shall not be permitted to the
extent they would cause the Annual Additions to exceed the limits specified in
ARTICLE 6.
(c) Employee Contributions shall be collected by the Employer by
payroll deduction or direct contribution, in accordance with rules that the Plan
Administrator may establish from time to time. Participants may change the
amounts designated to be deducted from payroll at any time and such changes will
become effective on the next payroll period following by at least thirty (30)
days the submission of such change of designation, unless a shorter period is
agreed to by the Plan Administrator. Employee Contributions shall be paid to the
Trust within thirty (30) days after receipt by the Employer.
4.4 Elective Deferrals.
(a) (i) If the Adoption Agreement so provides and the Employer
elects, a Participant may make Elective Deferrals to the Trust in amounts not to
exceed the limitations specified in the Adoption Agreement.
(ii) A Participant's Elective Deferrals shall be made by
direct reduction of Compensation, with such reduction to be accomplished through
regular payroll reduction, bonus reduction or in any other method approved by
the Plan Administrator.
(b)(i) The Elective Deferrals of a Participant shall be limited
in accordance with the provisions of this section, section 4.7 and any other
applicable provisions of the Plan. The Plan Administrator may refuse to accept
any or all prospective Elective Deferrals to be contributed by a Participant if
such prospective Elective Deferrals may cause violations of the limits set forth
under section 4.7.
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(ii) No Participant shall be permitted to have Elective
Deferrals made under this Plan, or any other qualified plan maintained by the
Employer, during any taxable year, in excess of the dollar limitation contained
in section 402(g) of the Code in effect at the beginning of such taxable year.
(iii) Elective Deferrals shall not be permitted to the extent
Elective Deferrals would cause the Annual Additions to exceed the limits
specified in ARTICLE 6.
(c) (i) Participants may elect to commence Elective Deferrals at
least once each calendar year during a period established by the Plan
Administrator. Such election may not be made retroactively and the election must
remain in effect until modified or terminated in accordance with subsection
(c)(ii).
(ii) Elective Deferrals shall be collected by the Employer by
a reduction in Compensation or Earned Income in accordance with rules that the
Plan Administrator may establish from time to time. Participants may terminate
the election or change the amounts designated to be deducted at any time and
such changes will become effective on the next payroll period following by at
least ten (10) days the submission of such change of designation, unless a
shorter period is agreed to by the Administrator.
(d) An Employee's eligibility to make Elective Deferrals under this
Plan may not be conditioned upon the completion of more than one (1) Year of
Service or the attainment of more than age twenty-one (21). No contributions or
benefits (other than Matching Contributions or Qualified Matching Contributions)
may be conditioned upon an Employee's Elective Deferrals. Under no circumstances
may a salary reduction agreement or other deferral mechanism be adopted
retroactively.
4.5 Rollovers.
(a) Subject to the approval of the Plan Administrator, a Participant
who has participated in any other qualified plan described in section 401(a) of
the Code or in a qualified annuity plan described in section 403(a) of the Code
shall be permitted to make a rollover contribution in the form of cash to the
Trustee of an amount received by the Participant that is attributable to
participation in such other plan (reduced by any nondeductible voluntary
contributions he made to the plan), provided that the rollover contribution
complies with all requirements of section 402(a)(5), section 403(a)(4) or
section 408(d)(3)(A)(ii) of the Code, whichever is applicable.
(b) Before approving such a Participant rollover, the Plan
Administrator may request from the Participant or the Employer any documents
that the Plan Administrator, in its discretion, deems necessary for such
rollover.
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(c) Any rollover contribution to the Trust shall be credited to the
Participant's rollover subaccount established under section 5.1 and separately
accounted for.
4.6 Direct Transfers.
(a) The Plan shall accept a transfer of assets directly from another
plan qualified under sections 401(a) or 403(a) of the Code only if the Plan
Administrator, in its sole discretion, agrees to accept such a transfer. In
determining whether to accept such a transfer the Plan Administrator shall
consider the administrative inconvenience engendered by such a transfer and any
risks to the continued qualification of the Plan under section 401(a) of the
Code. Acceptance of any such transfer shall not preclude the Plan Administrator
from refusing any subsequent such transfers.
(b) Any transfer of assets accepted under this section shall be
credited to the Participant's direct transfer subaccount and shall be separately
accounted for at all times and shall remain subject to the provisions of the
transferor plan (as it existed at the time of such transfer) to the extent
required by section 411(d)(6) of the Code (including, but not limited to, any
rights to Qualified Joint and Survivor Annuities and qualified preretirement
survivor annuities) as if such provisions were part of the Plan. In all other
respects, however, such transferred assets will be subject to the provisions of
the Plan.
(c) Assets accepted under this section shall be fully vested and
nonforfeitable.
(d) Before approving such a direct transfer, the Plan Administrator
may request from the Participant or the Employer (or the prior employer) any
documents the Plan Administrator, in its discretion, deems necessary for such
direct transfer.
4.7 Limits for Highly-Compensated.
(a) Matching Contributions, Elective Deferrals, Qualified
Nonelective Contributions and Employee Contributions allocable to the Accounts
of Highly-Compensated Employees shall not in any Plan Year exceed the limits
specified in this section. The Plan Administrator may make the adjustments
authorized in this section to ensure that the limits of subsection (b) (or any
other applicable limits) are not exceeded, regardless of whether such
adjustments affect some Participants more than others. This section shall be
administered and interpreted in accordance with sections 401(k) and 401(m) of
the Code. The Actual Deferral Percentage for any Participant who is a
Highly-Compensated Employee for the Plan Year and who is eligible to have
Elective Deferrals (and Qualified Nonelective Contributions or Qualified
Matching Contributions, or both, if treated as Elective Deferrals for purposes
of the Actual Deferral Percentage test) allocated to his or her accounts under
two (2) or more arrangements
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described in section 401(k) of the Code, that are maintained by the Employer,
shall be determined as if such Elective Deferrals (and, if applicable, such
Qualified Nonelective Contributions or Qualified Matching Contributions, or
both) were made under a single arrangement. If a Participant who is a
Highly-Compensated Employee participates in two or more cash or deferred
arrangements that have different plan years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a single
arrangement.
(b) (i) The Actual Deferral Percentage of the Participants who are
Highly-Compensated Employees shall not exceed, in any Plan Year, the greater of:
(1) one hundred twenty-five percent (125%) of the Actual
Deferral Percentage for all other Eligible Participants; or
(2) the lesser of two hundred percent (200%) of the
Actual Deferral Percentage for all other Eligible Participants or such
percentage plus two (2) percentage points.
(ii) The Average Contribution Percentage of the Participants
who are Highly-Compensated Employees shall not exceed, in any Plan Year, the
greater of:
(1) one hundred twenty-five percent (125%) of the
Average Contribution Percentage for all other Eligible Participants; or
(2) the lesser of two hundred percent (200%) of the
Average Contribution Percentage for all other Eligible Participants or such
percentage plus two (2) percentage points.
(c) For purposes of determining the Actual Deferral Percentage test,
Qualified Nonelective Contributions and Qualified Matching Contributions must be
made before the last day of the twelve (12) month period immediately following
the Plan Year to which contributions relate.
(d) The Employer shall maintain records sufficient to demonstrate
satisfaction of the Actual Deferral Percentage test and the amount of Qualified
Nonelective Contributions or Qualified Matching Contributions, or both, used in
such test.
(e) The following terms shall have the meanings specified herein for
purposes of this section and section 4.7:
(i) Actual Deferral Percentage. The average, for a specified
group of Participants for a Plan Year, of the ratios (calculated separately for
each Participant in such
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group) of (1) the amount of employer contributions actually paid over to the
Trust on behalf of such Participant for the Plan Year to (2) the Participant's
Compensation for such Plan Year (whether or not the Employee was a Participant
for the entire Plan Year). For this purpose, employer contributions on behalf of
any Participant shall include (1) any employer contributions made pursuant to
the Participant's Elective Deferral, including Excess Elective Deferrals, but
excluding Elective Deferrals that are taken into account in the Average
Contribution Percentage test (provided the Actual Deferral Percentage test is
satisfied both with and without exclusion of these Elective Deferrals), and (2)
under such rules as the Secretary of the Treasury may prescribe, Qualified
Nonelective Contributions and Qualified Matching Contributions. For purposes of
computing Actual Deferral Percentages, an Employee who would be a Participant
but for the failure to make Elective Deferrals shall be treated as a Participant
on whose behalf no Elective Deferrals are made.
(ii) Aggregate Limit. The sum of (1) one hundred twenty-five
percent (125%) of the greater of the Actual Deferral Percentage of the
non-Highly-Compensated Employees for the Plan Year or the Average Contribution
Percentage of non-Highly-Compensated Employees under the Plan subject to Code
section 401(m) for the Plan Year beginning with or within the Plan Year of the
cash or deferred arrangement and (2) the lesser of two hundred percent (200%) or
two (2) plus the lesser of such Actual Deferral Percentage or Average
Contribution Percentage.
(iii) Average Contribution Percentage. The average of the
Contribution Percentages of the Eligible Participants in a group.
(iv) Compensation. To the extent regulations permit the
definition of Compensation in ARTICLE II to be used, then such definition shall
be applied; provided, however, that to the extent such definition is not so
permitted, then Compensation shall include all compensation required to be
counted or excluded under section 414(s) of the Code; provided, further,
however, that this definition shall not apply for purposes of the definition of
Highly-Compensated Employee in section 2.22.
(v) Contribution Percentage. The ratio (expressed as a
percentage) of the Participant's Contribution Percentage Amounts to the
Participant's Compensation for the Plan Year (whether or not the Employee was a
Participant for the entire Plan Year).
(vi) Contribution Percentage Amounts. The sum of the Employee
Contributions, Matching Contributions, and Qualified Matching Contributions (to
the extent not taken into account for purposes of the Actual Deferral Percentage
test) made under the Plan on behalf of the Participant for the Plan Year. Such
Contribution Percentage Amounts shall include forfeitures of Excess Aggregate
Contributions or Matching Contributions allocated to the Participant's Account
which shall be taken into account in the year in which such forfeiture is
<PAGE>
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allocated. The Employer may include Qualified Nonelective Contributions in the
Contribution Percentage Amounts. The Employer may also elect to use Elective
Deferrals in the Contribution Percentage Amounts so long as the Actual Deferral
Percentage test is met before the Elective Deferrals are used in the Average
Contribution Percentage test and continues to be met following the exclusion of
those Elective Deferrals that are used to meet the Average Contribution
Percentage test.
(vii) Eligible Participant. Any Employee who is eligible to
make an Employee Contribution, or an Elective Deferral (if the Employer takes
such contributions into account in the calculation of the Contribution
Percentage), or to receive a Matching Contribution (including forfeitures) or a
Qualified Matching Contribution. If an Employee Contribution is required as a
condition of participation in the Plan, any Employee who would be a Participant
in the Plan if such Employee made such a contribution shall be treated as an
Eligible Participant on behalf of whom no Employee Contributions are made.
(viii) Participant. Any Employee who is eligible to
participate in the Plan under ARTICLE III.
(f) In the event that this Plan satisfies the requirements of
sections 401(k), 401(a)(4) or 410(b) of the Code only if aggregated with one or
more other plans, or if one or more other plans satisfy the requirements of such
sections of the Code only if aggregated with this Plan, then this section shall
be applied by determining the Actual Deferral Percentage of Employees as if all
such plans were a single plan. For Plan Years beginning after December 31, 1989,
plans may be aggregated in order to satisfy section 401(k) of the Code only if
they have the same Plan Year.
(g) (i) For purposes of this section, the Contribution Percentage
for any Participant who is a Highly-Compensated Employee and who is eligible to
have Contribution Percentage Amounts allocated to his or her Account under two
(2) or more plans described in section 401(a) of the Code, or arrangements
described in section 401(k) of the Code that are maintained by the Employer,
shall be determined as if the total of such Contribution Percentage Amounts was
made under each plan. If a Highly-Compensated Employee participates in two (2)
or more cash or deferred arrangements that have different plan years, all cash
or deferred arrangements ending with or within the same calendar year shall be
treated as a single arrangement.
(ii) For purposes of determining the Contribution Percentage
of a Participant who is a five percent (5%) owner or one of the ten (10) most
highly-paid Highly-Compensated Employees, the Contribution Percentage Amounts
and Compensation of such Participant shall include the Contribution Percentage
Amounts and Compensation for the Plan Year of family members (as defined in
section 414(q)(6) of the Code). Family members, with respect to
Highly-Compensated Employees, shall be disregarded as separate Employees in
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determining the Contribution Percentage both for Participants who are
non-Highly-Compensated Employees and for Participants who are Highly-Compensated
Employees.
(iii) For purposes of determining the Contribution Percentage
test, Employee Contributions are considered to have been made in the Plan Year
in which contributed to the Trust. Matching Contributions and Qualified
Nonelective Contributions will be considered made for a Plan Year if made no
later than the end of the twelve (12) month period beginning on the day after
the close of the Plan Year.
(4) The Employer shall maintain records sufficient to
demonstrate satisfaction of the Average Contribution Percentage test and the
amount of Qualified Nonelective Contributions or Qualified Matching
Contributions or both, used in such test.
(5) The determination and treatment of the Contribution
Percentage of any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(h) If one or more Highly-Compensated Employees participate in both
a cash or deferred arrangement and a plan maintained by the Employer that is
subject to the Average Contribution Percentage test and the sum of the Actual
Deferral Percentage and the Average Contribution Percentage of those
Highly-Compensated Employees subject to either or both tests exceeds the
Aggregate Limit, then the Average Contribution Percentage of those
Highly-Compensated Employees who also participate in a cash or deferred
arrangement will be reduced (beginning with such Highly-Compensated Employee
whose Average Contribution Percentage is the highest) so that the limit is not
exceeded. The amount by which each Highly-Compensated Employee's Average
Contribution Percentage amount is reduced shall be treated as an Excess
Aggregate Contribution. The Actual Deferral Percentage of the Highly-Compensated
Employees is determined after any corrections required to meet the Actual
Deferral Percentage and the Average Contribution Percentage tests. Multiple use
does not occur if both the Actual Deferral Percentage and the Average
Contribution Percentage of the Highly-Compensated Employees does not exceed 1.25
multiplied by the Actual Deferral Percentage and the Average Contribution
Percentage of the non-Highly-Compensated Employees.
(i) The determination and treatment of the Actual Deferral
Percentage amounts of any Participant shall satisfy such other requirements as
may be prescribed by the Secretary of the Treasury.
4.8 Excess Contributions.
(a) Excess Contributions shall be corrected as provided in this
section. The Plan Administrator may also prevent anticipated Excess
Contributions as provided in this section.
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The Plan Administrator may use any method of correction or prevention provided
in this section or any combination thereof, as it determines in its sole
discretion. This section shall be administered and interpreted in accordance
with sections 401(k) and 401(m) of the Code.
(b) The Plan Administrator may refuse to accept any or all
prospective Elective Deferrals or Employee Contributions to be contributed by a
Participant.
(c) (i) The Employer may, in its sole discretion, elect to
contribute a Qualified Nonelective Contribution in an amount necessary to
satisfy any or all of the requirements of section 4.6.
(ii) Qualified Nonelective Contributions for a Plan Year shall
be allocated to the Accounts of Participants who are not Highly-Compensated
Employees in the ratio in which each such Participant's Compensation for such
Plan Year bears to the total Compensation of all such Participants for such Plan
Year.
(iii) Qualified Nonelective Contributions for a Plan Year
shall be contributed to the Trust within twelve (12) months after the close of
such Plan Year.
(iv) Qualified Nonelective Contributions may, at the
Employer's election, be included in the Contribution Percentage Amounts.
(d) (i) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable thereto, shall be
distributed no later than the last day of each Plan Year to Participants to
whose Accounts such Excess Contributions were allocated for the preceding Plan
year. Such distributions shall be made to Highly-Compensated Employees on the
basis of the respective portions of the Excess Contributions attributable to
each of such Employees.
(ii) Excess Contributions shall be allocated to Participants
who are subject to the family member aggregation rules of section 414(q)(6) of
the Code in the manner prescribed by the regulations. If such Excess
Contributions are distributed more than two and one-half (2 1/2) months after
the last day of the Plan Year in which such Excess Amounts arose, a ten percent
(10%) excise tax will be imposed on the Employer maintaining the Plan with
respect to those amounts. Excess Contributions, including amounts
recharacterized, shall be treated as Annual Additions under the Plan.
(e) (i) The Plan Administrator may recharacterize any or all Excess
Contributions for a Plan Year as Employee Contributions in accordance with the
provisions of this subsection. Any Excess Contributions that are so
recharacterized shall be treated as if the Participant had elected to instead
receive cash Compensation on the earliest date that any Elective
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Deferral made on behalf of the Participant during the Plan Year would have been
received had the Participant originally elected to receive such amount in cash
and then contributed such amount as an Employee Contribution. Excess
Contributions may not be recharacterized to the extent such recharacterization
would cause the Employee Contributions to exceed any Plan limitations on
Employee Contributions. To the extent required by the Internal Revenue Service,
however, such recharacterized Excess Contributions shall continue to be treated
as if such amounts were not recharacterized.
(ii) The Plan Administrator shall report any recharacterized
Excess Contributions as Employee Contributions to the Internal Revenue Service
and to the affected Participants at such times and in accordance with such
procedures as are required by the Internal Revenue Service. The Plan
Administrator shall take such other actions regarding the amounts so
recharacterized as may be required by the Internal Revenue Service.
(iii) Excess Contributions may not be recharacterized under
this subsection more than two and one-half (2 1/2) months after the close of the
Plan Year to which the recharacterization relates. Recharacterization is deemed
to occur when the Participant is so notified (as required by the Internal
Revenue Service).
(f) (i) The Plan Administrator may distribute any or all Excess
Contributions for a Plan Year in accordance with the provisions of this
subsection. Such distribution may only occur after the close of such Plan Year
and within twelve (12) months of the close of such Plan Year. In the event of
the termination of the Plan, such distribution shall be made within twelve (12)
months after such termination. Such distribution shall include the income (or
loss) allocable to the amounts so distributed, as determined under this
subsection. The Plan Administrator may make any special allocations of earnings
or losses necessary to carry out the provisions of this subsection. A
distribution of an Excess Contribution under this subsection may be made without
regard to any notice or consent otherwise required pursuant to sections
411(a)(11) and 417 of the Code.
(ii) Excess Contributions shall be adjusted for any income or
loss up to the date of distribution. The income or loss allocable to Excess
Contributions is the sum of:
(1) income or loss allocable to the Participant's
Elective Deferral subaccount (and, if applicable, the Qualified Nonelective
Contribution subaccount or the Qualified Matching Contributions subaccount or
both) for the Plan Year multiplied by a fraction, the numerator of which is such
Participant's Excess Contributions for the year and the denominator is the
Participant's Account balance attributable to Elective Deferrals (and Qualified
Nonelective Contributions or Qualified Matching Contributions, or both, if any
of such contributions are included in the Actual Deferral Percentage test)
without regard to any income or loss occurring during such Plan Year; and
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(2) ten percent (10%) of the amount determined under (1)
above multiplied by the number of whole calendar months between the end of the
Plan Year and the date of distribution, counting the month of distribution if
distribution occurs after the fifteenth (15th) of such month.
(iii) Amounts distributed under this subsection (or other
provisions of this section) shall first be treated as distributions from the
Participant's subaccounts in the following order:
(1) from the Participant's Elective Deferral subaccount
and Matching Contribution subaccount (if applicable) in proportion to the
Participant's Elective Deferrals and Qualified Matching Contributions (to the
extent used in the Actual Deferral Percentage test) for the Plan Year; and
(2) from the Participant's Qualified Nonelective
Contribution subaccount to the extent that such Excess Contributions exceed the
balance in the Participant's Elective Deferral subaccount and Matching
Contribution subaccount.
(g) (i) The term "Excess Contribution" shall mean, with respect to a
Plan Year, the excess of the Elective Deferrals (including any Qualified
Nonelective Contributions and Matching Contributions that are treated as
Elective Deferrals under sections 401(k)(2) and 401(k)(3) of the Code) on behalf
of eligible Highly-Compensated Employees for the Plan Year over the maximum
amount of such contributions permitted under sections 401(k)(2) and 401(k)(3) of
the Code.
(ii) The amount of Excess Contributions for a
Highly-Compensated Employee for a Plan year is to be determined by the following
leveling method under which the Actual Deferral Percentage of the
Highly-Compensated Employee with the highest Actual Deferral Percentage is
reduced to the extent required to:
(1) enable the Plan to satisfy section 4.6; or
(2) cause such Highly-Compensated Employee's Actual
Deferral Percentage to equal the Actual Deferral Percentage of the
Highly-Compensated Employee with the next highest Actual Deferral Percentage.
This process is repeated until the Plan satisfies section 4.6. For each
Highly-Compensated Employee, the amount of Excess Contributions is equal to the
total Elective Deferrals (plus Qualified Nonelective Contributions and Matching
Contributions treated as Elective Deferrals) on behalf of the Participant,
(determined prior to the application of this paragraph (g)(ii)(2)) minus the
amount determined by multiplying the Participant's Actual Deferral Percentage
(determined after application of this
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paragraph (g)(ii)(2)) by his or her Compensation used in determining such Actual
Deferral Percentage.
4.9 Excess Elective Deferrals.
(a) Excess Elective Deferrals shall be corrected as provided in this
section. The Plan Administrator may also prevent anticipated Excess Elective
Deferrals as provided in this section. The Plan Administrator may use any method
of correction or prevention provided in this section or any combination thereof,
as it determines in its sole discretion. A distribution of an Excess Elective
Deferral under this section may be made without regard to any notice or consent
otherwise required pursuant to section 411(a)(11) and section 417 of the Code.
This section shall be administered and interpreted in accordance with sections
401(k) and 402(g) of the Code.
(b) The Plan Administrator may refuse to accept any or all
prospective Elective Deferrals to be contributed by a Participant.
(c) (i) The Plan Administrator shall distribute all Excess Elective
Deferrals to the Participant on whose behalf such Excess Elective Deferrals were
made before the close of the taxable year. Distributions under this subsection
include income allocable to the Excess Elective Deferrals so distributed, as
determined under this section.
(ii) Distribution under this subsection shall only be made if
all the following conditions are satisfied:
(1) the Participant seeking the distribution designates
the distribution as an Excess Elective Deferral;
(2) the distribution is made after the date the Excess
Elective Deferral is received by the Plan; and
(3) the Plan designates the distribution as a
distribution of an Excess Elective Deferral.
(iii) The income allocable to the Excess Elective Deferrals
distributed under this section shall be determined in the same manner as under
subsection (d)(iii), except that income shall only be determined for the period
from the beginning of the taxable year to the date on which the distribution is
made.
(d) (i) The Plan Administrator may distribute any or all Excess
Elective Deferrals to the Participant to whose Account such Excess Elective
Deferrals were allocated for the preceding taxable year. Distribution under this
subsection shall only be made if the Participant
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timely provides the notice required under subsection (d)(ii) and such
distribution is made after the preceding taxable year and before the first April
15 following the close of the preceding taxable year. Distributions under this
subsection shall include income allocable to the Excess Elective Deferrals so
distributed, as determined under this subsection.
(ii) Any Participant seeking a distribution of an Excess
Elective Deferral in accordance with this subsection must notify the Plan
Administrator in writing of such request no later than the first March 15
following the taxable year in which such Excess Elective Deferral was allocated.
The Plan Administrator may agree to accept notification received after such date
(but before the first April 15 following the preceding taxable year) if it
determines that it would still be administratively practicable to make such
distribution in view of the delayed notification. Such notification shall
specify the amount of such Excess Elective Deferrals for the preceding taxable
year and shall be accompanied by the Participant's written statement that if
such amounts are not distributed, such Excess Elective Deferrals, when added to
amounts deferred under other plans or arrangements described in sections 401(k),
403(b) or 408(k) of the Code, will exceed the limit imposed on the Participant
by section 402(g) of the Code for the year in which the deferrals occurred.
(iii) Excess Elective Deferrals shall be adjusted for any
income or loss up to the date of distribution. The income or loss allocable to
Excess Elective Deferrals is the sum of:
(1) income or loss allocable to the Participant's
Elective Deferral subaccount for the taxable year multiplied by a fraction, the
numerator of which is such Participant's Excess Elective Deferrals for the year
and the denominator of which is the Participant's Account balance attributable
to Elective Deferrals without regard to any income or loss occurring during such
taxable year; and
(2) ten percent (10%) of the amount determined under (1)
above multiplied by the number of whole calendar months between the end of the
Participant's taxable year and the date of distribution, counting the month of
distribution if distribution occurs after the fifteenth (15th) of such month.
(e) Excess Elective Deferrals that are distributed after April 15
are includable in the Participant's gross income in both the taxable year in
which deferred and the taxable year in which distributed.
4.10 Excess Aggregate Contributions.
(a) Notwithstanding any other provision of this Plan, Excess
Aggregate Contributions, plus any income and minus any loss allocable thereto,
shall be forfeited, if
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forfeitable, or if not forfeitable, distributed no later than the last day of
each Plan Year to Participants to whose Accounts such Excess Aggregate
Contributions were allocated for the preceding Plan Year. Excess Aggregate
Contributions shall be allocated to Participants who are subject to the family
member aggregation rules of section 414(q)(6) of the Code in the manner
prescribed by the regulations. If such Excess Aggregate Contributions are
distributed more than two and one-half (2 1/2) months after the last day of the
Plan Year in which such excess amounts arose, a ten percent (10%) excise tax
will be imposed on the Employer maintaining the Plan with respect to those
amounts. Excess Aggregate Contributions shall be treated as Annual Additions
under the Plan.
(b) Excess Aggregate Contributions shall be adjusted for any income
or loss up to the date of distribution. The income or loss allocable to Excess
Aggregate Contributions is the sum of: (1) income or loss allocable to the
Participant's Employee Contribution subaccount, Matching Contribution subaccount
(if any, and if all amounts therein are not used in the Actual Deferral
Percentage test) and, if applicable, Qualified Nonelective Contribution
subaccount and Elective Deferral subaccount for the Plan Year, multiplied by a
fraction, the numerator of which is such Participant's Excess Aggregate
Contributions for the year and the denominator is the Participant's Account
balance(s) attributable to Contribution Percentage Amounts without regard to any
income or loss occurring during such Plan Year; and (2) ten percent (10%) of the
amount determined under (1) multiplied by the number of whole calendar months
between the end of the Plan Year and the date of distribution, counting the
month of distribution if distribution occurs after the 15th of such month.
(c) Forfeitures of Excess Aggregate Contributions shall be applied
to reduce Employer Contributions.
(d) Excess Aggregate Contributions shall be forfeited, if
forfeitable, or distributed on a pro-rata basis from the Participant's Employee
Contribution subaccount and Matching Contribution subaccount (and, if
applicable, the Participant's Qualified Nonelective Contribution subaccount or
Elective Deferral subaccount, or both).
(e) (i) The term "Excess Aggregate Contributions" shall mean, with
respect to any Plan Year, the excess of:
(1) the aggregate Contribution Percentage Amounts taken
into account in computing the numerator of the Contribution Percentage actually
made on behalf of Highly-Compensated Employees for such Plan Year; over
(2) the maximum Contribution Percentage Amounts
permitted by the Average Contribution Percentage test (determined by reducing
contributions made on
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behalf of Highly-Compensated Employees in order of their Contribution
Percentages beginning with the highest of such percentages).
(ii) Such determination shall be made after first determining
Excess Elective Deferrals pursuant to section 4.8 and then determining Excess
Contributions pursuant to section 4.7.
4.11 Hardship Suspensions. In the event of a hardship withdrawal to a
Participant under section 12.3, such Employee shall be suspended from making
Elective Deferrals (and Employee Contributions) to the extent necessary to
comply with the requirements of section 12.3.
ARTICLE 5
ALLOCATIONS
5.1 Individual Accounts. The Plan Administrator shall establish and
maintain an Account in the name of each Participant. The Account shall contain
the following subaccounts:
(a) a discretionary contribution subaccount to which shall be
credited each such Participant's share of (i) Employer Contributions under
section 4.1(a); (ii) forfeitures; (iii) the net earnings or net losses on the
investment of the assets of the trust; (iv) distributions and (v) dividends,
capital gain distributions and other earnings received on any Shares credited to
the Participant's subaccount;
(b) a nondeductible voluntary contribution subaccount to which shall
be credited (i) nondeductible voluntary contributions by the Participant under
section 4.3; (ii) the net earnings or net losses on the investment of the assets
of the Trust; (iii) distributions; and (iv) dividends, capital gain
distributions and other earnings received on any Shares credited to the
Participant's subaccount;
(c) an Elective Deferral subaccount to which shall be credited (i)
each such Participant's Elective Deferrals made under section 4.4; (ii) the net
earnings or net losses on the investment of the assets of the Trust; (iii)
distributions; and (iv) dividends, capital gains distributions and other
earnings received on any Shares credited to the Participant's subaccount;
(d) a Qualified Nonelective Contribution subaccount to which shall
be credited (i) each such Participant's Qualified Nonelective Contributions made
under section 4.7(c); (ii) the net earnings or net losses on the investment of
the assets of the Trust; (iii) distributions; and (iv) dividends, capital gains
distributions and other earnings received on any Shares credited to the
Participant's subaccount;
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(e) a Matching Contribution subaccount to which shall be credited
(i) each such Participant's Matching Contributions made under section 4.1(b);
(ii) the net earnings or net losses on the investment of the assets of the
Trust; (iii) distributions; and (iv) dividends, capital gains distributions and
other earnings received on any Shares credited to the Participant's subaccount;
(f) a direct transfer subaccount to which shall be credited (i)
contributions to the Trust accepted under section 4.6; (ii) the net earnings or
net losses on the investment of the assets of the Trust; (iii) distributions;
and (iv) dividends, capital gain distributions and other earnings received on
any Shares credited to the Participant's subaccount; and
(g) a rollover subaccount to which shall be credited (i)
contributions to the Trust accepted under section 4.5; (ii) the net earnings or
net losses on the investment of the assets of the Trust; (iii) distributions;
and (iv) dividends, capital gain distributions and other earnings received on
any Shares credited to the Participant's subaccount.
5.2 Minimum Allocation.
(a) Except as otherwise provided in subsections (c) and (d) below,
the Employer Contributions and forfeitures allocated on behalf of any
Participant who is not a Key Employee shall not be less than the lesser of three
percent (3%) of such Participant's Compensation or in the case where the
Employer has no defined benefit plan which designates this Plan to satisfy
section 401 of the Code, the largest percentage of Employer Contributions and
forfeitures, as a percentage of the first two hundred thousand dollars
($200,000) of the Key Employee's Compensation, allocated on behalf of any Key
Employee for that year. The minimum allocation is determined without regard to
any Social Security contribution. This minimum allocation shall be made even
though, under other Plan provisions, the Participant would not otherwise be
entitled to receive an allocation, or would have received a lesser allocation
for the year because of (i) the Participant's failure to complete one thousand
(1,000) Hours of Service (or any equivalent provided in the Plan); or (ii) the
Participant's failure to make mandatory Employee contributions to the Plan; or
(iii) Compensation less than a stated amount. For purposes of this subsection,
all defined contribution plans required to be included in an aggregation group
under section 416(g)(2)(A)(i) shall be treated as a single plan.
(b) For purposes of computing the minimum allocation, Compensation
shall mean Compensation as defined in section 6.5(b) of the Plan.
(c) The provision in subsection (a) above shall not apply to any
Participant who was not employed by the Employer on the last day of the Plan
Year.
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(d) The provision in subsection (a) above shall not apply to any
Participant to the extent the Participant is covered under any other plan or
plans of the Employer and the Employer has provided in the Adoption Agreement
that the minimum allocation or benefit requirement applicable to top-heavy plans
will be met in the other plan or plans.
(e) The minimum allocation required (to the extent required to be
nonforfeitable under section 416(b)) may not be forfeited under section
411(a)(3)(B) or 411(a)(3)(D).
5.3 Allocation of Employer Contributions and Forfeitures.
(a) All discretionary contributions and forfeitures from a
Participant's profit sharing contribution subaccount shall be allocated to the
Account of each Participant in the ratio that such Participant's Compensation
bears to the Compensation of all Participants. However, if the discretionary
contribution formula selected in the Adoption Agreement is integrated with
Social Security, discretionary contributions for the Plan Year plus any
forfeitures shall be allocated to Participants' Accounts as follows:
(i) Step One. Contributions and forfeitures will be allocated
to each Participant's Account in the ratio that each Participant's total
Compensation bears to all Participants' total Compensation, but not in excess of
three percent (3%) of each Participant's Compensation.
(ii) Step Two. Any contributions and forfeitures remaining
after the allocation in Step One will be allocated to each Participant's Account
in the ratio that each Participant's Compensation for the Plan Year in excess of
the Integration Level bears to the excess Compensation of all Participants, but
not in excess of three percent (3%).
(iii) Step Three. Any contributions and forfeitures remaining
after the allocation in Step Two will be allocated to each Participant's Account
in the ratio that the sum of each Participant's total Compensation and
Compensation in excess of the Integration Level bears to the sum of all
Participants' total Compensation and Compensation in excess of the Integration
Level, but not in excess of the Profit Sharing Maximum Disparity Rate.
(iv) Step Four. Any remaining contributions or forfeitures
will be allocated to each Participant's Account in the ratio that each
Participant's total Compensation for the Plan Year bears to all Participants'
total Compensation for that year.
(b) All Elective Deferrals and Matching Contributions shall be
allocated to the Account of the Participant on whose behalf such contribution
was made.
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(c) All Qualified Nonelective Contributions shall be allocated as
provided in section 4.7(c).
(d) All distributions of Excess Contributions shall be distributed
as provided in section 4.7.
5.4 Coordination of Social Security Integration. If the Employer maintains
plans involving integration with Social Security other than this Plan, and if
any Participant is eligible to participate in more than one of such plans, all
such plans will be considered to be integrated if the extent of the integration
of all such plans does not exceed one hundred percent (100%). For purposes of
the preceding sentence, the extent of integration of a plan is the ratio
(expressed as a percentage) to which the actual benefits, benefit rate, offset
rate, or Employer Contribution rate under the plan bears to the integration
limitation applicable to such plan.
5.5 Withdrawals and Distributions. Any distribution to a Participant or
his Beneficiary, any amount transferred from a Participant's Account directly to
the trustee of any other qualified plan described in section 401(a) of the Code
or to a qualified annuity plan described in section 403(a) of the Code, or any
withdrawal by a Participant shall be charged to the appropriate subaccount(s) of
the Participant as of the date of the distribution or the withdrawal.
5.6 Determination of Value of Trust Fund and of Net Earnings or Losses. As
of each Valuation Date the Trustee shall determine for the period then ended the
sum of the net earnings or losses of the Trust (excluding with respect to Shares
and other assets specifically allocated to a specific Participant's subaccount,
(i) dividends and capital gain distributions from Shares; (ii) receipts or
income attributable to insurance policies; (iii) income gains and/or losses
attributable to a Participant's loans made pursuant to ARTICLE 13 or to any
other assets) which shall reflect accrued but unpaid interest, dividends, gains,
or losses realized from the sale, exchange or collection of assets, other income
received, appreciation in the fair market value of assets, depreciation in the
fair market value of assets, administration expenses, and taxes and other
expenses paid. Gains or losses realized and adjustments for appreciation or
depreciation in fair market value shall be computed with respect to the
difference between such value as of the preceding Valuation Date or date of
purchase, whichever is applicable, and the value as of the date of disposition
or the current Valuation Date, whichever is applicable.
5.7 Allocation of Net Earnings or Losses.
(a) As of each Valuation Date the net earnings or losses of the
Trust (excluding with respect to Shares and other assets specifically allocated
to a specific Participant's subaccount, (i) dividends and capital gain
distributions from Shares; (ii) dividends or credits attributable to insurance
policies; (iii) income gains and/or losses attributable to a Participant's loans
made pursuant to ARTICLE 13 or to any other assets, all of which shall be
allocated to
<PAGE>
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such Participant's subaccount) for the valuation period then ending shall be
allocated to the Accounts of all Participants (or Beneficiaries) having credits
in the Trust both on such date and at the beginning of such valuation period.
Such allocation shall be made by the application of a fraction, the numerator of
which is the value of the Account of a specific Participant (or Beneficiary) as
of the immediately preceding Valuation Date, reduced by any distributions
therefrom since such preceding Valuation Date, and the denominator of which is
the total value of all such Accounts as of that preceding Valuation Date,
reduced by any distributions therefrom since such preceding Valuation Date.
(b) To the extent that Shares and other assets are specifically
allocated to a specific Participant's subaccount:
(i) dividends and capital gain distributions from Shares;
(ii) dividends or credits attributable to insurance policies;
and
(iii) income gains and/or losses attributable to a
Participant's loans made pursuant to ARTICLE 13 or to any other assets;
shall be allocated to such Participant's subaccount.
5.8 Responsibilities of the Plan Administrator. The Plan Administrator
shall maintain accurate records with respect to the contributions made by or on
behalf of Participants under the Plan, and shall furnish the Trustee with
written instructions directing the Trustee to allocate all Plan contributions to
the Trust among the separate Accounts of Participants in accordance with section
5.1 above. In making any such allocation, the Trustee shall be fully entitled to
rely on the instructions furnished by the Plan Administrator, and shall be under
no duty to make any inquiry or investigation with respect thereto.
ARTICLE 6
LIMITATIONS ON ALLOCATIONS
6.1 Employers Who Do Not Maintain Other Qualified Plans.
(a) If the Participant does not participate in, and has never
participated in another qualified plan or a welfare benefit fund, as defined in
section 419(e) of the Code, maintained by the Employer, or an individual medical
account, as defined in section 415(l)(2) of the Code, maintained by the
Employer, which provides an Annual Addition as defined in section 6.5(a), the
amount of Annual Additions that may be credited to the Participant's Account for
any Limitation Year will not exceed the lesser of the Maximum Permissible Amount
or any other
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limitation contained in this Plan. If the Employer Contribution,
including any Elective Deferral, that would otherwise be contributed or
allocated to the Participant's Account would cause the Annual Additions for the
Limitation Year to exceed the Maximum Permissible Amount, the amount contributed
or allocated will be reduced so that the Annual Additions for the Limitation
Year will equal the Maximum Permissible Amount.
(b) Prior to determining the Participant's actual Compensation for
the Limitation Year, the Employer may determine the Maximum Permissible Amount
for a Participant on the basis of a reasonable estimation of the Participant's
Compensation for the Limitation Year, uniformly determined for all Participants
similarly situated.
(c) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation Year will be
determined on the basis of the Participant's actual Compensation and actual
Elective Deferrals for the Limitation Year.
(d) If, pursuant to subsection (c) or as a result of the allocation
of forfeitures, there is an Excess Amount the excess will be disposed of as
follows:
(i) Any nondeductible voluntary contributions, to the extent
they would reduce the Excess Amount, will be returned to the Participant.
(ii) If after the application of paragraph (i) an Excess
Amount still exists, and the Participant is covered by the Plan at the end of
the Limitation Year, the Excess Amount in the Participant's Account will be used
to reduce Employer Contributions (including any allocation of forfeitures) for
such Participant in the next Limitation Year, and each succeeding Limitation
Year if necessary.
(iii) If after the application of paragraph (i) an Excess
Amount still exists, and the Participant is not covered by the Plan at the end
of the Limitation Year, the Excess Amount will be held unallocated in a suspense
account. The suspense account will be applied to reduce future Employer
Contributions (including allocation of any forfeitures) for all remaining
Participants in the next Limitation Year, and each succeeding Limitation Year if
necessary.
(iv) If a suspense account is in existence at any time during
the Limitation Year pursuant to this section, it will not participate in the
allocation of the Trust's investment gains and losses. If a suspense account is
in existence at any time during a particular Limitation Year, all amounts in the
suspense account must be allocated and reallocated to Participants' Accounts
before any Employer or any Employee contributions may be made to the Plan for
that Limitation Year. Excess amounts may not be distributed to Participants or
former Participants.
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6.2 Employers Who Maintain Other Qualified Master or Prototype Defined
Contribution Plans.
(a) This section applies if, in addition to this Plan, the
Participant is covered under another qualified master or prototype defined
contribution plan maintained by the Employer, a welfare benefit fund, as defined
in section 419(e) of the Code maintained by the Employer or an individual
medical account, as defined in section 415(l)(2) of the Code, maintained by the
Employer which provides an Annual Addition as defined in section 6.5(a), during
any Limitation Year. The Annual Additions that may be credited to a
Participant's Account under this Plan for any such Limitation Year will not
exceed the Maximum Permissible Amount reduced by the Annual Additions credited
to a Participant's Account under the other plans and welfare benefit funds for
the same Limitation Year. If the Annual Additions with respect to the
Participant under other defined contribution plans and welfare benefit funds
maintained by the Employer are less than the Maximum Permissible Amount and the
Employer Contribution or Elective Deferral that would otherwise be contributed
or allocated to the Participant's Account under this Plan would cause the Annual
Additions for the Limitation Year to exceed this limitation, the amount
contributed or allocated will be reduced so that the Annual Additions under all
such plans and funds for the Limitation Year will equal the Maximum Permissible
Amount. If the Annual Additions with respect to the Participant under such other
defined contribution plans and welfare benefit funds in the aggregate are equal
to or greater than the Maximum Permissible Amount, no amount will be contributed
or allocated to the Participant's Account under this Plan for the Limitation
Year.
(b) Prior to determining the Participant's actual Compensation for
the Limitation Year, the Employer may determine the Maximum Permissible Amount
for a Participant in the manner described in section 6.1(b).
(c) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation Year will be
determined on the basis of the Participant's actual Compensation for the
Limitation Year.
(d) If, pursuant to section 6.2(c), or as a result of the allocation
of forfeitures, a Participant's Annual Additions under this Plan and such other
plans would result in an Excess Amount for a Limitation Year, the Excess Amount
will be deemed to consist of the Annual Additions last allocated, except that
Annual Additions attributable to a welfare benefit fund or individual medical
account will be deemed to have been allocated first regardless of the actual
allocation date.
(e) If an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date of another
plan, the Excess Amount attributed to this Plan will be the product of:
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(i) the total Excess Amount allocated as of such date, times
(ii) the ratio of (1) the Annual Additions allocated to the
Participant for the Limitation Year as of such date under this Plan to (2) the
total Annual Additions allocated to the Participant for the Limitation Year as
of such date under this and all the other qualified master or prototype defined
contribution plans.
(f) Any Excess Amount attributable to this Plan will be disposed of
in the manner described in section 6.1(d).
6.3 Employers Who, in Addition to This Plan, Maintain Other Qualified
Plans Which are Defined Contribution Plans Other Than Master or Prototype Plans.
If the Participant is covered under another qualified defined contribution plan
maintained by the Employer which is not a Master or Prototype Plan, Annual
Additions which may be credited to the Participant's Account under this Plan for
any Limitation Year will be limited in accordance with section 6.2 as though the
other plan were a Master or Prototype Plan unless the Employer provides other
limitations in the Adoption Agreement.
6.4 Employers Who, in Addition to This Plan, Maintain a Qualified Defined
Benefit Plan. If the Employer maintains, or at any time maintained, a qualified
defined benefit plan covering any Participant in this Plan, the sum of the
Participant's Defined Benefit Fraction and Defined Contribution Fraction will
not exceed 1.0 in any Limitation Year. The Annual Additions which may be
credited to the Participant's Account under this Plan for any Limitation Year
will be limited in accordance with the Adoption Agreement.
6.5 Definitions. Unless otherwise expressly provided herein, for purposes
of this ARTICLE only, the following definitions and rules of interpretation
shall apply:
(a) Annual Additions. The sum of the following amounts credited to a
Participant's Account for the Limitation Year:
(i) Employer Contributions (including Matching Contributions,
Qualified Nonelective Contributions and Elective Deferrals);
(ii) Employee Contributions;
(iii) forfeitures; and
(iv) amounts allocated after March 31, 1984 to an individual
medical account, as defined in section 415(l)(2) of the Code, which is part of a
pension or annuity plan
<PAGE>
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maintained by the Employer, are treated as Annual Additions to a defined
contribution plan. Also, amounts derived from contributions paid or accrued
after December 31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the separate
account of a key employee, as defined in section 419A(d)(3) of the Code,
maintained by the Employer, are treated as Annual Additions to a defined
contribution plan.
For this purpose, any Excess Amount applied under sections 6.1(d) or 6.2(f) in
the Limitation Year to reduce Employer Contributions will be considered Annual
Additions for such Limitation Year.
(b) Compensation. A Participant's earned income, wages, salaries,
and fees for professional services and other amounts received for personal
services actually rendered in the course of employment with the Employer
maintaining the Plan (including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of profits, commissions
on insurance premiums, tips and bonuses), and excluding the following:
(i) Employer contributions to a plan of deferred compensation
which are not includable in the Employee's gross income for the taxable year in
which contributed, or Employer contributions under a simplified employee pension
to the extent such contributions are excluded from the Employee's gross income,
or any distributions from a plan of deferred compensation;
(ii) amounts realized from the exercise of a nonqualified
stock option, or when restricted stock (or property) held by the Employee either
becomes freely transferable or is no longer subject to a substantial risk of
forfeiture;
(iii) amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
(iv) other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary reduction
agreement) towards the purchase of an annuity described in section 403(b) of the
Code (whether or not the amounts are actually excludable from the gross income
of the Employee).
For purposes of applying the limitations of this ARTICLE,
Compensation for a Limitation Year is the Compensation actually paid or
includable in gross income during such year.
Notwithstanding the preceding sentence, Compensation for a
Participant in a defined contribution plan who is Totally and Permanently
Disabled (as defined in section 22(e)(3) of the Code) is the Compensation such
Participant would have received for the Limitation Year if the Participant had
been paid at the rate of Compensation paid immediately before becoming
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permanently and totally disabled; such imputed Compensation for the disabled
Participant may be taken into account only if the Participant is not a
Highly-Compensated Employee (as defined in section 414(q) of the Code) and
contributions made on behalf of such Participant are nonforfeitable when made.
(c) Defined Benefit Fraction. A fraction, the numerator of which is
the sum of the Participant's Projected Annual Benefits under all the defined
benefit plans (whether or not terminated) maintained by the Employer, and the
denominator of which is the lesser of one hundred percent (100%) of the dollar
limitation determined for the Limitation Year under sections 415(b) and (d) of
the Code or one hundred forty percent (140%) of Highest Average Compensation
including any adjustments under section 415(b) of the Code.
Notwithstanding the above, if the Participant was a Participant as
of the first day of the first Limitation Year beginning after December 31, 1986
in one or more defined benefit plans maintained by the Employer which were in
existence on May 6, 1986, the denominator of this fraction will not be less than
one hundred percent (100%) of the sum of the annual benefits under such plans
which the Participant had accrued as of the close of the last Limitation Year
beginning before January 1, 1987, disregarding any changes in the terms and
conditions of the Plan after May 5, 1986. The preceding sentence applies only if
the defined benefit plans individually and in the aggregate satisfied the
requirements of section 415 of the Code for all Limitation Years beginning
before January 1, 1987.
(d) Defined Contribution Dollar Limitation. Thirty thousand dollars
($30,000) or, if greater, one fourth (1/4) of the defined benefit dollar
limitation set forth in section 415(b)(1) of the Code as in effect for the
Limitation Year.
(e) Defined Contribution Fraction. A fraction, the numerator of
which is the sum of the Annual Additions to the Participant's Account under all
the defined contribution plans (whether or not terminated) maintained by the
Employer for the current and all prior Limitation Years (including the Annual
Additions attributable to the Participant's nondeductible voluntary
contributions to all defined benefit plans, whether or not terminated,
maintained by the Employer, and the Annual Additions attributable to all welfare
benefit funds, as defined in section 419(e) of the Code and individual medical
accounts, as defined in section 415(l)(2) of the Code maintained by the
Employer), and the denominator of which is the sum of the maximum aggregate
amounts for the current and all prior Limitation Years of service with the
Employer (regardless of whether a defined contribution plan was maintained by
the Employer). The maximum aggregate amount in any Limitation Year is the lesser
of one hundred percent (100%) of the dollar limitation in effect under section
415(c)(1)(A) of the Code or thirty-five percent (35%) of the Participant's
Compensation for such year.
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If the Participant was a Participant as of the end of the first day
of the first Limitation Year beginning after December 31, 1986 in one or more
defined contribution plans maintained by the Employer which were in existence on
May 6, 1986, the numerator of this fraction will be adjusted if the sum of this
fraction and the Defined Benefit Fraction would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment an amount equal to the product of (1)
the excess of the sum of the fractions over 1.0 times (2) the denominator of
this fraction, will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as they would be
computed as of the end of the last Limitation Year beginning before January 1,
1987, and disregarding any changes in the terms and conditions of the Plan made
after May 5, 1986, but using the section 415 limitation applicable to the first
Limitation Year beginning on or after January 1, 1987. The Annual Addition for
any Limitation Year beginning before January 1, 1987 shall not be recomputed to
treat all Employee Contributions as Annual Additions.
(f) Employer. For purposes of this ARTICLE, Employer shall mean the
Employer that adopts this Plan, and all members of a controlled group of
corporations (as defined in section 414(b) of the Code as modified by section
415(h) of the Code), all commonly controlled trades or businesses (as defined in
section 414(c) of the Code as modified by section 415(h) of the Code), or
affiliated service groups (as defined in section 414(m) of the Code) of which
the adopting Employer is a part and any other entity required to be aggregated
with the Employer pursuant to regulations under section 414(o) of the Code.
(g) Excess Amount. The excess of the Participant's Annual Addition
for the Limitation Year over the Maximum Permissible Amount.
(h) Highest Average Compensation. The average Compensation for the
three (3) consecutive Plan Years that produce the highest average.
(i) Limitation Year. A Plan Year, or the twelve (12) consecutive
month period elected by the Employer in the Adoption Agreement. All qualified
plans maintained by the Employer must use the same Limitation Year. If the
Limitation Year is amended to a different twelve (12) consecutive month period,
the new Limitation Year must begin on a date within the Limitation Year in which
the amendment is made.
(j) Master or Prototype Plan. A plan the form of which is the
subject of a favorable opinion letter from the Internal Revenue Service.
(k) Maximum Permissible Amount. The maximum Annual Addition that may
be contributed or allocated to a Participant's Account under the Plan for any
Limitation Year shall not exceed the lesser of:
1
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(i) the Defined Contribution Dollar Limitation; or
(ii) twenty-five percent (25%) of the Participant's
Compensation for the Limitation Year.
The Compensation limitation referred to in subsection (b) shall not
apply to any contribution for medical benefits (within the meaning of section
401(h) or section 419A(f)(2) of the Code) which is otherwise treated as an
Annual Addition under section 415(l)(1) or section 419A(d)(2) of the Code.
If a short Limitation Year is created because of an amendment
changing the Limitation Year to a different twelve (12) consecutive month
period, the Maximum Permissible Amount will not exceed the Defined Contribution
Dollar Limitation multiplied by the following fraction:
Number of Months in the Short Limitation Year
---------------------------------------------
12
(l) Projected Annual Benefit. The annual retirement benefit
(adjusted to an actuarially equivalent straight life annuity if such benefit is
expressed in a form other than a straight life annuity or Qualified Joint and
Survivor Annuity) to which the Participant would be entitled under the terms of
the Plan assuming:
(i) the Participant will continue employment until Normal
Retirement Age under the Plan (or current age, if later); and
(ii) the Participant's Compensation for the current Limitation
Year and all other relevant factors used to determine benefits under the Plan
will remain constant for all future Limitation Years.
ARTICLE 7
TRUST FUND
7.1 Receipt of Contributions by Trustee. All contributions to the Trust
that are received by the Trustee, together with any earnings thereon, shall be
held, managed and administered by the Trustee named in the Adoption Agreement in
accordance with the terms and conditions of the Trust Agreement and the Plan.
The Trustee may use a Custodian designated by the Sponsor to perform
recordkeeping and custodial functions. The Trustee shall be subject to the
proper directions of the Employer or the Plan Administrator made in accordance
with the terms of the Plan and ERISA.
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7.2 Investment Responsibility.
(a) If the Employer elects in the Adoption Agreement to exercise
investment authority and responsibility, the selection of the investments in
which assets of the Trust are invested shall be the responsibility of the Plan
Administrator and each Participant will have a ratable interest in all assets of
the Trust.
(b) If the Adoption Agreement so provides and the Employer elects to
permit each Participant or Beneficiary to select the investments in his Account,
no person, including the Trustee and the Plan Administrator, shall be liable for
any loss or for any breach of fiduciary duty which results from such
Participant's or Beneficiary's exercise of control.
(c) If the Adoption Agreement so provides and the Employer elects to
permit each Participant or Beneficiary to select the investments in his Account,
the Employer or the Plan Administrator must complete a schedule of Participant
designations.
(d) If Participants and Beneficiaries are permitted to select the
investment in their Accounts, all investment related expenses, including
administrative fees charged by brokerage houses, will be charged against the
Accounts of the Participants.
(e) The Plan Administrator may at any time change the selection of
investments in which the assets of the Trust are invested, or subject to such
reasonable restrictions as may be imposed by the Sponsor for administrative
convenience, may submit an amended schedule of Participant designations. Such
amended documents may provide for a variance in the percentages of contributions
to any particular investment or a request that Shares in the Trust be reinvested
in whole or in part in other Shares.
7.3 Investment Limitations. The Sponsor may impose reasonable investment
limitations on the Employer and the Plan Administrator relating to the type of
permissible investments in the Trust or the minimum percentage of Trust assets
to be invested in Shares.
ARTICLE 8
VESTING
8.1 Employee Contributions and Elective Deferral Contributions and
Earnings. The Participant's nondeductible voluntary contribution subaccount,
Elective Deferral subaccount and Qualified Nonelective Contribution subaccount
shall be fully vested and nonforfeitable at all times and no forfeitures will
occur as a result of an Employee's withdrawal of such contributions.
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8.2 Rollovers, Transfers and Earnings. The Participant's rollover
subaccount and direct transfer subaccount shall be fully vested and
nonforfeitable at all times.
8.3 Employer Contributions and Matching Contributions and Earnings.
Notwithstanding the vesting schedule selected by the Employer in the Adoption
Agreement, the Participant's discretionary contribution subaccount and Matching
Contribution subaccount shall be fully vested and nonforfeitable upon the
Participant's death, disability, attainment of Normal Retirement Age, or, if the
Adoption Agreement provides for an Early Retirement Date, attainment of the
required age and completion of the required service. In the absence of any of
the preceding events, the Participant's discretionary contribution subaccount
and Matching Contribution subaccount shall be vested in accordance with a
minimum vesting schedule specified in the Adoption Agreement. The schedule must
be at least as favorable to Participants as either schedule (a) or (b) below.
(a) Graduated vesting according to the following schedule:
Years of Service Percent Vested
---------------- --------------
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
(b) Full one hundred percent (100%) vesting after three (3) Years of
Service.
8.4 Amendments to Vesting Schedule.
(a) If the Plan's vesting schedule is amended, or the Plan is
amended in any way that directly or indirectly affects the computation of the
Participant's nonforfeitable percentage or if the Plan is deemed amended by an
automatic change to or from a top-heavy vesting schedule, each Participant with
at least three (3) Years of Service with the Employer may elect, within a
reasonable period after the adoption of the amendment or change, to have the
nonforfeitable percentage computed under the Plan without regard to such
amendment or change. For any Participants who do not have at least one (1) Hour
of Service in any Plan Year beginning after December 31, 1988, the preceding
sentence shall be applied by substituting "five (5) Years of Service" for "three
(3) Years of Service" where such language appears.
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(b) The period during which the election may be made shall commence
with the date the amendment is adopted or deemed to be made and shall end on the
latest of:
(i) sixty (60) days after the amendment is adopted;
(ii) sixty (60) days after the amendment becomes effective; or
(iii) sixty (60) days after the Participant is issued written
notice of the amendment by the Employer or Plan Administrator.
(c) No amendment to the Plan shall be effective to the extent that
it has the effect of decreasing a Participant's accrued benefit. Notwithstanding
the preceding sentence, a Participant's Account balance may be reduced to the
extent permitted under section 412(c)(8) of the Code. For purposes of this
paragraph, a Plan amendment which has the effect of decreasing a Participant's
Account balance or eliminating an optional form of benefit, with respect to
benefits attributable to service before the amendment shall be treated as
reducing an accrued benefit. Furthermore, if the vesting schedule of a Plan is
amended, in the case of an Employee who is a Participant as of the later of the
date such amendment is adopted or the date it becomes effective, the
nonforfeitable percentage (determined as of such date) of such Employee's right
to his Employer-derived accrued benefit will not be less than his percentage
computed under the Plan without regard to such amendment.
8.5 Determination of Years of Service. For purposes of determining the
vested and nonforfeitable percentage of the Participant's Employer Contribution
subaccounts, all of the Participant's Years of Service with the Employer or an
Affiliated Employer shall be taken into account. If specified in the Adoption
Agreement, Years of Service with a predecessor employer will be treated as
service for the Employer; provided, however, that if the Employer maintains the
plan of a predecessor employer, Years of Service with such employer will be
treated as service with the Employer without regard to any election.
8.6 Forfeiture of Nonvested Amounts.
(a) For Plan Years beginning before 1985, any portion of a
Participant's Account that is not vested shall be forfeited by him as of the
last day of the Plan Year in which a Break in Service occurs. For Plan Years
beginning after 1984, any portion of a Participant's Account that is not vested
shall be forfeited by him as of the last day of the Plan Year in which his fifth
consecutive Break in Service occurs. Any amounts thus forfeited shall be
reallocated as provided in ARTICLE 5 and shall not be considered part of a
Participant's Account in computing his vested interest. The remaining portion of
the Participant's Account will be nonforfeitable.
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(b) If a distribution is made at a time when a Participant has a
vested right to less than one hundred percent (100%) of the value of the
Participant's Account attributable to Employer Contributions and forfeitures, as
determined in accordance with the provisions of section 8.3, and the nonvested
portion of the Participant's Account has not yet been forfeited in accordance
with paragraph (a) above:
(i) a separate remainder subaccount shall be established for
the Participant's interest in the Plan as of the time of the distribution; and
(ii) at any relevant time the Participant's vested portion of
the separate remainder subaccount shall be equal to an amount ("X") determined
by the formula:
X = P(AB + (R x D)) - (R x D).
For purposes of applying the formula, P is the vested percentage at
the relevant time; AB is the Account balance at the relevant time; D is the
amount of the distribution; and R is the ratio of the Account balance at the
relevant time to the Account balance after distribution.
8.7 Reinstatement of Benefit. If a benefit is forfeited because the
Participant or Beneficiary cannot be found, such benefit will be reinstated if a
claim is made by the Participant or Beneficiary.
ARTICLE 9
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
9.1 General. The provisions of this ARTICLE shall apply to any Participant
who is credited with at least one (1) Hour of Service with the Employer on or
after August 23, 1984, and such other Participants as provided in section 9.7.
9.2 Qualified Joint and Survivor Annuity. Unless an optional form of
benefit is selected pursuant to a Qualified Election within the ninety (90) day
period ending on the Annuity Starting Date, a married Participant's Vested
Account Balance will be paid in the form of a Qualified Joint and Survivor
Annuity and an unmarried Participant's Vested Account Balance will be paid in
the form of a life annuity. The Participant may elect to have such annuity
distributed upon attainment of the Earliest Retirement Age under the Plan.
9.3 Qualified Preretirement Survivor Annuity. Unless an optional form of
benefit has been selected within the Election Period pursuant to a Qualified
Election, if a Participant dies before the Annuity Starting Date, then the
Participant's Vested Account Balance shall be applied
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toward the purchase of an annuity for the life of the Surviving Spouse. The
Surviving Spouse may elect to have such annuity distributed within a reasonable
period after the Participant's death.
9.4 Definitions.
(a) Election Period.
(i) The period which begins on the first day of the Plan Year
in which the Participant attains age thirty-five (35) and ends on the date of
the Participant's death. If a Participant separates from service prior to the
first day of the Plan Year in which age thirty-five (35) is attained, with
respect to the Account balance as of the date of separation, the Election Period
shall begin on the date of separation.
(ii) A Participant who has not yet attained age thirty-five
(35) as of the end of any current Plan Year may make a special Qualified
Election to waive the qualified preretirement survivor annuity for the period
beginning on the date of such election and ending on the first day of the Plan
Year in which the Participant will attain age thirty-five (35). Such election
shall not be valid unless the Participant receives a written explanation of the
qualified preretirement survivor annuity in such terms as are comparable to the
explanation required under section 9.5. Qualified preretirement survivor annuity
coverage will be automatically reinstated as of the first day of the Plan Year
in which the Participant attains age thirty-five (35). Any new waiver on or
after such date shall be subject to the full requirements of this ARTICLE.
(b) Earliest Retirement Age. The earliest date on which, under the
Plan, the Participant could elect to receive retirement benefits.
(c) Qualified Election.
(i) A waiver of a Qualified Joint and Survivor Annuity or a
qualified preretirement survivor annuity. Any waiver of a Qualified Joint and
Survivor Annuity or a qualified preretirement survivor annuity shall not be
effective unless:
(1) the Participant's Spouse consents in writing to the
election;
(2) the election designates a specific Beneficiary,
including any class of Beneficiaries or any contingent Beneficiaries, which may
not be changed without spousal consent (or the Spouse expressly permits
designations by the Participant without any further spousal consent);
(3) the Spouse's consent acknowledges the effect of the
election; and
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(4) the Spouse's consent is witnessed by a Plan
representative or notary public. Additionally, a Participant's waiver of the
Qualified Joint and Survivor Annuity shall not be effective unless the election
designates a form of benefit payment which may not be changed without spousal
consent (or the Spouse expressly permits designations by the Participant without
any further spousal consent). If it is established to the satisfaction of a Plan
representative that there is no Spouse or that the Spouse cannot be located, a
waiver will be deemed a Qualified Election.
(ii) Any consent by a Spouse obtained under this provision (or
establishment that the consent of Spouse may not be obtained) shall be
effective only with respect to such Spouse. A consent that permits
designations by the Participant without any requirement of further consent
by such Spouse must acknowledge that the Spouse has the right to limit
consent to a specific Beneficiary, and a specific form of benefit where
applicable, and that the Spouse voluntarily elects to relinquish either or
both of such rights. A revocation of a prior waiver may be made by a
Participant without the consent of the Spouse at any time before the
commencement of benefits. The number of revocations shall not be limited.
No consent obtained under this provision shall be valid unless the
Participant has received notice as provided in section 9.5.
(d) Qualified Joint and Survivor Annuity. An immediate annuity for
the life of the Participant with a survivor annuity for the life of the Spouse
which equals fifty percent (50%) of the amount of the annuity which is payable
during the joint lives of the Participant and the Spouse and which is the amount
of benefit which can be purchased with the Participant's Vested Account Balance.
(e) Spouse (Surviving Spouse). The Spouse or Surviving Spouse of the
Participant, provided that a former Spouse will be treated as the Spouse or
Surviving Spouse and a current Spouse will not be treated as the Spouse or
Surviving Spouse to the extent provided under a qualified domestic relations
order as described in section 414(p) of the Code.
(f) Annuity Starting Date. The first day of the first period for
which an amount is paid as an annuity or any other form.
(g) Vested Account Balance. The aggregate value of the Participant's
Vested Account Balances derived from Employer and Employee contributions
(including rollovers and direct transfers), whether vested before or upon death,
including the proceeds of insurance contracts if any, on the Participant's life.
The provisions of this ARTICLE shall apply to a Participant who is vested in
amounts attributable to Employer Contributions, Employee Contributions (or both)
at the time of death or distribution.
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9.5 Notice Requirements.
(a) In the case of a Qualified Joint and Survivor Annuity, the Plan
Administrator shall no less than thirty (30) days and no more than ninety (90)
days prior to the Annuity Starting Date, provide each Participant a written
explanation of:
(i) the terms and conditions of a Qualified Joint and Survivor
Annuity;
(ii) the Participant's right to make and the effect of an
election to waive the Qualified Joint and Survivor Annuity form of benefit;
(iii) the rights of a Participant's Spouse; and
(iv) the right to make, and the effect of, a revocation of a
previous election to waive the Qualified Joint and Survivor Annuity.
(b) In the case of a qualified preretirement survivor annuity as
described in section 9.3, the Plan Administrator shall provide each Participant
within the applicable period for such Participant a written explanation of the
qualified preretirement survivor annuity in such terms and in such manner as
would be comparable to the explanation provided for meeting the requirements of
subsection (a) applicable to a Qualified Joint and Survivor Annuity.
(c) The applicable period for a Participant is whichever of the
following periods ends last:
(i) the period beginning with the first day of the Plan Year
in which the Participant attains age thirty-two (32) and ending with the close
of the Plan Year preceding the Plan Year in which the Participant attains age
thirty-five (35);
(ii) a reasonable period ending after the individual becomes a
Participant;
(iii) a reasonable period ending after subsection (e) ceases
to apply to the Participant;
(iv) a reasonable period ending after this ARTICLE first
applies to the Participant. Notwithstanding the foregoing, notice must be
provided within a reasonable period ending after separation from service in the
case of a Participant who separates from service before attaining age
thirty-five (35).
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(d) For purposes of applying subsection (c), a reasonable period
ending after the enumerated events described above in subsections (ii), (iii)
and (iv) is the end of the two-year period beginning one (1) year prior to the
date the applicable event occurs, and ending one (1) year after that date. In
the case of a Participant who separates from service before the Plan Year in
which age thirty-five (35) is attained, notice shall be provided within the two
(2) year period beginning one (1) year prior to separation and ending one (1)
year after separation. If such a participant thereafter returns to employment
with the Employer, the applicable period for such Participant shall be
redetermined.
(e) Notwithstanding the other requirements of this section, the
respective notices prescribed by this section need not be given to a Participant
if:
(i) the Plan "fully subsidizes" the costs of a Qualified Joint
and Survivor Annuity or qualified preretirement survivor annuity; and
(ii) the Plan does not allow the Participant to waive the
Qualified Joint and Survivor Annuity or qualified preretirement survivor annuity
and does not allow a married Participant to designate a nonspouse Beneficiary.
For purposes of this subsection, a plan fully subsidizes the costs
of a benefit if no increase in cost, or decrease in benefits to the Participant
may result from the Participant's failure to elect another benefit.
9.6 Safe Harbor Rules.
(a) This section shall apply to a Participant in a profit sharing
plan, and to any distribution, made on or after the first day of the first Plan
Year beginning after December 31, 1988, from or under a separate account
attributable solely to accumulated deductible Employee contributions, as defined
in section 72(o)(5)(B) of the Code, and maintained on behalf of a Participant in
a money purchase pension plan (including a target benefit plan) if the following
conditions are satisfied:
(i) the Participant does not or cannot elect payments in the
form of a life annuity; and
(ii) on the death of a Participant, the Participant's Vested
Account Balance will be paid to the Participant's Surviving Spouse, but if there
is no Surviving Spouse, or if the Surviving Spouse has consented in a manner
conforming to a Qualified Election, then to the Participant's designated
Beneficiary.
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(b) The Surviving Spouse may elect to have distribution of the
Vested Account Balance commence within the ninety (90) day period following the
date of the Participant's death. The Account balance shall be adjusted for gains
or losses occurring after the Participant's death in accordance with the
provisions of the Plan governing the adjustment of Account balances for other
types of distributions.
(c) This section shall not be operative with respect to a
Participant in a profit sharing plan if the plan is a direct or indirect
transferee of a defined benefit plan, money purchase plan, a target benefit
plan, stock bonus, or profit sharing plan which is subject to the survivor
annuity requirements of sections 401(a)(11) and 417 of the Code. If this section
is operative, then the provisions of this ARTICLE, other than section 9.7, shall
be inoperative.
(d) The Participant may waive the spousal death benefit described in
this section at any time provided that no such waiver shall be effective unless
it satisfies the conditions of section 9.4(c) (other than the notification
requirement referred to therein) that would apply to the Participant's waiver of
the qualified preretirement survivor annuity.
(e) For purposes of this section, Vested Account Balance shall mean,
in the case of a money purchase pension plan or a target benefit plan, the
Participant's separate Account balance attributable solely to accumulated
deductible Employee contributions within the meaning of section 72(o)(5)(B) of
the Code. In the case of a profit sharing plan, Vested Account Balance shall
have the same meaning as provided in section 9.4(g).
9.7 Transitional Rules.
(a) Any living Participant not receiving benefits on August 23,
1984, who would otherwise not receive the benefits prescribed by the previous
sections of this ARTICLE must be given the opportunity to elect to have the
prior sections of this ARTICLE apply if such Participant is credited with at
least one (1) Hour of Service under this Plan or a predecessor plan in a Plan
Year beginning on or after January 1, 1976, and such Participant had at least
ten (10) years of vesting service when he or she separated from service.
(b) Any living Participant not receiving benefits on August 23,
1984, who was credited with at least one (1) Hour of Service under this Plan or
a predecessor plan on or after September 2, 1974, and who is not otherwise
credited with any service in a Plan Year beginning on or after January 1, 1976,
must be given the opportunity to have his or her benefits paid in accordance
with subsection (d).
(c) The respective opportunities to elect (as described in
subsections (a) and (b) above) must be afforded to the appropriate Participants
during the period commencing on August 23, 1984, and ending on the date benefits
would otherwise commence to said Participants.
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(d) Any Participant who has elected pursuant to subsection (b) and
any Participant who does not elect under subsection (a) or who meets the
requirements of subsection (a) except that such Participant does not have at
least ten (10) years of vesting service when he or she separates from service,
shall have his or her benefits distributed in accordance with all of the
following requirements if benefits would have been payable in the form of a life
annuity:
(i) Automatic Joint and Survivor Annuity. If benefits in the
form of a life annuity become payable to a married Participant who:
(1) begins to receive payments under the Plan on or
after Normal Retirement Age; or
(2) dies on or after Normal Retirement Age while still
working for the Employer; or
(3) begins to receive payments on or after the qualified
early retirement age; or
(4) separates from service on or after attaining Normal
Retirement Age (or the qualified early retirement age) and after satisfying the
eligibility requirements for the payment of benefits under the Plan and
thereafter dies before beginning to receive such benefits;
then such benefits will be received under this Plan in the form of a Qualified
Joint and Survivor Annuity, unless the Participant has elected otherwise during
the Election Period. The Election Period must begin at least six (6) months
before the Participant attains qualified early retirement age and end not more
than ninety (90) days before the commencement of benefits. Any election
hereunder will be in writing and may be changed by the Participant at any time.
(ii) Election of Early Survivor Annuity. A Participant who is
employed after attaining the qualified early retirement age will be given the
opportunity to elect, during the Election Period, to have a survivor annuity
payable on death. If the Participant elects the survivor annuity, payments under
such annuity must not be less than the payments which would have been made to
the Spouse under the Qualified Joint and Survivor Annuity if the Participant had
retired on the day before his or her death. Any election under this provision
will be in writing and may be changed by the Participant at any time. The
Election Period begins on the later of (1) the 90th day before the Participant
attains the qualified early retirement age; or (2) the date on which
participation begins, and ends on the date the Participant terminates
employment.
(e) The following terms shall have the meanings specified herein:
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(i) Qualified Early Retirement Age. The latest of:
(1) the earliest date, under the Plan, on which the
Participant may elect to receive retirement benefits;
(2) the first day of the 120th month beginning before
the Participant reaches Normal Retirement Age; or
(3) the date the Participant begins participation.
(ii) Qualified Joint and Survivor Annuity. An annuity for the
life of the Participant with a survivor annuity for the life of the Spouse as
described in section 9.4(d).
ARTICLE 10
DISTRIBUTION PROVISIONS
10.1 Vesting on Distribution Before Break in Service.
(a) If an Employee terminates service, and the value of the
Employee's Vested Account Balance derived from Employer and Employee
contributions is not greater than three thousand five hundred dollars ($3,500),
the Employee will receive a distribution of the value of the entire vested
portion of such Account balance and the nonvested portion will be treated as a
forfeiture. For purposes of this section, if the value of an Employee's Vested
Account Balance is zero, the Employee shall be deemed to have received a
distribution of such Vested Account Balance. A Participant's Vested Account
Balance shall not include accumulated deductible Employee Contributions within
the meaning of section 72(o)(5)(B) of the Code for Plan Years beginning prior to
January 1, 1989.
(b) If an Employee terminates service and elects, in accordance with
this ARTICLE, to receive the value of his Vested Account Balance, the nonvested
portion will be treated as a forfeiture. If the Employee elects to have
distributed less than the entire vested portion of the Account balance derived
from Employer Contributions, the part of the nonvested portion that will be
treated as a forfeiture is the total nonvested portion multiplied by a fraction,
the numerator of which is the amount of the distribution attributable to
Employer Contributions and the denominator of which is the total value of the
vested Employer derived Account balance.
(c) If an Employee receives a distribution pursuant to this section
and the Employee resumes employment covered under this Plan, the Employee's
Employer-derived Account balance will be restored to the amount on the date of
distribution if the Employee repays
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to the Plan the full amount of the distribution attributable to Employer
Contributions before the earlier of five (5) years after the first date on which
the Participant is subsequently reemployed by the Employer, or the date the
Participant incurs five (5) consecutive one (1) year Breaks in Service following
the date of the distribution. If an Employee is deemed to receive a distribution
pursuant to this section, and the Employee resumes employment covered under this
Plan before the date the Participant incurs five (5) consecutive one (1) year
Breaks in Service, upon the reemployment of such Employee, the Employer-derived
Account balance of the Employee will be restored to the amount on the date of
such deemed distribution.
10.2 Restrictions on Immediate Distributions.
(a) If the value of a Participant's Vested Account Balance derived
from Employer and Employee Contributions exceeds (or at the time of any prior
distribution exceeded) three thousand five hundred dollars ($3,500) and the
Account balance is immediately distributable, the Participant and the
Participant's Spouse (or where either the Participant or the Spouse has died,
the survivor) must consent to any distribution of such Account balance. The
consent of the Participant and the Participant's Spouse shall be obtained in
writing within the ninety (90) day period ending on the Annuity Starting Date.
The Annuity Starting Date is the first day of the first period for which an
amount is paid as an annuity or any other form. The Plan Administrator shall
notify the Participant and the Participant's Spouse of the right to defer any
distribution until the Participant's Account balance is no longer immediately
distributable. Such notification shall include a general description of the
material features, and an explanation of the relative values of, the optional
forms of benefit available under the Plan in a manner that would satisfy the
notice requirements of section 417(a)(3), and shall be provided no less than
thirty (30) days and no more than ninety (90) days prior to the Annuity Starting
Date.
(b) Notwithstanding the provisions of subsection (a), only the
Participant need consent to the commencement of a distribution in the form of a
Qualified Joint and Survivor Annuity while the Account balance is immediately
distributable. (Furthermore, if payment in the form of a Qualified Joint and
Survivor Annuity is not required with respect to the Participant pursuant to
section 9.6 of the Plan, only the Participant need consent to the distribution
of an Account balance that is immediately distributable). Neither the consent of
the Participant nor the Participant's Spouse shall be required to the extent
that a distribution is required to satisfy section 401(a)(9) or section 415 of
the Code. In addition, upon termination of this Plan if the Plan does not offer
an annuity option (purchased from a commercial provider), the Participant's
Account balance may, without the Participant's consent, be distributed to the
Participant or transferred to another defined contribution plan (other than an
employee stock ownership plan as defined in section 4975(e)(7) of the Code)
within the same controlled group.
(c) An Account balance is immediately distributable if any part of
the Account balance could be distributed to the Participant (or Surviving
Spouse) before the Participant attains
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(or would have attained if not deceased) the later of Normal Retirement Age or
age sixty-two (62).
(d) For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first day of the first
Plan Year beginning after December 31, 1988, the Participant's Vested Account
Balance shall not include amounts attributable to accumulated deductible
Employee contributions within the meaning of section 72(o)(5)(B) of the Code.
10.3 Commencement of Benefits.
(a) Unless the Participant elects otherwise, distribution of
benefits will begin no later than the 60th day after the latest of the close of
the Plan Year in which:
(i) the Participant attains age sixty-five (65) (or Normal
Retirement Age, if earlier);
(ii) the 10th anniversary of the year in which the Participant
commenced participation in the Plan occurs; or
(iii) the Participant terminates service with the Employer.
(b) Notwithstanding the foregoing, the failure of a Participant and
Spouse to consent to a distribution while a benefit is immediately
distributable, within the meaning of section 10.2 of the Plan, shall be deemed
to be an election to defer commencement of payment of any benefit sufficient to
satisfy this section.
10.4 Early Retirement With Age and Service Requirement. If a Participant
separates from service before satisfying the age requirement for early
retirement, but has satisfied the service requirement, the Participant will be
entitled to elect an early retirement benefit upon satisfaction of such age
requirement.
10.5 Nontransferability of Annuities. Any annuity contract distributed
herefrom must be nontransferable.
10.6 Conflicts With Annuity Contracts. The terms of any annuity contract
purchased and distributed by the Plan to a Participant or Spouse shall comply
with the requirements of this Plan.
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ARTICLE 11
TIMING AND MODES OF DISTRIBUTION
11.1 General Rules.
(a) Subject to ARTICLE 9, the requirements of this ARTICLE shall
apply to any distribution of a Participant's interest and will take precedence
over any inconsistent provisions of this Plan. Unless otherwise specified, the
provisions of this ARTICLE apply to calendar years beginning after December 31,
1984.
(b) All distributions required under this ARTICLE shall be
determined and made in accordance with the income tax regulations under section
401(a)(9) of the Code, including the minimum distribution incidental benefit
requirement of section 1.401(a)(9)-2 of the proposed regulations.
11.2 Required Beginning Date. The entire interest of a Participant must be
distributed or begin to be distributed no later than the Participant's Required
Beginning Date.
11.3 Limits on Distribution Periods. As of the first Distribution Calendar
Year, distributions, if not made in a single-sum, may only be made over one of
the following periods (or a combination thereof):
(a) the life of the Participant;
(b) the life of the Participant and a Designated Beneficiary;
(c) a period certain not extending beyond the Life Expectancy of the
Participant; or
(d) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a Designated Beneficiary.
11.4 Determination of Amount to be Distributed Each Year.
(a) Individual Account.
(i) If a Participant's Benefit is to be distributed over (1) a
period not extending beyond the Life Expectancy of the Participant or the joint
life and last survivor expectancy of the Participant and the Participant's
Designated Beneficiary or (2) a period not extending beyond the Life Expectancy
of the Designated Beneficiary, the amount required to be distributed for each
calendar year, beginning with distributions for the first Distribution Calendar
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Year, must at least equal the quotient obtained by dividing the Participant's
Benefit by the Applicable Life Expectancy.
(ii) For calendar years beginning before January 1, 1989, if
the Participant's Spouse is not the Designated Beneficiary, the method of
distribution selected must assure that at least fifty percent (50%) of the
present value of the amount available for distribution is paid within the Life
Expectancy of the Participant.
(iii) For calendar years beginning after December 31, 1988,
the amount to be distributed each year, beginning with distributions for the
first Distribution Calendar Year shall not be less than the quotient obtained by
dividing the Participant's Benefit by the lesser of (1) the Applicable Life
Expectancy or (2) if the Participant's Spouse is not the Designated Beneficiary,
the applicable divisor determined from the table set forth in Q&A-4 of section
1.401(a)(9)-2 of the proposed regulations. Distributions after the death of the
Participant shall be distributed using the Applicable Life Expectancy in
subsection (a)(i) above as the relevant divisor without regard to proposed
regulations section 1.401(a)(9)-2.
(iv) The minimum distribution required for the Participant's
first Distribution Calendar Year must be made on or before the Participant's
Required Beginning Date. The minimum distribution for other calendar years
including the minimum distribution for the Distribution Calendar Year in which
the Employee's Required Beginning Date occurs, must be made on or before
December 31 of that Distribution Calendar Year.
(b) Other Forms. If the Participant's Benefit is distributed in the
form of an annuity purchased from an insurance company, distributions thereunder
shall be made in accordance with the requirements of section 401(a)(9) of the
Code and the proposed regulations thereunder.
11.5 Death Distribution Provisions.
(a) Distribution Beginning Before Death. If the Participant dies
after distribution of his or her interest has begun, the remaining portion of
such interest will continue to be distributed at least as rapidly as under the
method of distribution being used prior to the Participant's death.
(b) Distribution Beginning After Death. If the Participant dies
before distribution of his or her interest begins, distribution of the
Participant's entire interest shall be completed by December 31 of the calendar
year containing the fifth anniversary of the Participant's death except to the
extent that an election is made to receive distributions in accordance with (i)
or (ii) below:
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(i) if any portion of the Participant's interest is payable to
a Designated Beneficiary, distributions may be made over the life or over a
period certain not greater than the Life Expectancy of the Designated
Beneficiary commencing on or before December 31 of the calendar year immediately
following the calendar year in which the Participant died;
(ii) if the Designated Beneficiary is the Participant's
Surviving Spouse, the date distributions are required to begin in accordance
with (i) above shall not be earlier than the later of (1) December 31 of the
calendar year immediately following the calendar year in which the Participant
died and (2) December 31 of the calendar year in which the Participant would
have attained age seventy and one-half (70 1/2).
(c) If the Participant has not made an election pursuant to this
section by the time of his or her death, the Participant's Designated
Beneficiary must elect the method of distribution no later than the earlier of
(1) December 31 of the calendar year in which distributions would be required to
begin under this section; or (2) December 31 of the calendar year which contains
the fifth anniversary of the date of death of the Participant. If the
Participant has no Designated Beneficiary, or if the Designated Beneficiary does
not elect a method of distribution, distribution of the Participant's entire
interest must be completed by December 31 of the calendar year containing the
fifth anniversary of the Participant's death.
(d) For purposes of subsection (b) above, if the Surviving Spouse
dies after the Participant, but before payments to such Spouse begin, the
provisions of subsection (b), with the exception of paragraph (ii) therein,
shall be applied as if the Surviving Spouse were the Participant.
(e) For purposes of this section, any amount paid to a child of the
Participant will be treated as if it had been paid to the Surviving Spouse if
the amount becomes payable to the Surviving Spouse when the child reaches the
age of majority.
(f) For the purposes of this section, distribution of a
Participant's interest is considered to begin on the Participant's Required
Beginning Date (or, if subsection (d) above is applicable, the date distribution
is required to begin to the Surviving Spouse pursuant to subsection (b) above).
If distribution in the form of an annuity described in section 11.4(b) above
irrevocably commences to the Participant before the Required Beginning Date, the
date distribution is considered to begin is the date distribution actually
commences.
11.6 Designation of Beneficiary. Subject to the rules of ARTICLE 9, a
Participant (or former Participant) may designate from time to time any person
or persons (who may be designated contingently or successively and may be an
entity other than a natural person) as his Beneficiary who will be entitled to
receive any undistributed amounts credited to the Participant's separate Account
under the Plan at the time of the Participant's death. Any such Beneficiary
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designation by a Participant shall be made in writing in the manner prescribed
by the Plan Administrator, and shall be effective only when filed with the Plan
Administrator during the Participant's lifetime. A Participant may change or
revoke his Beneficiary designation at any time in the manner prescribed by the
Plan Administrator. If any portion of the Participant's Account is invested in
insurance pursuant to ARTICLE 14, the Beneficiary of the benefits under the
insurance policy shall be the person or persons designated under the policy. If
the Designated Beneficiary (or each of the Designated Beneficiaries) predeceases
the Participant, the Participant's Beneficiary designation shall be ineffective.
If no Beneficiary designation is in effect at the time of the Participant's
death, his Beneficiary shall be his estate.
11.7 Definitions.
(a) Applicable Life Expectancy. The Life Expectancy (or joint and
last survivor expectancy) calculated using the attained age of the Participant
(or Designated Beneficiary) as of the Participant's (or Designated
Beneficiary's) birthday in the applicable calendar year reduced by one (1) for
each calendar year which has elapsed since the date Life Expectancy was first
calculated. If Life Expectancy is being recalculated, the Applicable Life
Expectancy shall be the Life Expectancy as so recalculated. The applicable
calendar year shall be the first Distribution Calendar Year, and if Life
Expectancy is being recalculated such succeeding calendar year. If annuity
payments commence in accordance with section 11.4(b) before the Required
Beginning Date, the applicable calendar year is the year such payments commence.
If distribution is in the form of an immediate annuity purchased after the
Participant's death with the Participant's remaining interest, the applicable
calendar year is the year of purchase.
(b) Designated Beneficiary. The individual who is designated as the
Beneficiary under the Plan in accordance with section 401(a)(9) and the proposed
regulations thereunder.
(c) 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 pursuant to section 11.5 above.
(d) Life Expectancy.
(i) Life Expectancy and joint and last survivor expectancy are
computed by use of the expected return multiples in Tables V and VI of section
1.72-9 of the income tax regulations.
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(ii) Unless otherwise elected by the Participant (or Spouse,
in the case of distributions described in section 11.5(b)(ii) above) by the time
distributions are required to begin, life expectancies shall be recalculated
annually. Such election shall be irrevocable as to the Participant (or Spouse)
and shall apply to all subsequent years. The Life Expectancy of a non-Spouse
Beneficiary may not be recalculated.
(e) Participant's Benefit.
(i) The Account balance as of the last valuation date in the
calendar year immediately preceding the Distribution Calendar Year (valuation
calendar year) increased by the amount of any contributions 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.
(ii) For purposes of subsection (i) above, if any portion of
the minimum distribution for the first Distribution Calendar Year is made in the
second Distribution Calendar Year on or before the Required Beginning Date, the
amount of the minimum distribution made in the second Distribution Calendar Year
shall be treated as if it had been made in the immediately preceding
Distribution Calendar Year.
(f) Required Beginning Date.
(i) General Rule. The Required Beginning Date of a Participant
is the first day of April of the calendar year following the calendar year in
which the Participant attains age seventy and one-half (70 1/2).
(ii) Transitional Rules. The Required Beginning Date of a
Participant who attains age seventy and one-half (70 1/2) before January 1,
1988, shall be determined in accordance with (1) or (2) below:
(1) Non-Five-Percent Owners. The Required Beginning Date
of a Participant who is not a Five Percent (5%) Owner is the first day of April
of the calendar year following the calendar year in which the later of
retirement or attainment of age seventy and one-half (70 1/2) occurs.
(2) Five Percent Owners. The Required Beginning Date of
a Participant who is a Five Percent (5%) Owner during any year beginning after
December 31, 1979, is the first day of April following the later of:
(A) the calendar year in which the Participant
attains age seventy and one-half (70 1/2); or
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(B) the earlier of the calendar year with or
within which ends the Plan Year in which the Participant becomes a Five Percent
(5%) Owner, or the calendar year in which the Participant retires.
The Required Beginning Date of a Participant who is not a Five Percent (5%)
Owner who attains age seventy and one-half (70 1/2) during 1988 and who has not
retired as of January 1, 1989, is April 1, 1990.
(iii) Five Percent Owner. A Participant is treated as a Five
Percent (5%) Owner for purposes of this section if such Participant is a Five
Percent (5%) Owner as defined in section 416(i) of the Code (determined in
accordance with section 416 but without regard to whether the Plan is top-heavy)
at any time during the Plan Year ending with or within the calendar year in
which such owner attains age sixty-six and one-half (66 1/2) or any subsequent
year.
(iv) Once distributions have begun to a Five Percent (5%)
Owner under this section, they must continue to be distributed, even if the
Participant ceases to be a Five Percent (5%) Owner in a subsequent year.
11.8 Transitional Rule.
(a) Notwithstanding the other requirements of this ARTICLE and
subject to the requirements of ARTICLE 9, distribution on behalf of any
Employee, including a Five Percent (5%) Owner, may be made in accordance with
all of the following requirements (regardless of when such distribution
commences):
(i) The distribution by the Trust is one which would not have
disqualified such trust under section 401(a)(9) of the Internal Revenue Code as
in effect prior to amendment by the Deficit Reduction Act of 1984.
(ii) The distribution is in accordance with a method of
distribution designated by the Employee whose interest in the Trust is being
distributed or, if the Employee is deceased, by a Beneficiary of such Employee.
(iii) Such designation was in writing, was signed by the
Employee or the Beneficiary, and was made before January 1, 1984.
(iv) The Employee had accrued a benefit under the Plan as of
December 31, 1983.
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(v) The method of distribution designated by the Employee or
the Beneficiary specifies the time at which distributions will be made, and in
the case of any distribution upon the Employee's death, the Beneficiaries of the
Employee listed in order of priority.
(b) A distribution upon death will not be covered by this
transitional rule unless the information in the designation contains the
required information described above with respect to the distributions to be
made upon the death of the Employee.
(c) For any distribution which commences before January 1, 1984, but
continues after December 31, 1983, the Employee, or the Beneficiary, to whom
such distribution is being made, will be presumed to have designated the method
of distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirements in subsections (a)(i) and (a)(v).
(d) If a designation is revoked, any subsequent distribution must
satisfy the requirements of section 401(a)(9) of the Code and the proposed
regulations thereunder. If a designation is revoked subsequent to the date
distributions are required to begin, the Trust must distribute by the end of the
calendar year following the calendar year in which the revocation occurs the
total amount not yet distributed which would have been required to have been
distributed to satisfy section 401(a)(9) of the Code and the regulations
thereunder but for the section 242(b)(2) election. For calendar years beginning
after December 31, 1988, such distributions must meet the minimum distribution
incidental benefit requirements in section 1.401(a)(9)-2 of the proposed
regulations. Any changes in the designation will be considered to be a
revocation of the designation. However, the mere substitution or addition of
another beneficiary (one not named in the designation) under the designation
will not be considered to be a revocation of the designation, so long as such
substitution or addition does not alter the period over which distributions are
to be made under the designation, directly or indirectly (for example, by
altering the relevant measuring life). In the case in which an amount is
transferred or rolled over from one plan to another plan, the rules in Q&A J-2
and Q&A J-3 shall apply.
11.9 Optional Forms of Benefit.
(a) Except to the extent benefits are required to be paid in the
form of an automatic joint and survivor annuity under ARTICLE 9, any amount
which a Participant shall be entitled to receive under the Plan shall be
distributed in one or a combination of the following ways:
(i) in a lump-sum payment of cash, the amount of which shall
be determined by redeeming all Shares credited to the Participant's Account
under the Plan as of the date of distribution;
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(ii) in a lump-sum payment including a distribution in kind of
all Shares credited to the Participant's Account under the Plan as of the date
of distribution;
(iii) in substantially equal monthly, quarterly, or annual
installment payments of cash, or the distribution of Shares in kind, over a
period certain not to exceed the Life Expectancy of the Participant or the joint
and last survivor Life Expectancy of the Participant and his Beneficiary,
determined in each case as of the earlier of: (1) the end of the Plan Year in
which occurs the event entitling the Participant to a distribution of benefits,
or (2) the date such installments commence;
(iv) if permitted by the Sponsor, in monthly, quarterly, or
annual installment payments of cash, or the distribution of Shares in kind, so
that the amount distributed in each Plan Year equals the quotient obtained by
dividing the Participant's Account at the beginning of that Plan Year by the
joint and last survivor Life Expectancy of the Participant and the Beneficiary
for that Plan Year. The Life Expectancy will be computed using the recomputation
method described in section 11.7(d). Unless the Spouse of the retired
Participant is the Beneficiary, the actuarial present value of all expected
payments to the retired Participant must be more than fifty percent (50%) of the
actuarial present value of payments to the retired Participant and the
Beneficiary; or
(v) by application of the Participant's vested Account to the
purchase of a nontransferable immediate or deferred annuity contract, on an
individual or group basis. Unless the Spouse of the retired Participant is the
Beneficiary, the actuarial present value of all expected payments to the retired
Participant must be more than fifty percent (50%) of the actuarial present value
of payments to the retired Participant and the Beneficiary.
(b) If the Participant fails to select a method of distribution,
except as may be required by ARTICLE 9, all amounts which he is entitled to
receive under the Plan shall be distributed to him in a lump-sum payment.
ARTICLE 12
WITHDRAWALS
12.1 Withdrawal of Nondeductible Voluntary Contributions. Subject to the
Qualified Election requirements of ARTICLE 9 and section 12.4, any Participant
who has made nondeductible voluntary contributions may, upon thirty (30) days
notice in writing filed with the Plan Administrator, have paid to him all or any
portion of the fair market value of his nondeductible voluntary contribution
subaccount.
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12.2 Withdrawal of Elective Deferrals. Subject to the Qualified Election
requirements of ARTICLE 9 and section 12.4, any Participant who has made
Elective Deferrals and who has attained age fifty-nine and one-half (59 1/2)
may, upon thirty (30) days notice in writing filed with the Plan Administrator,
have paid to him all or any portion of the fair market value of his elective
deferral subaccount.
12.3 Hardship Withdrawals.
(a) Distribution of Elective Deferrals (and earnings thereon accrued
as of December 31, 1988) may be made to a Participant in the event of hardship.
For the purposes of this section, hardship is defined as an immediate and heavy
financial need of the Employee where such Employee lacks other available
resources. Hardship distributions are subject to the spousal consent
requirements contained in sections 401(a)(11) and 417 of the Code, unless
section 9.6 is applicable.
(b) The only financial needs considered immediate and heavy are the
following:
(i) deductible medical expenses (within the meaning of section
213(d) of the Code) of the Employee, the Employee's Spouse, children or
dependents;
(ii) the purchase (excluding mortgage payments) of a principal
residence for the Employee;
(iii) payment of tuition for the next quarter or semester of
post-secondary education for the Employee, the Employee's Spouse, children or
dependents; or
(iv) the need to prevent the eviction of the Employee from, or
a foreclosure on the mortgage of, the Employee's principal residence.
(c) A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Employee only if:
(i) the Employee has obtained all distributions, other than
hardship distributions, and all nontaxable loans under all plans maintained by
the Employer;
(ii) all plans maintained by the Employer provide that the
Employee's Elective Deferrals (and Employee Contributions) will be suspended for
twelve (12) months after the receipt of the hardship distribution;
(iii) the distribution is not in excess of the amount of an
immediate and heavy financial need; and
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(iv) all plans maintained by the Employer provide that the
Employee may not make Elective Deferrals for the Employee's taxable year
immediately following the taxable year of the hardship distribution in excess of
the applicable limit under section 402(g) of the Code for such taxable year less
the amount of such Employee's Elective Deferrals for the taxable year of the
hardship distribution.
12.4 Manner of Making Withdrawals. Any withdrawal by a Participant under
the Plan shall be made only after the Participant files a written request with
the Plan Administrator specifying the nature of the withdrawal (and the reasons
therefor, if a hardship withdrawal), and the amount of funds requested to be
withdrawn. Upon approving any withdrawal, the Plan Administrator shall furnish
the Trustee with written instructions directing the Trustee to make the
withdrawal in a lump-sum payment of cash to the Participant. In making any
withdrawal payment, the Trustee shall be fully entitled to rely on the
instructions furnished by the Plan Administrator, and shall be under no duty to
make any inquiry or investigation with respect thereto. Unless section 9.6 is
applicable, if the Participant is married, his Spouse must consent to the
withdrawal pursuant to a Qualified Election (as defined in section 9.4(c))
within the ninety (90) day period ending on the date of the withdrawal.
12.5 Limitations on Withdrawals. The Plan Administrator may prescribe
uniform and nondiscriminatory rules and procedures limiting the number of times
a Participant may make a withdrawal under the Plan during any Plan Year, and the
minimum amount a Participant may withdraw on any single occasion.
ARTICLE 13
LOANS
13.1 General Provisions.
(a) If the Adoption Agreement so provides and the Employer so
elects, loans shall be made available to any Participant or Beneficiary who is a
party-in-interest (as defined in section 3(14) of ERISA) on a reasonably
equivalent basis. A Participant or Beneficiary who is not a party-in-interest
(as defined in section 3(14) of ERISA) shall not be eligible to receive a loan
under this ARTICLE.
(b) Loans shall not be made available to Highly-Compensated
Employees (as defined in section 414(q) of the Code) in an amount greater than
the amount made available to other Employees.
(c) Loans must be adequately secured and bear a reasonable interest
rate.
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(d) No Participant loan shall exceed the present value of the
Participant's Vested Account Balance.
(e) Unless section 9.6 is applicable, a Participant must obtain the
consent of his or her Spouse, if any, to use of the Account balance as security
for the loan. Spousal consent shall be obtained no earlier than the beginning of
the ninety (90) day period that ends on the date on which the loan is to be so
secured. The consent must be in writing, must acknowledge the effect of the
loan, and must be witnessed by a Plan representative or notary public. Such
consent shall thereafter be binding with respect to the consenting Spouse or any
subsequent Spouse with respect to that loan. A new consent shall be required if
the Account balance is used for renegotiation, extension, renewal or other
revision of the loan.
(f) In the event of default, foreclosure on the note and attachment
of security will not occur until a distributable event occurs under the Plan.
(g) Loans will not be made to any shareholder-employee or
Owner-Employee. For purposes of this requirement, a shareholder-employee means
an Employee or officer of an electing small business (subchapter S) corporation
who owns (or is considered as owning within the meaning of section 318(a)(1) of
the Code), on any day during the taxable year of such corporation, more than
five percent (5%) of the outstanding stock of the corporation.
(h) If a valid spousal consent has been obtained in accordance with
subsection (e), then, notwithstanding any other provision of this Plan, the
portion of the Participant's Vested Account Balance used as a security interest
held by the Plan by reason of a loan outstanding to the Participant shall be
taken into account for purposes of determining the amount of the Account balance
payable at the time of death or distribution, but only if the reduction is used
as repayment of the loan. If less than one hundred percent (100%) of the
Participant's Vested Account Balance (determined without regard to the preceding
sentence) is payable to the Surviving Spouse, then the Account balance shall be
adjusted by first reducing the Vested Account Balance by the amount of the
security used as repayment of the loan, and then determining the benefit payable
to the Surviving Spouse.
13.2 Administration of Loan Program.
(a) The Plan's loan program will be administered by the Plan
Administrator.
(b) Loan requests shall be made on a form prescribed by the Plan
Administrator and shall comply with section 13.4.
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(c) Loan requests that comply with all the requirements of this
ARTICLE shall be approved by the Plan Administrator.
(d) The rate of interest to be charged on loans shall be determined
under section 13.5.
(e) The only collateral that may be used as security for a loan, and
the limitations and requirements applicable, are determined under section 13.6.
(f) The rules regarding defaults are set forth in section 13.9.
13.3 Amount of Loan. Loans to any Participant or Beneficiary will not be
made to the extent that such loan, when added to the outstanding balance of all
other loans to the Participant or Beneficiary, would exceed the lesser of:
(a) fifty thousand dollars ($50,000) reduced by the excess (if any)
of the highest outstanding balance of loans during the one (1) year period
ending on the day before the loan is made, over the outstanding balance of loans
from the Plan on the date the loan is made; or
(b) one-half (1/2) the present value of the nonforfeitable accrued
benefit of the Participant.
(c) For the purpose of the above limitation, all loans from all
plans of the Employer and other members of a group of employers described in
sections 414(b), 414(c) and 414(m) of the Code are aggregated.
13.4 Manner of Making Loans. A request by a Participant for a loan shall
be made in writing to the Plan Administrator and shall specify the amount of the
loan, and the subaccount(s) or Shares of the Participant from which the loan
should be made. The terms and conditions on which the Plan Administrator shall
approve loans under the Plan shall be applied on a uniform and nondiscriminatory
basis with respect to all Participants. If a Participant's request for a loan is
approved by the Plan Administrator, the Plan Administrator shall furnish the
Trustee with written instructions directing the Trustee to make the loan in a
lump-sum payment of cash to the Participant. In making any loan payment under
this ARTICLE, the Trustee shall be fully entitled to rely on the instructions
furnished by the Plan Administrator, and shall be under no duty to make any
inquiry or investigation with respect thereto.
13.5 Terms of Loan. Loans shall be made on such terms and subject to such
limitations as the Plan Administrator may prescribe. Furthermore, any loan
shall, by its terms, require that repayment (principal and interest) be
amortized in level payments, not less frequently than quarterly, over a period
not extending beyond five (5) years from the date of the loan, unless such
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loan is used to acquire a dwelling unit which, within a reasonable time
(determined at the time the loan is made) will be used as the principal
residence of the Participant. The rate of interest to be charged shall be
determined by the Plan Administrator in accordance with the rates quoted by
representative financial institutions in the local area for similar loans.
13.6 Security for Loan. Any loan to a Participant under the Plan shall be
secured by the pledge of all the Participant's right, title and interest in the
Trust except that Elective Deferrals shall not be security for loans except to
the extent necessary to adequately secure the loan. Such pledge shall be
evidenced by the execution of a promissory note by the Participant which shall
provide that, in the event of any default by the Participant on a loan
repayment, the Plan Administrator shall be authorized (to the extent permitted
by law) to deduct the amount of the loan outstanding and any unpaid interest due
thereon from the Participant's wages or salary to be thereafter paid by the
Employer, and to take any and all other actions necessary and appropriate to
enforce collection of the unpaid loan. An assignment or pledge of any portion of
the Participant's interest in the Plan and a loan, pledge, or assignment with
respect to any insurance contract purchased under the Plan, will be treated as a
loan under this section. In the event the value of the Participant's vested
Account at any time is less than one hundred twenty five percent (125%) of the
outstanding loan balance, the Plan Administrator shall request additional
collateral of sufficient value to adequately secure the repayment of the loan.
Failure to provide such additional collateral upon a request of the Plan
Administrator shall constitute an event of default.
13.7 Segregated Investment. Loans shall be considered a Participant
directed investment and, for the limited purposes of allocating earnings and
losses pursuant to ARTICLE 5, shall not be considered a part of the common fund
under the Trust.
13.8 Repayment of Loan. The Plan Administrator shall have the sole
responsibility for ensuring that a Participant timely makes all loan repayments,
and for notifying the Trustee in the event of any default by the Participant on
the loan. Each loan repayment shall be paid to the Trustee, and shall be
accompanied by written instructions from the Plan Administrator that identify
the Participant on whose behalf the loan repayment is being made.
13.9 Default on Loan.
(a) In the event of a termination of the Participant's employment
with the Affiliated Employers or a default by a Participant on a loan repayment,
all remaining payments on the loan shall be immediately due and payable. The
Employer shall, upon the direction of the Plan Administrator, to the extent
permitted by law, deduct the total amount of the loan outstanding and any unpaid
interest due thereon from the wages or salaries payable to the Participant by
the Employer in accordance with the Participant's promissory note. In addition,
the Plan Administrator shall take any and all other actions necessary and
appropriate to enforce collection
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of the unpaid loan. However, attachment of the Participant's Account pledged as
security will not occur until a distributable event occurs under the Plan.
(b) For purposes of this section, the term "default" shall mean
failure, by a period of at least ten (10) days, to make any loan payment
(whether principal or interest or both) that is due and payable. Neither the
Plan Administrator nor any other fiduciary is required to give any written or
oral notice of default.
13.10.Unpaid Amounts. Upon the occurrence of a Participant's retirement or
death, or upon a Participant's fifth (5th) consecutive Break in Service or
earlier distribution, the unpaid balance of any loan, including any unpaid
interest, shall be deducted from any payment or distribution from the Trust to
which such Participant or his Beneficiary may be entitled. If after charging the
Participant's Account with the unpaid balance of the loan, including any unpaid
interest, there still remains an unpaid balance of any such loan and interest,
then the remaining unpaid balance of such loan and interest shall be charged
against any property pledged as security with respect to such loan.
ARTICLE 14
INSURANCE
14.1 Insurance. If the Adoption Agreement so provides and the Employer
elects to allocate or permit Participants to allocate a portion of their
Accounts to purchase life insurance, the ensuing subsections of this ARTICLE
shall apply.
14.2 Policies. The Plan Administrator shall instruct the Trustee to
procure one or more life insurance policies on the Participant's life, the terms
of which shall conform to the requirements of the Plan and the Code. The
policies and the companies which write them shall be subject to the approval of
the Plan Administrator and the Trustee. The Trustee shall procure and hold such
policies in its name or the name of the nominee. The Trustee shall be the sole
owner of all contracts purchased hereunder, and it shall be so designated in
each policy and application therefor.
14.3 Beneficiary. The Participant shall have the right to name the
Beneficiary and choose the benefit option under the policy for the Beneficiary.
The Trustee shall designate the Beneficiary of all such policies in accordance
with the written directions of the Plan Administrator and the policy terms. Such
designation may be outlined in the original application as forwarded to the
issuing company. However, the Plan Administrator shall have available and shall
furnish the Participant with the necessary forms for any Beneficiary designation
or change of Beneficiary and it will keep a copy of all executed designations as
part of its records. Upon a Participant's death, the Plan Administrator will
promptly furnish the Trustee a copy of the last designation and shall
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authorize the Trustee to complete such forms as the insurance company may
require in order to effect the benefit option.
14.4 Payment of Premiums. Subject to the provisions of sections 7.3 and
14.5, premium payments to the insurer may be made only by the Trustee with
respect to any insurance policy purchased on behalf of a Participant and shall
constitute first an investment of a portion of the funds of the Participant's
Employer Contribution subaccounts up to the maximum amount of such subaccounts
permitted to be applied toward such premium payments, as provided in section
14.5. If a Participant's subaccounts lack sufficient assets to pay premiums on a
life insurance policy due on his behalf, the Trustee, at the direction of the
Plan Administrator, acting upon the request of the Participant, shall borrow
under the policy loan provisions, if any, the amount necessary to pay such
premiums, using the cash value of the insurance as security, or the Trustee may
liquidate assets held in the Participant's Account, in the same order, of
sufficient value to pay such premiums. Any loans shall be repaid by the
application of earnings, contributions, or forfeitures to the Account of the
Participant insured by such policy. In the absence of the Plan Administrator's
direction to borrow or to liquidate assets to pay premiums, the life insurance
policy shall be put on a paid-up basis or, if it has no cash value, cancelled.
14.5 Limitation on Insurance Premiums. The Trustee shall not pay, nor
shall anyone on behalf of the Trustee pay, any life insurance premium for any
Participant out of the Participant's Employer Contribution subaccounts unless
the amount of such payment, plus all premiums previously so paid on behalf of
the Participant, is less than fifty percent (50%) of the Employer Contributions
and forfeitures allocated to the Participant's Employer Contribution subaccounts
as determined on the date such premium is paid with respect to reserve life
insurance policies and shall be less than twenty-five percent (25%) thereof with
respect to nonreserve (term) policies, or, if both reserve life and term
insurance are purchased on the life of any Participant, the sum of the term
insurance premium plus one-half of the reserve life premiums may not exceed
twenty-five percent (25%) of the Employer Contributions made on behalf of such
Participant. For purposes of these incidental insurance provisions, reserve life
insurance contracts are contracts with both nondecreasing death benefits and
nonincreasing premiums. Dividends received on life insurance policies shall be
considered a reduction of premiums paid in such computations.
If payment of premiums on a Participant's life insurance policy is
prohibited because of the limitation, the Trustee, as directed by the Plan
Administrator, shall permit the Participant to maintain that part of the
coverage made available by the prohibited premiums, either by payment of the
amount of the prohibited premium by the Participant from sources other than the
Trust or by distributing the policy to the extent of the Participant's vested
interest to the Participant and eliminating it from the Trust.
Nothing contained in the foregoing provisions of section 14.4 and this
section 14.5 shall be deemed to authorize the payment of any premium or premiums
for any Participant which
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would result in a failure to maintain any mandatory investment in Shares
required by the Sponsor in the Account or subaccounts of any such Participant.
14.6 Insurance Company. No insurance company which may issue any policies
for the purposes of this Plan shall be required to take or permit any action
contrary to the provisions of said policies, nor shall such insurance company be
deemed to be a party to, or responsible for the validity of, this Plan for any
purpose. No such insurance company shall be required to look into the terms of
this Plan or question any action of the Trustee hereunder, nor be responsible to
see that any action of the Trustee is authorized under the terms of this Plan.
Any such issuing insurance company shall be fully discharged from any and all
liability for any amount paid to the Trustee or paid in accordance with the
direction of the Trustee, as the case may be, or for any change made or action
taken by such insurance company upon such direction and no such insurance
company shall be obliged to see to the distribution or further application of
any monies paid by it. The certificate of the Trustee signed by one of its trust
officers, assistant secretary, or other authorized representative thereof may be
received by any insurance company as conclusive evidence of any of the matters
mentioned in this Plan, and any insurance company shall be fully protected in
taking or permitting any action on the faith thereof and shall incur no
liability or responsibility for so doing.
14.7 Distribution of Policies. Upon a Participant's death, the Trustee,
upon direction of the Plan Administrator, shall procure the payment of the
proceeds of any policy held by the Participant in accordance with its terms and
this Plan. The Trustee shall be required to pay over all the proceeds of any
policy to the Participant's designated Beneficiary in accordance with the
distribution provisions of this Plan. A Participant's Spouse will be the
designated Beneficiary unless a Qualified Election has been made in accordance
with section 9.4(c) of the Plan. Under no circumstances shall the Trust retain
any part of the proceeds. Subject to the joint and survivor annuity requirements
of section ARTICLE 9, the policies shall be converted or distributed upon
commencement of benefits in accordance with the provisions of this section. Upon
a Participant's retirement at or after his Normal Retirement Age, unless there
is a single sum distribution in which case any policy shall be distributed, any
such policy shall be converted to a paid-up contract and delivered to the
Participant but the Plan Administrator may, with the Participant's consent,
direct that a portion or all of such cash value of the policy be converted to
provide retirement income as permitted within the terms of the policy and this
Plan. Upon a Participant's retirement due to Total and Permanent Disability, any
such policy shall be held for his account and assigned or delivered to the
Participant in addition to any other benefits provided by this Plan. Upon a
Participant's termination of employment for reasons other than death, Total and
Permanent Disability or retirement as stated above, to the extent of life
insurance purchased by Employer Contributions, he shall be entitled to a vested
interest in any policy held for his account as his interest is vested in the
remainder of his Employer Contribution subaccounts (exclusive of any such
policy). Whenever the Participant is entitled to one hundred percent (100%)
vesting, then such policy shall be assigned and delivered to the Participant in
accordance with its terms and the
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terms of this Plan. Whenever the Participant is entitled to a vesting of less
than one hundred percent (100%), then the Participant shall be entitled to a
vested interest of the cash surrender value of any such policy equal to his
vested interest in his Employer Contribution subaccounts, exclusive of the
policy, and one of the following distribution procedures shall apply:
(a) If the nonvested portion of the cash surrender value of all
policies held for the Participant's Account is less than the amount of his
vested termination benefit exclusive of the policies, then, such policy shall be
assigned to the Participant and the remainder of the Participant's vested
interest in the Participant's Employer Contribution subaccounts shall be reduced
by the cash surrender value of the nonvested portion of all policies, after
which it shall be paid or distributed to the Participant in accordance with the
terms of the Plan; or
(b) If the nonvested portion of the cash surrender value of all
policies held for the Participant's Account exceeds the Participant's vested
interest in the Employer Contribution subaccount exclusive of such policies, the
Participant shall be given the opportunity to purchase such policies by paying
to the Trustee the amount of such excess within thirty (30) days after notice to
him of the amount to be paid. Upon receipt of such payment said policy shall be
assigned and delivered to the Participant to the full satisfaction of all
termination benefits under this Plan. Any such policy not so purchased shall be
surrendered by the Trustee for its cash value and the proceeds thereof deposited
in the Trust for reallocation pursuant to ARTICLE 5.
It is the intention hereof that the total termination benefit of a
Participant whose interest is not fully vested shall be equal to the sum of the
vested percentage of his Employer Contribution subaccounts exclusive of all such
policies and the same percentage of the cash value of all such policies held for
his Account. To the extent possible under the foregoing provisions, such total
termination benefits shall be satisfied by the transfer and delivery to the
Participant of one or more such policies with the balance, if any, to be paid in
cash or in kind.
14.8 Policy Features. The Trustee shall arrange, where possible, that all
policies purchased for the benefit of a Participant shall have the same dividend
option which shall be on the premium reduction plan, and as nearly as may be
possible all policies issued under the Plan shall have the same anniversary
date. To the extent any dividends or credits earned on insurance policies are
not applied toward the next premiums due, they shall be allocated to the
Participant's Employer Contribution subaccount in the same manner as a
Participant directed investment.
14.9 Changed Conditions. From time to time because of changed conditions,
the Trustee, acting at the direction of the Plan Administrator upon the election
of the Participant concerned, shall obtain an additional contract or policy or
make such change in the contracts or policies maintained by the Trustee on the
life of the Participant as may be required by such changed conditions, within
the limits permitted by the insurance company which issued or is requested to
issue a contract and the limits established by this Plan.
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14.10.Conflicts. In the event of any conflict between the terms of the
Plan and the provisions of any contract issued hereunder, the terms of the Plan
shall control.
ARTICLE 15
ADMINISTRATION
15.1 Duties and Responsibilities of Fiduciaries; Allocation of Fiduciary
Responsibility. A fiduciary of the Plan shall have only those specific powers,
duties, responsibilities, and obligations as are explicitly given him under the
Plan and Trust Agreement. In general, the Employer shall have the sole
responsibility for making contributions to the Plan required under ARTICLE 4;
appointing the Trustee and the Plan Administrator; and determining the funds
available for investment under the Plan. The Plan Administrator shall have the
sole responsibility for the administration of the Plan, as more fully described
in section 15.2. It is intended that each fiduciary shall be responsible only
for the proper exercise of his own powers, duties, responsibilities, and
obligations under the Plan and Trust Agreement, and shall not be responsible for
any act or failure to act of another fiduciary. A fiduciary may serve in more
than one fiduciary capacity with respect to the Plan.
15.2 Powers and Responsibilities of the Plan Administrator.
(a) Administration of the Plan. The Plan Administrator shall have
all powers necessary to administer the Plan, including the power to construe and
interpret the Plan documents; to decide all questions relating to an
individual's eligibility to participate in the Plan; to determine the amount,
manner and timing of any distribution of benefits or withdrawal under the Plan;
to approve and ensure the repayment of any loan to a Participant under the Plan;
to resolve any claim for benefits in accordance with section 15.7; and to
appoint or employ advisors, including legal counsel, to render advice with
respect to any of the Plan Administrator's responsibilities under the Plan. Any
construction, interpretation, or application of the Plan by the Plan
Administrator shall be final, conclusive and binding. All actions by the Plan
Administrator shall be taken pursuant to uniform standards applied to all
persons similarly situated. The Plan Administrator shall have no power to add
to, subtract from, or modify any of the terms of the Plan, or to change or add
to any benefits provided by the Plan, or to waive or fail to apply any
requirements of eligibility for a benefit under the Plan.
(b) Records and Reports. The Plan Administrator shall be responsible
for maintaining sufficient records to reflect the Eligibility Computation
Periods in which an Employee is credited with one or more Years of Service for
purposes of determining his eligibility to participate in the Plan, and the
Compensation of each Participant for purposes of determining the amount of
contributions that may be made by or on behalf of the Participant under the
Plan. The
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Plan Administrator shall be responsible for submitting all required reports and
notifications relating to the Plan to Participants or their Beneficiaries, the
Internal Revenue Service and the Department of Labor.
(c) Furnishing Trustee with Instructions. The Plan Administrator
shall be responsible for furnishing the Trustee with written instructions
regarding all contributions to the Trust, all distributions to Participants in
accordance with ARTICLE 10, all withdrawals by Participants in accordance with
ARTICLE 12, all loans to Participants in accordance with ARTICLE 13 and all
purchases of life insurance in accordance with ARTICLE 14. In addition, the Plan
Administrator shall be responsible for furnishing the Trustee with any further
information respecting the Plan which the Trustee may request for the
performance of its duties or for the purpose of making any returns to the
Internal Revenue Service or Department of Labor as may be required by the
Trustee.
(d) Rules and Decisions. The Plan Administrator may adopt such rules
as it deems necessary, desirable, or appropriate in the administration of the
Plan. All rules and decisions of the Plan Administrator shall be applied
uniformly and consistently to all Participants in similar circumstances. When
making a determination or calculation, the Plan Administrator shall be entitled
to rely upon information furnished by a Participant or Beneficiary, the
Employer, the legal counsel of the Employer, or the Trustee.
(e) Application and Forms for Benefits. The Plan Administrator may
require a Participant or Beneficiary to complete and file with it an application
for a benefit, and to furnish all pertinent information requested by it. The
Plan Administrator may rely upon all such information so furnished to it,
including the Participant's or Beneficiary's current mailing address.
(f) Facility of Payment. Whenever, in the Plan Administrator's
opinion, a person entitled to receive a payment of a benefit or installment
thereof is under a legal disability or is incapacitated in any way so as to be
unable to manage his financial affairs, as determined by a court of competent
jurisdiction, it may direct the Trustee to make payments to such person or to
the legal representative or to a relative or friend of such person for that
person's benefit, or it may direct the Trustee to apply the payment for the
benefit of such person in such manner as it considers advisable.
15.3 Allocation of Duties and Responsibilities. The Plan Administrator
may, by written instrument, allocate among its members or employees any of its
duties and responsibilities not already allocated under the Plan or may
designate persons other than members or employees to carry out any of the Plan
Administrator's duties and responsibilities under the Plan. Any such duties or
responsibilities thus allocated must be described in the written instrument. If
a person other than an Employee of the Employer is so designated, such person
must acknowledge in writing his acceptance of the duties and responsibilities
allocated to him.
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15.4 Appointment of the Plan Administrator. The Employer shall designate
in the Adoption Agreement the Plan Administrator who shall administer the
Employer's Plan. Such Plan Administrator may consist of an individual, a
committee of two or more individuals, whether or not, in either such case, the
individual or any of such individuals are Employees of the Employer, a
consulting firm or other independent agent, the Trustee (with its consent), or
the Employer itself. The Plan Administrator shall be charged with the full power
and the responsibility for administering the Plan in all its details. If no Plan
Administrator has been appointed by the Employer, or if the person designated as
Plan Administrator by the Employer is not serving as such for any reason, the
Employer shall be deemed to be the Plan Administrator of the Plan. The Plan
Administrator may be removed by the Employer, or may resign by giving notice in
writing to the Employer, and in the event of the removal, resignation, death, or
other termination of service by the Plan Administrator, the Employer shall, as
soon as practicable, appoint a successor Plan Administrator, such successor
thereafter to have all of the rights, privileges, duties and obligations of the
predecessor Plan Administrator.
15.5 Expenses. The Employer shall pay all expenses authorized and incurred
by the Plan Administrator in the administration of the Plan except to the extent
such expenses are paid from the Trust.
15.6 Liabilities. The Plan Administrator and each person to whom duties
and responsibilities have been allocated pursuant to section 15.3 may be
indemnified and held harmless by the Employer with respect to any alleged breach
of responsibilities performed or to be performed hereunder. The Employer and
each Affiliated Employer shall indemnify and hold harmless the Sponsor against
all claims, liabilities, fines, and penalties and all expenses reasonably
incurred by or imposed upon him (including, but not limited to, reasonable
attorney's fees) which arise as a result of actions or failure to act in
connection with the operation and administration of the Plan.
15.7 Claims Procedure.
(a) Filing a Claim. Any Participant or Beneficiary under the Plan
may file a written claim for a Plan benefit with the Plan Administrator or with
a person named by the Plan Administrator to receive claims under the Plan.
(b) Notice of Denial of Claim. In the event of a denial or
limitation of any benefit or payment due to or requested by any Participant or
Beneficiary under the Plan ("claimant"), claimant shall be given a written
notification containing specific reasons for the denial or limitation of his
benefit. The written notification shall contain specific reference to the
pertinent Plan provisions on which the denial or limitation of his benefit is
based. In addition, it shall contain a description of any other material or
information necessary for the claimant to
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perfect a claim, and an explanation of why such material or information is
necessary. The notification shall further provide appropriate information as to
the steps to be taken if the claimant wishes to submit his claim for review.
This written notification shall be given to a claimant within ninety (90) days
after receipt of his claim by the Plan Administrator unless special
circumstances require an extension of time for processing the claim. If such an
extension of time for processing is required, written notice of the extension
shall be furnished to the claimant prior to the termination of said ninety (90)
day period, and such notice shall indicate the special circumstances which make
the postponement appropriate.
(c) Right of Review. In the event of a denial or limitation of his
benefit, the claimant or his duly authorized representative shall be permitted
to review pertinent documents and to submit to the Plan Administrator issues and
comments in writing. In addition, the claimant or his duly authorized
representative may make a written request for a full and fair review of his
claim and its denial by the Plan Administrator; provided, however, that such
written request must be received by the Plan Administrator (or its delegate to
receive such requests) within sixty (60) days after receipt by the claimant of
written notification of the denial or limitation of the claim. The sixty (60)
day requirement may be waived by the Plan Administrator in appropriate cases.
(d) Decision on Review. A decision shall be rendered by the Plan
Administrator within sixty (60) days after the receipt of the request for
review, provided that where special circumstances require an extension of time
for processing the decision, it may be postponed on written notice to the
claimant (prior to the expiration of the initial sixty (60) day period) for an
additional sixty (60) days, but in no event shall the decision be rendered more
than one hundred twenty (120) days after the receipt of such request for review.
Any decision by the Plan Administrator shall be furnished to the claimant in
writing and shall set forth the specific reasons for the decision and the
specific Plan provisions on which the decision is based.
(e) Court Action. No Participant or Beneficiary shall have the right
to seek judicial review of a denial of benefits, or to bring any action in any
court to enforce a claim for benefits prior to filing a claim for benefits or
exhausting his rights to review under this section.
ARTICLE 16
AMENDMENT, TERMINATION AND MERGER
16.1 Sponsor's Power to Amend. The Sponsor may amend any part of the Plan.
For purposes of Sponsor's amendments, the mass submitter shall be recognized as
the agent of the Sponsor. If the Sponsor does not adopt the amendments made by
the mass submitter, it will no longer be identical to or a minor modifier of the
mass submitter plan.
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16.2 Amendment by Adopting Employer.
(a) The Employer may:
(i) change the choice of options in the Adoption Agreement;
(ii) add overriding language in the Adoption Agreement when
such language is necessary to satisfy section 415 or section 416 of the Code
because of the required aggregation of multiple plans; and
(iii) add certain model amendments published by the Internal
Revenue Service which specifically provide that their adoption will not cause
the Plan to be treated as individually designed.
(b) An Employer that amends the Plan for any other reason, including
a waiver of the minimum funding requirement under section 412(d) of the Code,
will no longer participate in this prototype plan and will be considered to have
an individually designed plan.
16.3 Vesting Upon Plan Termination. In the event of the termination or
partial termination of the Plan, the Account balance of each affected
Participant will be nonforfeitable.
16.4 Vesting Upon Complete Discontinuance of Contributions. In the event
of a complete discontinuance of contributions under the Plan, the Account
balance of each affected Participant will be nonforfeitable.
16.5 Maintenance of Benefits Upon Merger. In the event of a merger or
consolidation with, or transfer of assets to any other plan, each Participant
will receive a benefit immediately after such merger, consolidation or transfer
(if the Plan then terminated) which is at least equal to the benefit the
Participant was entitled to immediately before such merger, consolidation or
transfer (if the Plan had been terminated).
16.6 Special Amendments. The Employer may from time to time make any
amendment to the Plan that may be necessary to satisfy section 415 or 416 of the
Code. Any such amendment will be adopted by the Employer by completing
overriding Plan language in the Adoption Agreement. In the event of such an
amendment, the Employer must obtain a separate determination letter from the
Internal Revenue Service to continue reliance on the Plan's qualified status.
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ARTICLE 17
MISCELLANEOUS
17.1 Exclusive Benefit of Participants and Beneficiaries.
(a) All assets of the Trust shall be retained for the exclusive
benefit of Participants and their Beneficiaries, and shall be used only to pay
benefits to such persons or to pay the fees and expenses of the Trust. The
assets of the Trust shall not revert to the benefit of the Employer, except as
otherwise specifically provided in section 17.1(b).
(b) To the extent permitted or required by ERISA and the Code,
contributions to the Trust under this Plan are subject to the following
conditions:
(i) if a contribution or any part thereof is made to the Trust
by the Employer under a mistake of fact, such contribution or part thereof shall
be returned to the Employer within one (1) year after the date the contribution
is made;
(ii) In the event the Plan is determined not to meet the
initial qualification requirements of section 401 of the Code, contributions
made in respect of any period for which such requirements are not met shall be
returned to the Employer within one (1) year after the Plan is determined not to
meet such requirements, but only if the application for the qualification is
made by the time prescribed by law for filing the Employer's return for the
taxable year in which the Plan is adopted, or such later date as the Secretary
of the Treasury may prescribe.
(iii) contributions to the Trust are specifically conditioned
on their deductibility under the Code and, to the extent a deduction is
disallowed for any such contribution, such amount shall be returned to the
Employer within one (1) year after the date of the disallowance of the
deduction.
17.2 Nonguarantee of Employment. Nothing contained in this Plan shall be
construed as a contract of employment between the Employer and any Employee, or
as a right of any Employee to be continued in the employment of the Employer, or
as a limitation of the right of the Employer to discharge any of its Employees,
with or without cause.
17.3 Rights to Trust Assets. No Employee, Participant, or Beneficiary
shall have any right to, or interest in, any assets of the Trust upon
termination of employment or otherwise, except as provided under the Plan. All
payments of benefits under the Plan shall be made solely out of the assets of
the Trust.
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17.4 Nonalienation of Benefits. No benefit or interest available hereunder
will be subject to assignment or alienation, either voluntarily or
involuntarily. The preceding sentence shall also apply to the creation,
assignment, or recognition of a right to any benefit payable with respect to a
Participant pursuant to a domestic relations order, unless such order is
determined to be a qualified domestic relations order, as defined in section
414(p) of the Code, or any domestic relations order entered before January 1,
1985.
17.5 Aggregation Rules.
(a) Except as provided in ARTICLE 6, all Employees of the Employer
or any Affiliated Employer will be treated as employed by a single employer.
(b) If this Plan provides contributions or benefits for one or more
Owner-Employees who control both the business for which the Plan is established
and one or more other trades or businesses, this Plan and the plan established
for other trades or businesses must, when looked at as a single plan, satisfy
sections 401(a) and (d) for the Employees of this and all other trades or
businesses.
(c) If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses, the
employees of the other trades or businesses must be included in a plan which
satisfies sections 401(a) and (d) and which provides contributions and benefits
not less favorable than provided for Owner-Employees under this Plan.
(d) If an individual is covered as an Owner-Employee under the plans
of two or more trades or businesses which are not controlled and the individual
controls a trade or business, then the contributions or benefits of the
employees under the plan of the trades or businesses which are controlled must
be as favorable as those provided for him under the most favorable plan of the
trade or business which is not controlled.
(e) For purposes of paragraphs (b), (c) and (d), an Owner-Employee
or two or more Owner-Employees, will be considered to control a trade or
business if the Owner-Employee, or two or more Owner-Employees together:
(i) own the entire interest of an unincorporated trade or
business; or
(ii) in the case of a partnership, own more than fifty percent
(50%) of either the capital interest or the profits interest in the partnership.
For purposes of the preceding sentence, an Owner-Employee, or two or
more Owner-Employees shall be treated as owning an interest in a partnership
which is owned, directly
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or indirectly, by a partnership which such Owner-Employee, or such two or more
Owner-Employees, are considered to control within the meaning of the preceding
sentence.
17.6 Failure of Qualification. If the Employer's plan fails to attain or
retain qualification, such plan will no longer participate in this prototype
plan and will be considered an individually designed plan.
17.7 Applicable Law. Except to the extent otherwise required by ERISA, as
amended, this Plan shall be construed and enforced in accordance with the laws
of the state in which the Employer's principal place of business is located, as
specified in the Adoption Agreement.
<PAGE>
INSTRUCTIONS FOR PREPARING
THE MODEL SUMMARY PLAN DESCRIPTION
OF THE
PROTOTYPE PROFIT SHARING/401(k) PLAN
Each employer who adopts the Prototype Profit Sharing/401(k) Plan is
required by Department of Labor regulations to provide employees with a summary
plan description. A summary plan description is intended to provide employees
with the information they need to properly understand their rights under such a
retirement plan.
The summary plan description distributed to employees must accurately
reflect the provisions of the Plan, in accordance with the choices made in the
Adoption Agreement. The model summary plan description was designed to assist in
producing such a document.
The model summary plan description contains several sections where the
employer must choose which language is appropriate, or whether language should
be included in the summary plan description at all. These decisions should be
made by looking at the Adoption Agreement and determining which language, if
any, is appropriate. Instructions are included wherever possible to help make
these decisions. Once the choices have been made, the employer simply checks off
the appropriate language in the spaces provided. Employers may then wish to have
the summary plan description retyped to delete those provisions which do not
apply to the Plan.
<PAGE>
PROCEDURES FOR DETERMINING METHOD OF INVESTMENT SELECTION
Under the prototype plan, contributions may be invested at the direction
of one of several parties. Thus, in completing the adoption agreement for the
plan, the employer must designate who will have investment authority under the
plan and the extent of such authority.
1. Select Investment Authority. The employer must determine whether plan
contributions are to be invested at the instruction of:
(a) the employer via the plan administrator;
(b) the trustee; or
(c) each participant.
2. Determine Extent of Authority. The employer may wish to limit the
authority designated above. If the employer delegates investment decisions to
the trustee, the trustee must be informed as to whether decisions may be made
among unlimited options or whether decisions must be made among certain
designated investment options. If the employer elects to permit participants to
make investment decisions, then the employer must designate whether the
participant may direct the investment of employer contributions or employee
contributions or both.
3. Schedule of Participant Designations. If participants are permitted to
direct investments of contributions to their individual accounts, then the plan
administrator must prepare a schedule indicating the investment selections
available to the participants.
<PAGE>
PROCEDURES FOR TRANSFERRING ASSETS BETWEEN TRUSTS
If the adoption of the prototype plan constitutes the amendment of an
existing plan, the newly amended prototype plan provisions must not decrease the
rights of participants under the existing plan. For example, if participants'
accounts are 100 percent vested under the existing plan, these accounts must be
100 percent vested under the new plan.
In addition, the assets of the existing plan must be transferred to the
trustee of the prototype plan. If existing plan assets are invested solely in
shares of the sponsor, and the existing plan has a custodian (rather than a
trustee), shares must be transferred from the custodial accounts into the name
of the trustee. Sponsors will typically make this change on their records when
the employer adopts the plan.
If existing plan assets are held in a trust, or if there are assets other
than shares of the sponsor, the following steps should be taken:
1. The Employer. The employer should inform the trustee or custodian of
the prior plan that the plan assets are to be transferred to the trustee of the
newly amended prototype plan. The employer also should request a final
accounting of the prior plan. In addition, if the employer has elected to
exercise investment authority or if participants direct their own investments,
the plan administrator should instruct the trustee of the newly amended
prototype plan how to invest the assets upon receipt.
2. The Trustee or Custodian of the Prior Plan. The trustee or custodian of
the prior plan should request verification of the employer's adoption of the
newly amended prototype plan and of the appointment of a trustee and custodian
for the newly amended prototype plan. The trustee or custodian should prepare a
final accounting of the prior plan, liquidate the assets of the plan, and
<PAGE>
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transfer them directly to the trustee of the newly amended prototype plan. The
trustee or custodian should request acknowledgment from the trustee of the newly
amended prototype plan of the receipt of the plan assets.
3. The Trustee of the Newly Amended Prototype Plan. The trustee of the
newly amended prototype plan should advise the trustee or custodian of the prior
plan how the assets are to be forwarded to the new trustee, and acknowledge
receipt of the assets. The trustee of the newly amended prototype plan should
then invest the plan assets according to the method of investment selection
designated in the adoption agreement.
<PAGE>
NOTICE OF GENERAL ADMINISTRATIVE RESPONSIBILITIES
The plan administrator is responsible for the administration and
recordkeeping under the plan. The plan administrator may be the trustee, the
employer (including a corporate employer), an individual, or a committee of two
or more individuals. Among its duties, the plan administrator must comply with
many reporting and disclosure requirements. These requirements apply to
communications to government agencies and to plan participants. The following
list, which is not exhaustive, identifies the primary areas of administrative
responsibility.
1. Record Keeping. The plan administrator must compile the employee data
necessary to credit employees with service for eligibility and vesting purposes.
The plan administrator should also have each participant designate a
beneficiary. If the participant is married, the participant cannot designate a
beneficiary other than his or her spouse without the spouse's consent. If the
participant marries or remarries after designating a beneficiary, the new spouse
must consent to any beneficiary (other than that spouse) who has been named by
the participant. See Beneficiary Designation Form at Tab 17.
2. Accounting. The plan administrator must collect all contributions from
the employer and from employees. Also, the plan administrator must establish an
individual account for each participant and account separately for the employer
contributions and employee contributions allocated to the accounts, as well as
for investment gains or losses. The plan administrator must also account for
amounts rolled over or transferred from other tax-qualified plans.
3. Investment Selection. The plan administrator must record the
participant's instructions directing the investment of contributions.
<PAGE>
-2-
4. Notices. The plan administrator must provide participants with a number
of notices. For example, the plan administrator must notify participants of any
benefits that will be forfeited in the event of the participant's death. The
plan administrator must also notify participants of the receipt of any court
order requiring the plan to pay out any part of the participant's account to or
on behalf of the participant's former spouse or as child support. See Notice of
Domestic Relations Order at Tab 21.
The plan administrator must also provide participants with a general
notice of the participant's ability to elect not to receive annuity benefits in
the form of a Joint and Survivor Annuity and to elect not to have a
Preretirement Survivor Annuity paid to the participant's surviving spouse. This
notice can be permanently posted in the locations customarily used to inform
employees of labor-management relations matters. Specific information on the
effect of a Joint and Survivor Annuity or Preretirement Survivor Annuity must
also be provided to participants who request it. See Tabs 18 and 19 for a Notice
of Preretirement Survivor Annuity and Explanation of Joint and Survivor Annuity
and Tab 20 for Specific Information About Joint and Survivor Annuity.
5. Distributions. The plan administrator must determine which employees
are entitled to receive distributions of benefits under the plan. With respect
to such distributions, the plan administrator must distribute and collect any
participant elections concerning the time or manner of distribution.
If participants receive distributions in a lump-sum, the plan
administrator must provide them with Form 1099-R. If participants receive
distributions in a periodic payment, the plan administrator must provide them
with Form W-2P. If the distribution could be rolled over to an individual
retirement account, the plan administrator must inform participants that a
rollover is possible. Tab 23 contains an Explanation of Rollovers, Capital Gains
and Forward Averaging Treatment.
The plan administrator must also comply with the withholding requirements
under the Code unless the duty to withhold has been delegated to the sponsor or
payor of benefits.
<PAGE>
-3-
6. Reporting. The plan administrator is responsible for submitting a
number of reports or statements to government agencies or to plan participants.
The plan administrator must provide a summary plan description to each
participant within 90 days of commencing participation and to the Department of
Labor within 120 days of adoption of the Plan. A summary plan description and
instructions for completing it are at Tabs 14 and 15. If there are significant
changes in the plan, the plan administrator must provide participants and the
Department of Labor with a statement of material modifications. The sponsor will
inform the plan administrator of significant changes in the plan and will
provide model statements of material modifications if required.
An annual report must be filed with the Internal Revenue Service. Form
5500 is used for plans with 100 or more employees, and Form 5500-C/R for plans
with less than 100 employees. Certain one-participant plans may file Form
5500EZ. A summary annual report and a benefit statement must be provided to
participants each year.
<PAGE>
NOTICE OF GENERAL ADMINISTRATIVE RESPONSIBILITIES
The plan administrator is responsible for the administration and
recordkeeping under the plan. The plan administrator may be the trustee, the
employer (including a corporate employer), an individual, or a committee of two
or more individuals. Among its duties, the plan administrator must comply with
many reporting and disclosure requirements. These requirements apply to
communications to government agencies and to plan participants. The following
list, which is not exhaustive, identifies the primary areas of administrative
responsibility.
1. Record Keeping. The plan administrator must compile the employee data
necessary to credit employees with service for eligibility and vesting purposes.
The plan administrator should also have each participant designate a
beneficiary. If the participant is married, the participant cannot designate a
beneficiary other than his or her spouse without the spouse's consent. If the
participant marries or remarries after designating a beneficiary, the new spouse
must consent to any beneficiary (other than that spouse) who has been named by
the participant. See Beneficiary Designation Form at Tab 17.
2. Accounting. The plan administrator must collect all contributions from
the employer and from employees. Also, the plan administrator must establish an
individual account for each participant and account separately for the employer
contributions and employee contributions allocated to the accounts, as well as
for investment gains or losses. The plan administrator must also account for
amounts rolled over or transferred from other tax-qualified plans.
3. Investment Selection. The plan administrator must record the
participant's instructions directing the investment of contributions.
<PAGE>
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4. Notices. The plan administrator must provide participants with a number
of notices. For example, the plan administrator must notify participants of any
benefits that will be forfeited in the event of the participant's death. The
plan administrator must also notify participants of the receipt of any court
order requiring the plan to pay out any part of the participant's account to or
on behalf of the participant's former spouse or as child support. See Notice of
Domestic Relations Order at Tab 21.
The plan administrator must also provide participants with a general
notice of the participant's ability to elect not to receive annuity benefits in
the form of a Joint and Survivor Annuity and to elect not to have a
Preretirement Survivor Annuity paid to the participant's surviving spouse. This
notice can be permanently posted in the locations customarily used to inform
employees of labor-management relations matters. Specific information on the
effect of a Joint and Survivor Annuity or Preretirement Survivor Annuity must
also be provided to participants who request it. See Tabs 18 and 19 for a Notice
of Preretirement Survivor Annuity and Explanation of Joint and Survivor Annuity
and Tab 20 for Specific Information About Joint and Survivor Annuity.
5. Distributions. The plan administrator must determine which employees
are entitled to receive distributions of benefits under the plan. With respect
to such distributions, the plan administrator must distribute and collect any
participant elections concerning the time or manner of distribution.
If participants receive distributions in a lump-sum, the plan
administrator must provide them with Form 1099-R. If participants receive
distributions in a periodic payment, the plan administrator must provide them
with Form W-2P. If the distribution could be rolled over to an individual
retirement account, the plan administrator must inform participants that a
rollover is possible. Tab 23 contains an Explanation of Rollovers, Capital Gains
and Forward Averaging Treatment.
The plan administrator must also comply with the withholding requirements
under the Code unless the duty to withhold has been delegated to the sponsor or
payor of benefits.
<PAGE>
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6. Reporting. The plan administrator is responsible for submitting a
number of reports or statements to government agencies or to plan participants.
The plan administrator must provide a summary plan description to each
participant within 90 days of commencing participation and to the Department of
Labor within 120 days of adoption of the Plan. A summary plan description and
instructions for completing it are at Tabs 14 and 15. If there are significant
changes in the plan, the plan administrator must provide participants and the
Department of Labor with a statement of material modifications. The sponsor will
inform the plan administrator of significant changes in the plan and will
provide model statements of material modifications if required.
An annual report must be filed with the Internal Revenue Service. Form
5500 is used for plans with 100 or more employees, and Form 5500-C/R for plans
with less than 100 employees. Certain one-participant plans may file Form
5500EZ. A summary annual report and a benefit statement must be provided to
participants each year.
<PAGE>
SECRETARY'S CERTIFICATION
OF ADOPTION OF CORPORATE RESOLUTION
[INSERT NAME OF CORPORATION]
The undersigned hereby certifies that he/she is the Secretary of
[INSERT NAME OF CORPORATION], (the "Corporation"), a corporation organized and
existing under the laws of [INSERT NAME OF STATE], and that the following
resolutions were duly adopted by the Corporation's Board of Directors on [INSERT
DATE OF MEETING OR UNANIMOUS CONSENT ACTION]; that such resolutions are in full
force and effect as of the date of this certification; and that the following is
a true copy of the resolutions as adopted:
|_| [CHECK IF THE ADOPTION OF THIS PROTOTYPE CONSTITUTES AN AMENDMENT AND
RESTATEMENT OF AN EXISTING PLAN]
1. RESOLVED, that the [INSERT NAME OF PLAN] is hereby amended by the
actions taken pursuant to the following resolutions; and
- or -
|_| [CHECK IF THE ADOPTION OF THIS PROTOTYPE CONSTITUTES THE ESTABLISHMENT
OF A NEW PLAN]
1. RESOLVED, that the Corporation adopt the [INSERT NAME OF SPONSOR'S
PROTOTYPE PLAN AND TRUST] by executing and delivering the Adoption Agreement;
and
2. RESOLVED, that the Corporation adopt the [INSERT NAME OF SPONSOR'S
PROTOTYPE PLAN AND TRUST] by executing and delivering the Adoption Agreement;
and
3. RESOLVED, that the proper officers of the Corporation are hereby
authorized to take all steps necessary to notify the employees concerning the
Plan, properly execute said Adoption Agreement, and do all things as they, in
their discretion and with advice of counsel, deem necessary or desirable to
establish and maintain the Plan and Trust, including, but not limited to, making
contributions in accordance with the terms of the Plan; and
4. RESOLVED, that the Trustee(s) and the Plan Administrator designated in
the Adoption Agreement be appointed to serve in accordance with the terms of the
Plan and Trust.
IN WITNESS WHEREOF, the undersigned has signed this Certificate and
affixed the seal of the Corporation this _____ day of __________________, 19
___.
<PAGE>
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[Corporate Seal] __________________________________________
Corporate Secretary
<PAGE>
PROVISION-BY-PROVISION EXPLANATION AND INSTRUCTIONS
FOR COMPLETING THE ADOPTION AGREEMENT
As indicated in the introductory material to the Adoption Agreement, the
Employer should consult with a tax advisor or attorney before completing an
Adoption Agreement. The consultation is advised because adopting a retirement
plan has substantial financial and legal consequences. Establishing a plan
imposes contribution obligations on the Employer and subjects the Employer to
additional tax laws. In addition, the Employer assumes new administrative
responsibilities and fiduciary obligations. These consequences should be known
and carefully assessed with professional tax or legal assistance before deciding
to adopt any retirement plan.
Two alternative Adoption Agreements are provided for adoption of the plan.
Adoption Agreement #001 provides the simplest and easiest to administer method
of adopting the plan. Adoption Agreement #002 should be used if the Employer
wishes to utilize some of the more complex features of the plan.
The following explanation will review both Adoption Agreements and by
comparison will illustrate the features available through the adoption of
Adoption Agreement #002.
EMPLOYER DATA
(Section II of Adoption Agreements)
Name of Employer. The name and employer identification number (EIN) of the
Employer should include the names and EINs of all Affiliated Employers. If there
are a number of Affiliated Employers, their names and EINs can be listed on an
attachment to the Adoption Agreement and all the Affiliated Employers should
execute the Adoption Agreement. Failure to list all Affiliated Employers can
jeopardize the tax-qualified status of the plan.
Examples of an Affiliated Employer are:
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1. A corporation or unincorporated business that owns 80 percent or more
of the Employer.
2. A corporation or unincorporated business that is 80 percent or more
owned by the Employer.
3. Certain businesses that perform services for or with the Employer and
that are owned in part by the Employer.
4. Certain businesses that are owned in part by the Employer and for which
the Employer provides services.
Amendment to Existing Plan. The sponsor may impose reasonable investment
limitations on the Employer regarding the type of investments selected for the
trust or the minimum percentage of trust assets that must be invested in mutual
funds. If the adoption of a prototype plan constitutes an amendment to an
existing plan, it may be necessary to change the existing investments to conform
to these limitations.
ELIGIBILITY
(Section III of Adoption Agreements)
The eligibility provisions of a plan govern which employees participate in
a plan and the date on which an employee begins to participate in the plan. An
employee can be required to complete both age and service requirements before
participation begins.
Years of Service. The Employer may require an employee to complete one
Year of Service with the Employer (including Affiliated Employers).
Alternatively, the Employer may permit immediate participation without any
service requirement. A Year of Service is a 12-month period of employment during
which an employee must complete at least 1,000 Hours of Service, unless the
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Employer chooses a lesser number of hours under Section IV of Adoption Agreement
#002. If the Employer does not maintain records that make it possible to
determine an employee's Hours of Service, the Employer, under Adoption Agreement
#002, may use an Equivalency Method that will credit an employee with a
specified number of Hours of Service based upon designated periods of service.
See CREDITED SERVICE herein.
Age. The Employer may require an employee to reach a specified age, up to
21 years of age, to be eligible to participate in the plan. However, the
Employer may permit immediate participation upon employment or upon completion
of stated service requirements without any age requirement.
Coverage. Under Adoption Agreement #001, all employees of the Employer and
of Affiliated Employers must be eligible to participate. Under Adoption
Agreement #002, an Employer may exclude union employees who have bargained in
good faith with the Employer for retirement benefits, and nonresident alien
employees.
CREDITED SERVICE
(Section IV of Adoption Agreements)
Hours of Service. Under the plan, a Year of Service requires 1,000 Hours
of Service. The Employer is permitted to reduce the number of required hours if
Adoption Agreement #002 is chosen. The Employer is not permitted, however, to
change the method of counting Hours of Service. Under the plan, one Hour of
Service is counted for each hour for which an employee is paid or entitled to be
paid for work, vacation, holiday, illness, incapacity, maternity or paternity
leave, layoff, jury duty, military duty, or leave of absence. However, no more
than 501 Hours of Service will be credited on account of any period during which
no duties are performed by the employee.
Equivalency Methods. Under Adoption Agreement #002, the Employer may
designate how Hours of Service will be determined. If the Employer has records
of actual hours for which an employee is paid or entitled to payment, the
Employer can use actual hours to determine Hours of
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Service. If the Employer does not wish to use this method, or does not have the
necessary records, the Employer should choose an alternate method based on days,
weeks, semimonthly payroll periods, or months worked. If no Equivalency Method
is indicated, the Employer will be deemed to use actual hours and must keep
appropriate records.
Note: If the plan is an amendment to a prior plan that used the elapsed
time method of calculating service, the plan provides special rules for
converting elapsed time service to Years of Service and Hours of Service.
These rules count Hours of Service for partial periods on the basis of the
weekly method, under which employees are credited with 45 Hours of Service
for each week in which they perform one Hour of Service.
Service with Predecessor Employer. Under Adoption Agreement #001, no
credit will be given generally for hours worked for a Predecessor Employer. If,
however, the adoption of the prototype plan is a continuation of a Predecessor
Plan or a successor plan to a Predecessor Plan, then hours counted under the
Predecessor Plan must be counted under the prototype plan. For example, if a
partnership maintained a Keogh plan before it incorporated, and adopts the
prototype plan after it incorporates, the hours counted under the Keogh plan
must be counted under the corporate plan.
Under Adoption Agreement #002, the Employer has the discretion as to
whether to count hours worked for a predecessor employer. For example, if a
business is sold, the new Employer may count hours worked by employees for the
old business under the prototype plan. If, however, the plan is a continuation
of a Predecessor Plan, service under the Predecessor Plan must be counted.
COMPENSATION
(Section V of Adoption Agreements)
Definition of Compensation. Generally, Compensation under the plan means
all of the employee's W-2 earnings. The Employer may elect, however, in the
Adoption Agreements, to expand the definition to include amounts contributed
pursuant to a salary reduction agreement, such as
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contributions to a cafeteria plan under section 125 of the Code or a
tax-deferred annuity under section 403(b) of the Code.
CONTRIBUTIONS AND ALLOCATIONS
(Section VI of Adoption Agreement #001)
(Sections VI and VII of Adoption Agreement #002)
Employer Contributions. An Employer may choose from several contribution
formulas in Adoption Agreement #002. An Employer may make a discretionary
contribution pursuant to Employer resolution (or, if no resolution is adopted,
the Employer may specify a certain percentage of participants' compensation).
Or, the Employer may contribute a percentage of participants' compensation plus
additional discretionary amounts, if any, pursuant to Employer resolution. See
section VI.A.1., 2. and 3. of Adoption Agreement #002.
In addition, an Employer may make a "Matching Contribution" equal to a
percentage (specified in the Adoption Agreement) of voluntary deductible
contributions ("Elective Deferrals") made by participants. Or, if the Employer
elects in the Adoption Agreement, the Matching Contribution could equal a
percentage of Elective Deferrals up to a certain percent of the participant's
compensation plus a different percentage of a participant's additional Elective
Deferrals (such percentages to be specified in the Adoption Agreement). See
section VI.B. of Adoption Agreement #002. The Employer shall elect in the
Adoption Agreement whether or not to permit participants to make Elective
Deferrals.
Adoption Agreement #001 permits only Elective Deferrals and Matching
Contributions.
The Employer may choose to use Social Security Integration with Adoption
Agreement #002. When Social Security Integration is used, the Employer's
contributions are adjusted to take into account the Employer's Social Security
contribution for old age and disability benefits for an employee.
Employers considering integration of their plans should consult with a tax
advisor.
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Allocation Formula. If the Employer chooses Adoption Agreement #002 and
does not use Social Security Integration, item VII.A.1. should be checked. Item
VII.A.2. should be checked if the plan uses Social Security Integration. The
plan's integration level may be set at the Social Security taxable wage base, at
a dollar amount below the Social Security taxable wage base, or at a specified
percentage of the Social Security taxable wage base.
If the Employer allows the integration level to vary with changes in the
Social Security Act, the level of compensation required in order to receive plan
contributions will generally increase.
Employee Contributions. Under Adoption Agreement #002, the Employer may
allow employees to make voluntary nondeductible contributions to the plan, and
may require a minimum contribution. A maximum employee contribution of 10
percent of aggregate compensation is an aggregate limit imposed on all qualified
plans maintained by the Employer. Voluntary contributions are annual additions
that are counted as part of the maximum annual additions that may be allocated
to a participant's individual account in any year. As a result, if the sum of
Employer contributions and forfeitures allocated to a participant's account
under the plan exceeds 15 percent of compensation, voluntary contributions for
the year must be less than 10 percent.
The rules on voluntary contributions are somewhat different if the plan
covers self-employed individuals. Contributions on behalf of self-employed
participants must first be converted from a percent of earned income before
deductible plan contributions to a percent of earned income after deductible
plan contributions. This conversion is shown below:
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Contributions as Contributions as
a Percentage of a Percentage of
Earned Income Earned Income
Before Deductible After Deductible
Contributions Contributions
----------------- ----------------
20.00% 25.00%
19.00% 23.46%
18.00% 21.95%
17.00% 20.48%
16.00% 19.05%
15.00% 17.65%
14.00% 16.28%
13.00% 14.94%
12.00% 13.64%
11.00% 12.36%
10.00% 11.11%
9.00% 9.89%
8.00% 8.70%
7.00% 7.53%
6.00% 6.38%
5.00% 5.26%
4.00% 4.17%
3.00% 3.09%
2.00% 2.04%
1.00% 1.01%
The preceding rules on permitting voluntary contributions then apply. Of
course, annual additions cannot exceed $30,000.
Contribution Eligibility. This provision of Adoption Agreement #002
concerns the contribution for the year in which an employee terminates
employment with the Employer with not more than 500 Hours of Service and is not
an Employee on the last day of the plan year.
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DISTRIBUTIONS
(Section VII of Adoption Agreement #001)
(Section VIII of Adoption Agreement #002)
Normal Retirement Age. Generally, normal retirement age is 65 years of
age. However, the Employer may choose a different age (item A.1.), or may choose
a combination of age and Years of Service (item A.2.), provided the age does not
exceed 65 and is not less than 55, and no more than 5 Years of Service is
required.
Early Retirement Date. The Employer has the discretion, in Adoption
Agreement #002, to allow benefits to be paid upon a designated early retirement
date. The early retirement age must be at least 55, and no more than 15 years of
service can be required.
OPTIONAL FEATURES
(Section IX of Adoption Agreement #001)
(Section X of Adoption Agreement #002)
Adoption Agreement #002 allows participant loans, purchases of insurance,
and hardship withdrawals. Adoption Agreement #001 contains only one optional
feature -- hardship withdrawals. Withdrawals of voluntary employee contributions
are permitted under Adoption Agreement #002. If the participant is married,
spousal consent is required for all distributions, including hardship
withdrawals and withdrawals of nondeductible voluntary employee contributions.
Hardship Withdrawals. The Employer may allow hardship withdrawals of
Elective Deferrals and matching contributions if the plan is not integrated
with Social Security benefits. This feature is not available if item
VII.A.2. of Adoption Agreement #002 is selected.
Loans. Under Adoption Agreement #002, the Employer may choose to allow
loans to participants to be made from plan assets, provided the loans meet the
requirements specified in the plan, including a reasonable interest rate,
adequate security, and a fixed repayment term. If the loans
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do not meet these requirements, they may result in plan disqualification. If
loans are permitted, the plan administrator assumes the additional
administrative responsibility of seeing that the loans are repaid in a timely
fashion.
A participant loan will be treated as a distribution to the extent that
the sum of all a participant's loans under all the Employer's qualified plans
(taking into account the highest principal balance of any loan outstanding at
any time during the preceding 12 months) exceeds the lesser of $50,000 or 50
percent of the participant's vested account balance, unless it is less than
$10,000. It will also be treated as a distribution if it is not repaid within
five years.
The plan does not permit loans to Owner-Employees or to
Shareholder-Employees in subchapter S corporations.
Life Insurance Contracts. Under Adoption Agreement #002, the Employer may
permit a participant to use a portion of the plan assets allocated to him to
purchase life insurance contracts. The maximum amount that may be used to
purchase whole life policies is 50 percent of the participant's account balance.
Also, the maximum amount that may be used to purchase term life insurance is 25
percent of the participant's account balance.
VESTING
(Section X of Adoption Agreement #001)
(Section XI of Adoption Agreement #002)
Vesting is the rate at which an employee earns a nonforfeitable right to
the Employer contributions allocated to his account. Adoption Agreement #001
provides for automatic 100% vesting. Adoption Agreement #002 allows the Employer
to choose among four vesting schedules.
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INVESTMENT CHOICES (Section XI of Adoption
Agreement #001) (Section XII of Adoption Agreement #002)
Subject to limitations imposed by the sponsor, the Employer may limit the
investment of plan assets to investment options offered by the sponsor or permit
a designated percentage of plan assets to be invested in other investment
options.
INVESTMENT AUTHORITY
(Section XII of Adoption Agreement #001)
(Section XIII of Adoption Agreement #002)
Under Adoption Agreement #002, the Employer may choose whether plan assets
are to be invested according to the instructions of the Employer, the plan
administrator, the participants, or some combination of the above. If
participants are to be permitted to direct the investment of voluntary employee
contributions, Elective Deferrals or Employer contributions, items XIII.C.1. or
XIII.C.2. of Adoption Agreement #002 should be checked.
ALLOCATION LIMITATIONS (Section XIV of Adoption
Agreement #001) (Section XV of Adoption Agreement #002)
This section is applicable only if the Employer maintains or ever
maintained other qualified plans in addition to this prototype plan. If not,
section 6.1 of the plan will automatically apply.
ADMINISTRATION
(Section XV of Adoption Agreement #001)
(Section XVI of Adoption Agreement #002)
Plan Administrator. The Employer must designate the plan administrator,
unless the Employer is going to be the plan administrator. The plan
administrator is generally responsible for implementing and interpreting the
plan; deciding all questions concerning eligibility, distribution of benefits
and loan
<PAGE>
-11-
provisions; employing investment, legal, or accounting professionals; keeping
all records and filing all administrative reports; furnishing instructions to
the plan trustees; adopting rules and procedures for employee elections and
benefit claims; and collecting all forms and applications from employees.
Named Fiduciaries. The plan administrator is the named fiduciary under the
plan. Additional named fiduciaries also may be designated in the Adoption
Agreement. If any powers or duties under the plan are allocated between the
named fiduciaries or to third parties, they should be specified in item C.
THE TRUSTEE
(Section XVI of Adoption Agreement #001)
(Section XVII of Adoption Agreement #002)
Unless the sponsor has designated a trustee, the Employer must designate
individuals or institutions with trust powers to serve as trustees of the plan.
If the Employer wishes to have individuals as trustees, more than one individual
should be chosen. The designated parties must be informed of their fiduciary
obligations regarding the plan and must expressly accept those obligations in
writing.
EMPLOYER SIGNATURE
(Section XVII of Adoption Agreement #001)
(Section XVIII of Adoption Agreement #002)
The Employer must execute the Adoption Agreement on the last page. If the
Employer is a corporation, the individual executing the agreement must be a
corporate officer who is duly authorized, pursuant to a corporate resolution, to
act on behalf of the corporation. Any Affiliated Employers also should execute
the Adoption Agreement.
<PAGE>
NOTICE OF PRE-RETIREMENT SURVIVOR ANNUITY
As a married participant in the [NAME OF PLAN], if you die before
commencing distributions from your account, your entire account will be used to
purchase a qualified survivor annuity for your spouse, which will be distributed
in monthly installments over his or her lifetime.
You may elect to waive the requirement that your spouse receive a
survivor annuity during any Plan year in which you are at least age 35. However,
your spouse must consent in writing to this waiver before a Plan representative
or notary public.
You may also elect to waive the requirement that your spouse be your
primary beneficiary during any Plan year in which you are at least age 35.
Again, your spouse must consent to this waiver in writing before a Plan
representative or notary public. If you do elect to waive both the survivor
annuity and the designation of your spouse as beneficiary, and your spouse has
consented in writing, you may designate any beneficiary as the recipient of your
account balance.
You may revoke your waiver at any time before your death and make a
new election. Should you choose to make an election change, or should you have a
change in marital status, notify the Plan Administrator promptly.
<PAGE>
WAIVER OF PRERETIREMENT SURVIVOR ANNUITY
I, _________________________________________, a participant in the
_____________________________________ Plan (the "Plan"), am married. With the
consent of my spouse, ______________________________, I hereby elect to waive
the right of my spouse to receive a preretirement survivor annuity in the event
I die before my annuity starting date. This annuity would have entitled my
surviving spouse to an annuity for the remainder of his/her life, the actuarial
equivalent of which is not less than fifty percent (50%) of my account on the
date of my death.
The foregoing election is effective upon receipt by the Plan
administrator and revokes any and all previous elections made by me concerning
the preretirement survivor annuity. The Plan administrator is authorized to act
under this election unless it is revoked by me in writing at any time prior to
my death or unless my spouse revokes his/her consent to this Waiver of
Preretirement Survivor Annuity at any time prior to my death. Such revocation of
consent must be in writing on a form obtained from and submitted to the Plan
administrator.
- -------------------------------------- -------------------------------------
Witness Participant
Dated: _____________________
Consent of Spouse
I, _____________________________________________, spouse of
_________________________________________, in accordance with section 417 of the
Internal Revenue Code, hereby consent to the Waiver of Preretirement Survivor
Annuity by my spouse and acknowledge that with this consent I forfeit my right
to receive an annuity for the remainder of my life in the event my spouse dies
before his/her retirement benefits commence. Such annuity would have been equal
to my spouse's benefit (actuarially adjusted) on the date of his/her death. I
understand that my consent to this Waiver of Preretirement Survivor Annuity may
be revoked by me at any time before my spouse's death. The effect of such
revocation will be to restore my right to receive a preretirement survivor
annuity in the event my spouse dies before his/her annuity starting date.
<PAGE>
-2-
Dated:
-------------------------------- -------------------------------------
Spouse of Participant
The foregoing Waiver of Preretirement Survivor Annuity and Consent
of Spouse were signed in my presence.
Dated:
-------------------------------- -------------------------------------
Plan Administrator
[If not so witnessed, the following notarization must be executed]
)
) s
)
I, ______________________________________, a notary public in and
for the jurisdiction above named, do hereby certify that
______________________________________ did personally appear before me and did
acknowledge that he/she executed the foregoing Consent of Spouse as his/her free
act and deed.
Subscribed and sworn to before me this ___________ day of
__________________________, 19_____.
-------------------------------------
Notary Public
My Commission
Expires: ___________________
<PAGE>
-3-
Receipt of this Waiver of Preretirement Survivor Annuity is hereby
acknowledged.
Dated:
-------------------------------- -------------------------------------
Plan Administrator
<PAGE>
NAME OF PLAN
Beneficiary Designation
- ------------------------------------------ ------------------------------
Employee's Name (last, first, middle) Social Security Number
Birth Date: ______________________________
Marital Status _____ Married _____ Single _____ Divorced _____ Widowed
================================================================================
I. Primary
Percent (Paid
Equally Unless
Last Name, First Name, Middle Initital Relationship Otherwise Noted)
- -------------------------------------- ------------ ----------------
- -------------------------------------------- ----------- ----------------
- -------------------------------------------- ----------- ----------------
- -------------------------------------------- ----------- ----------------
- -------------------------------------------- ----------- ----------------
II. Contingent
If all of the above beneficiaries are not living, then pay:
Percent (Paid
Equally Unless
Last Name, First Name, Middle Initital Relationship Otherwise Noted)
- -------------------------------------- ------------ ----------------
- -------------------------------------------- ----------- ----------------
- -------------------------------------------- ----------- ----------------
<PAGE>
-2-
Note: If more than one primary beneficiary is named and a primary
beneficiary dies before payment is made, the amounts designated for the
deceased primary beneficiary will be reallocated to the other primary
beneficiaries (in accordance with the indicated proportions). Similar
rules apply for contingent beneficiaries.
The foregoing designation is effective upon receipt by the Plan
administrator and revokes any and all previous designations made by the
employee. The Plan administrator is authorized to act under this Beneficiary
Designation unless it is revoked or changed by the employee in writing.
- --------------------------------- ------------------------------------------
Witness Employee
================================================================================
[In the event the employee designates someone other than his or her
spouse, the following Consent of Spouse must be completed by the employee's
spouse.]
Consent of Spouse
I, _______________________________________________________, spouse of
__________________________________________, in accordance with section 417 of
the Internal Revenue Code, do hereby consent to this Beneficiary Designation.
The effect of the foregoing consent is to pay my spouse's vested benefits
under the Plan, which may be substantial, to persons other than myself.
------------------------------------------
[Signature of] Spouse
<PAGE>
-3-
The foregoing Beneficiary Designation and Consent of Spouse were signed in
my presence.
Dated:
-------------------------------- -------------------------------------
Plan Administrator
================================================================================
[If not so witnessed, the following notarization must be executed]
)
) ss
)
I, _______________________________________________________________, a
notary public in and for the jurisdiction above named, do hereby certify that
______________________________________________ did personally appear before me
and did acknowledge that he/she executed the foregoing Consent of Spouse as
his/her free act and deed.
Subscribed and sworn to before me this __________ day of
_________________, 19_____.
------------------------------------------
Notary Public
My Commission Expires: ________________________
Date
================================================================================
<PAGE>
-4-
Receipt of this Beneficiary Designation is hereby acknowledged.
Dated:
-------------------------------- -------------------------------------
Plan Administrator
<PAGE>
DISTRIBUTION ELECTION FORM
[FOR USE BY MONEY PURCHASE PENSION PLANS, PLANS THAT HAVE ACCEPTED TRANSFERS
FROM PLANS SUBJECT TO ANNUITY RULES AND ALL OTHER PLANS THAT OFFER DISTRIBUTIONS
IN THE FORM OF A JOINT AND SURVIVOR ANNUITY]
SINGLE PARTICIPANTS COMPLETE PAGE 1. MARRIED PARTICIPANTS COMPLETE PAGES 1 AND
2.
I am a married participant in the [INSERT NAME OF PLAN] and have received
information regarding payment of benefits in the form of a joint and survivor
annuity or I am a single participant and have received information regarding
payment of benefits in the form of a life annuity. I hereby elect to change my
form of benefit distribution to that which I have checked below:
|_| Lump-sum distribution of cash only.
|_| Lump-sum distribution that includes the mutual fund shares credited to my
account.
|_| [INSERT FREQUENCY OF PAYMENTS] installment payments over a period of years
equal to [INSERT PERIOD OF PAYMENTS]. The period may not exceed my life
expectancy or the joint and last survivor expectancy of me and my
beneficiary, determined in each case as of the earlier of the end of the
plan year entitling me to a distribution or the date the payments
commence.
[IF PERMITTED BY PLAN SPONSOR]
|_| Installment payments [monthly, quarterly, annually] in cash or in shares,
actuarially determined, in accordance with section 11.9(a)(iv) of the
Plan.
|_| Purchase of an annuity contract.
<PAGE>
-2-
|_| Direct Rollover
Name of IRA or Other Payee:
________________________________________________________________________
________________________________________________________________________
Name and Telephone Number of Contact Person:
________________________________________________________________________
________________________________________________________________________
Attached is a statement from payee verifying that it is an individual
retirement account, an individual retirement annuity, a qualified trust
described in section 401(a) of the Internal Revenue Code or a qualified
annuity plan described in section 403(a) of the Internal Revenue Code and
that it will accept a Direct Rollover for my benefit.
Note: The amount must be at least $200 in order to elect Direct Rollover.
|_| Combination Direct Rollover/Lump-Sum
Amount to be transferred as a direct rollover: $________ (amount must be
at least $500).
Fill in information above (under Direct Rollover) and attach statement
required for Direct Rollover.
The balance of the distribution will be paid in a single, lump-sum to me,
subject to applicable withholding requirements.
* * *
Any elections I have made on this form revoke all prior elections with
regard to this form.
I may change any election I have made on this form by making a new
election.
<PAGE>
-3-
Date:
---------------------------------- ------------------------------------
[Signature of] Participant
- --------------------------------------- ------------------------------------
Witness Plan Representative or Notary
Date: _________________________________
MARRIED PARTICIPANTS MUST COMPLETE THE FOLLOWING:
I hereby consent to the elections made by my spouse on this form on this date.
Date:
- --------------------------------------- ------------------------------------
[Signature of] Participant's Spouse
- --------------------------------------- ------------------------------------
Witness Plan Representative or Notary
Date: _________________________________
<PAGE>
DISTRIBUTION ELECTION FORM
[FOR USE BY PROFIT SHARING PLANs, 401(k) PLANS AND PLANS THAT DO NOT OFFER, AND
HAVE NOT ACCEPTED, TRANSFERS FROM PLANS SUBJECT TO A JOINT AND SURVIVOR ANNUITY
FORM OF PAYMENT]
I hereby elect to receive my benefit distribution from the [INSERT NAME OF
PLAN] in the form which I have checked below:
|_| Lump-sum distribution of cash only.
|_| Lump-sum distribution that includes the mutual fund shares credited to my
account.
|_| [INSERT FREQUENCY OF PAYMENTS] installment payments over a period of years
equal to [INSERT PERIOD OF PAYMENTS]. The period may not exceed my life
expectancy or the joint and last survivor expectancy of me and my
beneficiary, determined in each case as of the earlier of the end of the
plan year entitling me to a distribution or the date the payments
commence.
[IF PERMITTED BY PLAN SPONSOR]
|_| Installment payments [monthly, quarterly, annually] in cash or in shares,
actuarially determined, in accordance with section 11.9(a)(iv) of the
Plan.
|_| Purchase of an annuity contract.
|_| Direct Rollover
Name of IRA or Other Payee:
________________________________________________________________________
________________________________________________________________________
<PAGE>
-2-
Name and Telephone Number of Contact Person:
________________________________________________________________________
________________________________________________________________________
Attached is a statement from payee verifying that it is an individual
retirement account, an individual retirement annuity, a qualified trust
described in section 401(a) of the Internal Revenue Code or a qualified
annuity plan described in section 403(a) of the Internal Revenue Code and
that it will accept a Direct Rollover for my benefit.
Note: The amount must be at least $200 in order to elect Direct Rollover.
Combination Direct Rollover/Lump-Sum
Amount to be transferred as a direct rollover: $________ (amount must be
at least $500).
Fill in information above (under Direct Rollover) and attach statement
required for Direct Rollover.
The balance of the distribution will be paid in a single, lump-sum to me,
subject to applicable withholding requirements.
* * *
Any elections I have made on this form revoke all prior elections with
regard to this form.
I may change any election I have made on this form by making a new
election.
Date:
---------------------------------- ------------------------------------
[Signature of] Participant
- --------------------------------------- ------------------------------------
Witness Plan Representative or Notary
Date: _________________________________
<PAGE>
EXPLANATION OF JOINT AND SURVIVOR ANNUITY
As a married participant in this Plan, your benefit will be paid to you in
the form of a joint and survivor annuity. A joint and survivor annuity provides
a benefit to you over your lifetime, and a benefit to your surviving spouse over
that spouse's lifetime equal to [INSERT JOINT AND SURVIVOR PERCENTAGE (WILL BE
50% IF LEFT BLANK)] of the benefit you received or would have received. The
total of the annuity payments to both you and your surviving spouse will be the
actuarial equivalent of the amount in your account at the time you first receive
your distribution. This means that the monthly payments you and your spouse
receive will be less than the monthly payments you would receive if payments
were made only during your lifetime.
You may opt out of this form of distribution by electing one of the other
forms of distribution permitted by this Plan during the 90-day period ending on
the date your distribution begins. If you want to opt out of the joint and
survivor annuity, or wish to have the benefit after your death paid to someone
other than your spouse, you must receive the consent of your spouse in writing
in order for the change to be effective.
If you elect out of the joint and survivor annuity, you and your spouse
will no longer receive a guaranteed level of benefits over your joint lifetimes.
Depending on the form of distribution you do select, your spouse may receive no
benefit at all in the event of your death.
Any election that you make may be revoked at any time before you begin to
receive payments. If you want to change your election, please notify the Plan
Administrator promptly.
You can request from the Plan Administrator a written explanation of the
financial effect upon the monthly benefits payable to you of any election you
and your spouse wish to make. The explanation will show the dollar effect of
different elections you and your spouse might wish to make. Your request must be
submitted to the Plan Administrator in writing. No more than one request may be
made in any calendar year.
<PAGE>
SPECIFIC INFORMATION ABOUT JOINT AND SURVIVOR ANNUITY
As a married participant in the [INSERT NAME OF PLAN], you are entitled to
receive a retirement benefit equal to the amount contained in your account.
Unless you elect otherwise, and your spouse consents in writing, this benefit
will be distributed in the form of a joint and survivor annuity.
A joint and survivor annuity will provide you with a periodic benefit over
your lifetime, and a periodic benefit over your spouse's lifetime equal to
[INSERT JOINT AND SURVIVOR PERCENTAGE] of the benefit you received or would have
received. The total of the annuity payments to both you and your surviving
spouse is calculated so as to equal the amount you would receive were the
benefit paid over your lifetime only. This results in periodic joint and
survivor benefit payments that are smaller than you would receive were payments
made over your lifetime only.
You currently have a vested account balance of [INSERT PARTICIPANT'S
VESTED ACCOUNT BALANCE]. If this vested account balance were distributed to you
today in the form of a joint and survivor annuity, you would receive [INSERT
FREQUENCY OF PAYMENT] payments of [INSERT AMOUNT OF PARTICIPANT'S ANNUITY] over
your lifetime. In the event of your death, your spouse would receive [INSERT
FREQUENCY OF PAYMENT] payments of [INSERT AMOUNT OF SURVIVOR'S ANNUITY] over
that spouse's lifetime.
If you were to elect to receive a single life annuity, and your spouse
consented to that election in writing, you would receive [INSERT FREQUENCY OF
PAYMENT] payments of [INSERT AMOUNT OF PARTICIPANT'S ANNUITY] over your
lifetime, but your spouse would receive no further benefits in the event of your
death.
The actual payments you would receive from an annuity would depend on your
vested account balance at the time you begin distributions, and the current
rates being charged for annuity contracts.
If you wish to elect a form of distribution other than a joint and
survivor annuity, you should use the form "Distribution Election Form for
Married Participants."
<PAGE>
DOMESTIC RELATIONS ORDER
A domestic relations order recognizes or assigns to an alternate payee the
right to receive all or a portion of the benefits payable to you under the Plan.
An alternate payee can be any spouse, former spouse, child, or other dependent.
If a domestic relations order is received by the Plan, the following procedure
shall be in effect:
1. The Plan Administrator shall promptly notify you and any other
alternate payee that a domestic relations order has been received, and shall
explain how the Plan determines the status of the order.
2. As soon as possible, the Plan Administrator shall determine whether the
order is a qualified domestic relations order, as defined in ERISA.
3. If it is determined that the domestic relations order is a qualified
domestic relations order, the Plan Administrator shall promptly inform you and
any alternate payee of that fact. The Plan Administrator shall then ascertain
the amount payable to each alternate payee, and disburse it accordingly.
4. If, for any reason, there is a delay in making payment to the alternate
payee(s), the Plan Administrator shall direct that the dollar amount in question
be segregated in a separate account in the Plan or in an escrow account where it
will continue to accumulate interest. If it is later determined that the
domestic relations order is not a qualified domestic relations order, the
segregated account and its accrued interest shall be restored to you.
Attached are various sample forms for use by Plan administrators who
receive domestic relations orders.
<PAGE>
______________________________________ PLAN
Notice to Participant of Plan Administrator's Determination Regarding
Domestic Relations Order
You were previously notified that the ____________________________________
Plan (the "Plan"), in which you are a participant, received a domestic relations
order that purported to confer upon your former spouse,
____________________________, certain of your rights to benefits under the Plan.
In that prior notification, dated ____________________, you were informed that
the Plan administrator would determine whether the domestic relations order
received constituted a qualified domestic relations order under section 414(p)
of the Internal Revenue Code of 1986 (the "Code).
Conclusion
After careful consideration, the Plan administrator has determined that
the domestic relations order received by it does not constitute a qualified
domestic relations order. Based on this determination, the Plan will not honor
the domestic relations order unless the domestic relations order is modified,
within the time period established by section 414(p) of the Code, to bring it
into compliance with the provisions of Code section 414(p).
Reasons for Conclusion
The Plan administrator's determination that the domestic relations
order does not constitute a qualified domestic relations order is based on its
determination that the domestic relations order fails to satisfy certain
requirements set forth in section 414(p)(2) of the Code. Each of those
requirements is set froth below, as well as the indication of the reason by the
domestic relations order does not comply with these requirements:
[To be Completed by Plan Administrator]
In all other respects the domestic relations order received by the Plan
appears to satisfy the requirements for a qualified domestic relations order as
established by the Internal Revenue Code. For this purpose, it is assumed that
payments to the alternate payee will be made in accordance with the time and
manner in which payments will be made to the participant since the domestic
relations order received by the Plan does not otherwise specify.
<PAGE>
-2-
Since the Plan administrator has determined that the domestic relations
order in question is not presently a qualified domestic relations order, it will
not make any payments pursuant to the domestic relations order received by it at
the present time. If the domestic relations order is modified to become a
qualified domestic relations order, within the time period prescribed in section
414(p) of the Code, the Plan will make payments in accordance with the
directions of such domestic relations order. In the interim, the Plan
administrator will separately account for the amounts which would have been
payable to the alternate payee during the period as if the domestic relations
order received by it had been determined to have been a qualified domestic
relations order. If, however, under the terms of the Plan, payments are required
to be made to the Participant and the domestic relations order received by the
Plan has not been modified to become a qualified domestic relations order, the
Plan will pay the entire amount to the Participant in accordance with the Plan
provisions.
Date: _______________________________ _________________________________
Plan Administrator
Address for Comment:
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<PAGE>
______________________________________ PLAN
Notice to Alternate Payee of Plan Administrator's Determination Regarding
Domestic Relations Order
You were previously notified that the ___________________________________
Plan (the "Plan"), in which ___________________________________ is a participant
(the "Participant"), received a domestic relations order that purported to
confer upon you certain of the Participant's rights to benefits under the Plan.
In that prior notification, dated ____________________, you were informed that
the Plan administrator would determine whether the domestic relations order
received constituted a qualified domestic relations order under section 414(p)
of the Internal Revenue Code of 1986 (the "Code).
Conclusion
After careful consideration, the Plan administrator has determined that
the domestic relations order received by it does not constitute a qualified
domestic relations order. Based on this determination, the Plan will not honor
the domestic relations order unless the domestic relations order is modified,
within the time period established by section 414(p) of the Code, to bring it
into compliance with the provisions of Code section 414(p).
Reasons for Conclusion
The Plan administrator's determination that the domestic relations order
does not constitute a qualified domestic relations order is based on its
determination that the domestic relations order fails to satisfy certain
requirements set forth in section 414(p)(2) of the Code. Each of those
requirements is set froth below, as well as the indication of the reason by the
domestic relations order does not comply with these requirements:
[To be Completed by Plan Administrator]
In all other respects the domestic relations order received by the Plan
appears to satisfy the requirements for a qualified domestic relations order as
established by the Internal Revenue Code. For this purpose, it is assumed that
payments to the alternate payee will be made in accordance with the time and
manner in which payments will be made to the participant since the domestic
relations order received by the Plan does not otherwise specify.
<PAGE>
-2-
Since the Plan administrator has determined that the domestic relations
order in question is not presently a qualified domestic relations order, it will
not make any payments pursuant to the domestic relations order received by it at
the present time. If the domestic relations order is modified to become a
qualified domestic relations order, within the time period prescribed in section
414(p) of the Code, the Plan will make payments in accordance with the
directions of such domestic relations order. In the interim, the Plan
administrator will separately account for the amounts which would have been
payable to the alternate payee during the period as if the domestic relations
order received by it had been determined to have been a qualified domestic
relations order. If, however, under the terms of the Plan, payments are required
to be made to the Participant and the domestic relations order received by the
Plan has not been modified to become a qualified domestic relations order, the
Plan will pay the entire amount to the Participant in accordance with the Plan
provisions.
Date: _______________________________ _________________________________
Plan Administrator
Address for Comment:
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<PAGE>
______________________________________ PLAN
Notice to Participant of Plan Administrator's Determination Regarding
Domestic Relations Order
You were previously notified that the __________________________________
Plan (the "Plan"), in which you are a participant, received a domestic relations
order that purported to confer upon your former spouse,
____________________________, certain of your rights to benefits under the Plan.
In that prior notification, dated ____________________, you were informed that
the Plan administrator would determine whether the domestic relations order
received constituted a qualified domestic relations order under section 414(p)
of the Internal Revenue Code of 1986.
After careful consideration, the Plan administrator has determined that
the domestic relations order received by it constitutes a qualified domestic
relations order. Based on this determination, the Plan will honor the qualified
domestic relations order.
The Plan administrator has further determined that the qualified domestic
relations order requires that the amount of payment shall equal _______________
_______________________________________________________________________________
__________________________________________. Accordingly, the Plan will promptly
issue a check in the amount of ________________________________________________
($____________________), plus earnings, payable to your former spouse, which
amount represents payment in full of all amounts due [him/her] under the terms
of the qualified domestic relations order.
Date: _______________________________ _________________________________
Plan Administrator
Address for Comment:
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<PAGE>
______________________________________ PLAN
Notice to Alternate Payee of Plan Administrator's Determination
Regarding Domestic Relations Order
You were previously notified that the ____________________________________
Plan (the "Plan"), in which your former spouse, ____________________________, is
a participant, received a domestic relations order that purported to confer upon
you certain of your former spouse's rights to benefits under the Plan. In that
prior notification, dated ______________________, you were informed that the
Plan administrator would determine whether the domestic relations order received
constituted a qualified domestic relations order under section 414(p) of the
Internal Revenue Code of 1986.
After careful consideration, the Plan administrator has determined that
the domestic relations order received by it constitutes a qualified domestic
relations order. Based on this determination, the Plan will honor the qualified
domestic relations order.
The Plan administrator has further determined that the qualified domestic
relations order requires that the amount of payment shall equal ________________
________________________________________________________________________________
_________________________________________________________Accordingly, the Plan
will promptly issue a check in the amount of ___________________________________
($_________________) plus earnings, payable to you, which amount represents
payment in full of all amounts due you under the terms of the qualified domestic
relations order.
Date: _______________________________ _________________________________
Plan Administrator
Address for Comment:
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<PAGE>
___________________________________ PLAN
Notice to Alternate Payee of Receipt of Domestic Relations Order
You are hereby notified that the _____________________________________
Plan (the "Plan"), in which __________________________ is a participant (the
"Participant"), has recently received a domestic relations order that purports
to confer upon ________________________________, the Participant's former
spouse, certain of the rights of the Participant to benefits under the Plan. A
copy of this communication is attached. If the Plan administrator determines
that this communication constitutes a qualified domestic relations order as
defined by section 414(p) of the Internal Revenue Code of 1986, it will comply
with the request or instructions that the communication contains.
The Plan administrator will make its determination as to whether the
attached communication constitutes a qualified domestic relations not more than
sixty (60) days after the date of this notice, which is set forth below. If you
wish to comment on this matter, please write the Plan administrator at the
address set forth below. In making its determination, the Plan administrator
will consider any written comments mailed within thirty (30) days from the date
of this notice.
Upon making its determination, the Plan administrator will notify you
thereof and, if it determines that the communication is not a qualified domestic
relations order, will furnish the reason or reasons for that determination. It
will also notify you of any action it intends to take pursuant to its
determination.
Date: _______________________________ _________________________________
Plan Administrator
Address for Comment:
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<PAGE>
___________________________________ PLAN
Notice to Plan Participant of Receipt of Domestic Relations Order
You are hereby notified that the ______________________________________
__________________________ Plan (the "Plan"), in which you are a participant,
has recently received a domestic relations order that purports to confer upon
your former spouse, ________________________, certain of your rights to benefits
under the Plan. A copy of this communication is attached. If the Plan
administrator determines that this communication constitutes a qualified
domestic relations order as defined by section 414(p) of the Internal Revenue
Code of 1986, it will comply with the request or instructions that the
communication contains.
The Plan administrator will make its determination as to whether the
attached communication constitutes a qualified domestic relations not more than
sixty (60) days after the date of this notice, which is set forth below. If you
wish to comment on this matter, please write the Plan administrator at the
address set forth below. In making its determination, the Plan administrator
will consider any written comments mailed within thirty (30) days from the date
of this notice.
Upon making its determination, the Plan administrator will notify you
thereof and, if it determines that the communication is not a qualified domestic
relations order, will furnish the reason or reasons for that determination. It
will also notify you of any action it intends to take pursuant to its
determination.
Date: _______________________________ _________________________________
Plan Administrator
Address for Comment:
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<PAGE>
INSTRUCTION FOR NOTICE TO INTERESTED PARTIES
Retype this form on your letterhead, filling in all blanks. Post it on the
bulletin boards customarily used to display notices concerning labor-management
relations, or hand distribute or mail it to employees after adopting the Plan.
A list of IRS Key District Offices is attached to the end of this notice.
The list should be kept available to employees at the location indicated in the
notice.
<PAGE>
KEY DISTRICT OFFICES
Key District IRS Districts Covered
- ------------ ---------------------
Central Region
Cincinnati............ Cincinnati, Louisville,
Indianapolis
Cleveland............. Cleveland, Parkersburg
Detroit............... Detroit
Mid-Atlantic Region
Baltimore............. Baltimore (which includes the District of Columbia
and Office of International Operations), Pittsburgh,
Richmond
Philadelphia.......... Philadelphia, Wilmington
Newark................ Newark
Midwest Region
Chicago............... Chicago
St. Paul.............. St. Paul, Fargo, Aberdeen,
Milwaukee
St. Louis............. St. Louis, Springfield, Des Moines, Omaha
North-Atlantic Region
Boston................ Boston, Augusta, Burlington, Providence, Hartford,
Portsmouth
Manhattan............. Manhattan
Brooklyn.............. Brooklyn, Albany, Buffalo
Southeast Region
Atlanta............... Atlanta, Greensboro, Columbia, Nashville,
Jacksonville, Jackson, Birmingham
Southwest Region
Dallas................ Austin, New Orleans, Albuquerque, Denver, Cheyenne,
Dallas, Oklahoma City, Little Rock, Wichita
<PAGE>
-2-
Western Region
Los Angeles........... Los Angeles, Phoenix, Honolulu
San Francisco......... San Francisco, Salt Lake City, Reno
Seattle............... Seattle, Portland, Anchorage, Boise, Helena
<PAGE>
NOTICE TO INTERESTED PARTIES
Current employees of [NAME OF EMPLOYER] are hereby notified that [NAME OF
ADOPTING EMPLOYER] has adopted the [NAME OF PLAN OR PLANS] as its employee
retirement benefit plan.
The employees eligible to participate under this Plan are [INSERT ELIGIBLE
CLASS OF EMPLOYEES].
It is not expected that this Plan will be submitted to the Internal
Revenue Service for an advance determination as to whether or not the Plan meets
the qualification requirements of section 401(a) of the Internal Revenue Code.
However, this Plan is a prototype plan and the Internal Revenue Service has
previously issued a favorable opinion letter to the sponsor with regard to this
Plan.
As an interested party, you have the right to submit to the Key District
Director of the Internal Revenue Service, either individually or jointly with
other interested parties, your comments as to whether this Plan meets the
qualification requirements of the Internal Revenue Code.
You may also, either individually or jointly with other interested
parties, request that the Department of Labor submit, on your behalf, comments
to the Key District Director regarding qualification of this Plan.
If the Department of Labor declines to comment on all or some of the
matters you raise, you may, individually or jointly if your request was made to
the Department jointly, submit your comments on these matters directly to the
Key District Director at the following address:
[INSERT NAME AND ADDRESS OF KEY DISTRICT DIRECTOR]
The Department of Labor may not comment on behalf of interested parties
unless requested to do so by the lesser of 10 employees or 10% of the employees
who qualify as interested parties. The number of persons needed for the
Department of Labor to comment with respect to this Plan is [INSERT NUMBER]. A
request to the Department of Labor should be sent to the following address:
<PAGE>
-2-
Administrator of Pension and
Welfare Benefit Programs
U.S. Department of Labor
200 Constitution Avenue, N.W.
Washington, D.C. 20216
Attention: 3001 Comment Request
Any comment you submit to the Key District Director, or any request to the
Department of Labor must include the name of the Plan, the Plan number, the
opinion letter number, the adopting employer's identification number, the name
and address of the sponsor, and the name and address of the Plan administrator.
Any request to the Department of Labor must also include the address of the Key
District Director. This information can be found at the end of this Notice.
A comment to the Key District Director must be received by [INSERT DATE 75
DAYS AFTER PLAN IS ADOPTED]. A request for comment submitted to the Department
of Labor must be received by [INSERT DATE 45 DAYS AFTER PLAN IS ADOPTED], if you
wish to preserve your right to comment to the Key District Director, or by
[INSERT DATE 55 DAYS AFTER PLAN IS ADOPTED] if you wish to waive that right.
If there are matters upon which you request the Department of Labor to
comment upon on your behalf, and the Department declines to do so, you may
submit comments on these matters directly to the Key District Director. These
comments must be received by the Key District Director within 15 days from the
time the Department of Labor notifies you that it will not comment on a
particular matter, or by [INSERT THE DATE 75 DAYS AFTER THE PLAN IS ADOPTED],
whichever is later.
Detailed instructions regarding the requirements for submitting comments
may be found in sections 6, 7 and 8 of Revenue Procedure 80-30.
Additional information concerning this Plan (including, where applicable,
a description of the circumstances which may result in ineligibility or loss of
benefits, a description of the source of financing of the plan, and copies of
section 6 of Revenue Procedure 80-30) is available at [INSERT LOCATION] during
the hours of [INSERT HOURS] for inspection or copying. There may be a nominal
charge for copying and/or mailing.
The following information will be needed for correspondence with the
Department of Labor or the Key District Director:
[INSERT NAME OF ADOPTING EMPLOYER]
[INSERT NAME OF PLAN OR PLANS]
[INSERT PLAN IDENTIFICATION NUMBER(s)]
[INSERT OPINION LETTER NUMBER]
<PAGE>
-3-
[INSERT NAME OF SPONSOR]
[INSERT ADDRESS OF SPONSOR]
[INSERT ADOPTING EMPLOYER'S EIN]
[INSERT NAME OF PLAN ADMINISTRATOR]
[INSERT ADDRESS OF PLAN ADMINISTRATOR]
[INSERT ADDRESS OF KEY DISTRICT DIRECTOR]
<PAGE>
SPECIAL TAX NOTICE REGARDING PLAN PAYMENTS
The attached form is a model explanation, prepared by the IRS, of
some of the consequences of plan distributions. The model explanation describes
the tax-free rollover rules, the direct rollover option, the mandatory and
voluntary income tax withholding rules, the special tax treatment of lump sum
distributions, the special tax treatment of distributions of employer stock and
other matters.
The IRS permits this model explanation to be "customized" by
omitting any portions of it that are not applicable to a plan. For example, the
explanation of the special tax treatment of employer stock might be omitted by
plans that do not invest in or distribute employer stock. In addition,
alternative explanations may be substituted for all or any portion of the model
explanation. Any alterations must, however, comply with the requirements of
section 402(f) of the Internal Revenue Code.
<PAGE>
SPECIAL TAX NOTICE REGARDING PLAN PAYMENTS
This notice contains important information you will need before you
decide how to receive your benefits from the __________________________________
Plan (the "Plan").
SUMMARY
A payment from the Plan that is eligible for "rollover" can be taken
in two ways. You can have all or any portion of your payment either (1) paid in
a "direct rollover"; or (2) paid to you. A rollover is a payment of your Plan
benefits to your individual retirement arrangement (IRA) or to another employer
plan. This choice will affect the tax you owe.
If you choose a direct rollover --
o Your payment will not be taxed in the current year and no income tax
will be withheld.
o Your payment will be made directly to your IRA or, if you choose, to
another employer plan that accepts your rollover.
o Your payment will be taxed later when you take it out of the IRA or the
employer plan.
If you choose to have your Plan benefits paid to you --
o You will receive only 80% of the payment because the Plan administrator
is required to withhold 20% of the payment and send it to the IRS as income tax
withholding to be credited against your taxes.
o Your payment will be taxed in the current year unless you roll it over.
You may be able to use special tax rules that could reduce the tax you owe.
However, if you receive the payment before age 59 1/2, you also may have to pay
an additional 10% tax.
o Within 60 days of receiving the payment you can roll over the payment by
paying it to your IRA or to another employer plan that accepts your rollover.
The amount rolled over will not be taxed until you take it out of the IRA or
employer plan.
<PAGE>
-2-
o If you want to roll over 100% of the payment to an IRA or an employer
plan, you must find other money to replace the 20% that was withheld. If you
roll over only the 80% that you received, you will be taxed on the 20% that was
withheld and that is not rolled over.
SPECIAL NOTICE
The Plan administrator must provide this Special Tax Notice to you
within a reasonable time before an "eligible rollover distribution," as
described herein, is made. Under IRS regulations, this Special Tax Notice must
generally be given no more than 90 days and no less than 30 days before the
distribution or transfer. However, the 30-day requirement no longer applies once
you affirmatively elect to make or not make a direct rollover. You have the
right to wait the full 30 days before making a decision, if you wish to do so.
MORE INFORMATION
I. PAYMENTS THAT CAN AND CANNOT BE ROLLED OVER
Payments from the Plan may be "eligible rollover distributions." This
means that they can be rolled over to an IRA or to another employer plan that
accepts rollovers. Your Plan administrator should be able to tell you what
portion of your payment is an eligible rollover distribution. The following
types of payments cannot be rolled over:
A. Nontaxable Payments
In general, only the "taxable portion" of your payment is an
eligible rollover distribution. If you have made "after-tax" employee
contributions to the Plan, these contributions will be nontaxable when they are
paid to you and they cannot be rolled over. (After-tax employee contributions
generally are contributions you made from your own pay that were already taxed).
B. Payments Spread Over Long Periods
You cannot roll over a payment if it is part of a series of equal
(or almost equal) payments that are made at least once a year and that will last
for (1) your lifetime (or your life expectancy); (2) your lifetime and your
beneficiary's lifetime (or life expectancies); or (3) a period of ten or more
years.
<PAGE>
-3-
C. Required Minimum Payments
Beginning in the year you reach age 70 1/2, a certain portion of
your payment cannot be rolled over because it is a "required minimum payment"
that must be paid to you.
II. DIRECT ROLLOVER
You can choose a direct rollover of all or any portion of your payment
that is an "eligible rollover distribution," as described above. In a direct
rollover, the eligible rollover distribution is paid directly from the Plan to
an IRA or another employer plan that accepts rollovers. If you choose a direct
rollover, you are not taxed on a payment until you later take it out of the IRA
or the employer plan.
A. Direct Rollover to an IRA
You can open an IRA to receive the direct rollover. (The term "IRA,"
as used in this notice, includes individual retirement accounts and individual
retirement annuities). If you choose to have your payment made directly to an
IRA, contact an IRA sponsor (usually a financial institution) to find out how to
have your payment made in a direct rollover to an IRA at that institution. If
you are unsure of how to invest your money, you can temporarily establish an IRA
to receive the payment. However, in choosing an IRA, you may wish to consider
whether the IRA you choose will allow you to move all or a part of your payment
to another IRA at a later date, without penalties or other limitations. See IRS
Publication 590, Individual Retirement Arrangements, for more information on
IRAs (including limits on how often you can roll over between IRAs).
B. Direct Rollover to a Plan
If you are employed by a new employer that has a plan, and you want
a direct rollover to that plan, ask the administrator of that plan whether it
will accept your rollover. An employer plan is not legally required to accept a
rollover. If your new employer's plan does not accept a rollover, you can choose
a direct rollover to an IRA.
C. Direct Rollover of a Series of Payments
If you receive eligible rollover distributions that are paid in a
series for less than ten years, your choice to make or not make a direct
rollover for a payment will apply to all later payments in the series until you
change your election. You are free to change your election for any later payment
in the series.
<PAGE>
-4-
III. PAYMENT PAID TO YOU
If you have the payment made to you, it is subject to 20% income tax
withholding. The payment is taxed in the year you receive it unless, within 60
days, you roll it over to an IRA or another plan that accepts rollovers. If you
do not roll it over, special tax rules may apply.
A. Income Tax Withholding
1. Mandatory Withholding
If any portion of the payment to you is an eligible rollover
distribution, the Plan is required by law to withhold 20% of that amount. This
amount is sent to the IRS as income tax withholding. For example, if your
eligible rollover distribution is $10,000, only $8,000 will be paid to you
because the Plan must withhold $2,000 as income tax. However, when you prepare
your income tax return for the year, you will report the full $10,000 as a
payment from the Plan. You will report the $2,000 as tax withheld, and it will
be credited against any income tax you owe for the year.
2. Voluntary Withholding
If any portion of your payment is not an eligible rollover
distribution but is taxable, the mandatory withholding rules described above do
not apply. In this case, you may elect not to have withholding apply to that
portion. To elect out of withholding, ask the Plan administrator for the
election form and related information.
B. Sixty-Day Rollover Option
If you have an eligible rollover distribution paid to you, you can
still decide to roll over all or part of it to an IRA or another employer plan
that accepts rollovers. If you decide to roll over, you must make the rollover
within 60 days after you receive the payment. The portion of your payment that
is rolled over will not be taxed until you take it out of the IRA or the
employer plan.
You can roll over up to 100% of the eligible rollover distribution,
including an amount equal to the 20% that was withheld. If you choose to roll
over 100%, you must find other money within the 60-day period to contribute to
the IRA or the employer plan to replace the 20% that was withheld. On the other
hand, if you roll over only the 80% that you received, you will be taxed on the
20% that was withheld.
Example
Your eligible rollover distribution is $10,000, and you choose to have it
paid to you. You will receive $8,000 and $2,000 will be sent to the IRS as
income tax withholding.
<PAGE>
-5-
Within 60 days after receiving the $8,000, you may roll over the entire
$10,000 to an IRA or employer plan. To do this, you roll over the $8,000
you received from the Plan, and you will have to find $2,000 from other
sources (your savings, a loan, etc.). In this case, the entire $10,000 is
not taxed until you take it out of the IRA or employer plan. If you roll
over the entire $10,000, when you file your income tax return you may get
a refund of the $2,000 withheld.
If, on the other hand, you roll over only $8,000, the $2,000 you did not roll
over is taxed in the year it was withheld. When you file your income tax return
you may get a refund of part of the $2,000 withheld. (However, any refund is
likely to be larger if you roll over the entire $10,000).
C. Additional 10% Tax if You are Under Age 59 1/2
If you receive a payment before you reach age 59 1/2 and you do not
roll it over, then, in addition to the regular income tax, you have to pay an
extra tax equal to 10% of the taxable portion of the payment. The additional 10%
tax does not apply to your payment if it is (1) paid to you because you separate
from service with your employer during or after the year you reach age 55, (2)
paid because you retire due to disability, (3) paid to you as equal (or almost
equal) payments over your life or life expectancy (or your and your
beneficiary's lives or life expectancies), or (4) used to pay certain medical
expenses. See IRS Form 5329 for more information on the additional 10% tax.
D. Special Tax Treatment
If your eligible rollover distribution is not rolled over, it will
be taxed in the year you receive it. However, if it qualifies as a "lump sum
distribution," it may be eligible for special tax treatment. A lump sum
distribution is a payment, within one year, of your entire balance under the
Plan (and certain other similar plans of the employer) that is payable to you
because you have reached age 59 1/2 or have separated from service with your
employer (or, in the case of a self-employed individual, because you have
reached age 59 1/2 or have become disabled). For a payment to qualify as a lump
sum distribution, you must have been a participant in the Plan for at least five
years. The special tax treatment for lump sum distributions is described below.
1. Five-Year Averaging
If you receive a lump sum distribution after you are age
59 1/2, you may be able to make a one-time election to figure the tax on the
payment by using "5-year averaging." Five-year averaging often reduces the tax
you owe because it treats the payment much as if it were paid over five years.
<PAGE>
-6-
2. Ten-Year Averaging if You Were Born Before January 1, 1936
If you receive a lump sum distribution and you were born
before January 1, 1936, you can make a one-time election to figure the tax on
the payment by using "10-year averaging" (using 1986 tax rates) instead of
5-year averaging (using current tax rates). Like the 5-year averaging rules,
10-year averaging often reduces the tax you owe.
3. Capital Gain Treatment if You Were Born Before January 1, 1936
In addition, if you receive a lump sum distribution and you
were born before January 1, 1936, you may elect to have the part of your payment
that is attributable to your pre-1974 participation in the Plan (if any) taxed
as long-term capital gain at a rate of 20%.
There are other limits on the special tax treatment for lump sum
distributions. For example, you can generally elect this special tax treatment
only once in your lifetime, and the election applies to all lump sum
distributions that you receive in that same year. If you have previously rolled
over a payment from the Plan (or certain other similar plans of the employer),
you cannot use this special tax treatment for later payments from the Plan. If
you roll over your payment to an IRA, you will not be able to use this special
tax treatment for later payments from the IRA. Also, if you roll over only a
portion of your payment to an IRA, this special tax treatment is not available
for the rest of the payment. Additional restrictions are described in IRS Form
4972, which has more information on lump sum distributions and how you elect the
special tax treatment.
E. Employer Stock or Securities
There is a special rule for a payment from the Plan that includes
employer stock (or other employer securities). To use this special rule, (1) the
payment must qualify as a lump sum distribution, as described above (or would
qualify except that you do not yet have five years of participation in the
Plan), or (2) the employer stock included in the payment must be attributable to
"after-tax" employee contributions, if any. Under this special rule, you may
have the option of not paying tax on the "net unrealized appreciation" of the
stock until you sell the stock. Net unrealized appreciation generally is the
increase in the value of the employer stock while it was held by the Plan. For
example, if employer stock was contributed to your Plan account when the stock
was worth $1,000 but the stock was worth $1,200 when you received it, you would
not have to pay tax on the $200 increase in value until you later sold the
stock.
You may instead elect not to have the special rule apply to the net
unrealized appreciation. In this case, your net unrealized appreciation will be
taxed in the year you receive the stock, unless you roll over the stock. The
stock (including any net unrealized appreciation) can be rolled over to an IRA
or another employer plan either in a direct rollover or a rollover that you make
yourself.
<PAGE>
-7-
If you receive employer stock in a payment that qualifies as a lump
sum distribution, the special tax treatment for lump sum distributions described
above (such as 5-year averaging) also may apply. See IRS Form 4972 for
additional information on these rules.
IV. SURVIVING SPOUSES, ALTERNATE PAYEES, AND OTHER BENEFICIARIES
In general, the rules summarized above that apply to payments to employees
also apply to payments to surviving spouses of employees and to spouses or
former spouses who are "alternate payees." You are an alternate payee if your
interest in the Plan results from a "qualified domestic relations order," which
is an order issued by a court, usually in connection with a divorce or legal
separation. Some of the rules summarized above also apply to a deceased
employee's beneficiary who is not a spouse. However, there are some exceptions
for payments to surviving spouses, alternate payees, and other beneficiaries
that should be mentioned.
If you are a surviving spouse, you may choose to have an eligible
rollover distribution paid in a direct rollover to an IRA or paid to you. If you
have the payment paid to you, you can keep it or roll it over yourself to an IRA
but you cannot roll it over to an employer plan. If you are an alternate payee,
you have the same choices as the employee. Thus, you can have the payment paid
as a direct rollover or paid to you. If you have it paid to you, you can keep it
or roll it over yourself to an IRA or to another employer plan that accepts
rollovers. If you are a beneficiary other than the surviving spouse, you cannot
choose a direct rollover, and you cannot roll over the payment yourself.
If you are a surviving spouse, an alternate payee, or another
beneficiary, your payment is not subject to the additional 10% tax described in
section III. above, even if you are younger than age 59 1/2.
If you are a surviving spouse, an alternate payee or another
beneficiary, you may be able to use the special tax treatment for lump sum
distributions and the special rule for payments that include employer stock, as
described in section III. above. If you receive a payment because of the
employee's death, you may be able to treat the payment as a lump sum
distribution if the employee met the appropriate age requirements, whether or
not the employee had five years of participation in the Plan.
V. HOW TO OBTAIN ADDITIONAL INFORMATION
This notice summarizes only the federal (not state or local) tax rules
that might apply to your payment. The rules described above are complex and
contain many conditions and exceptions that are not included in this notice.
Therefore, you may want to consult with a professional tax advisor before you
take a payment of your benefits from the Plan. Also, you can find more specific
information on the tax treatment of payments from qualified retirement plans in
IRS Publication 575, Pension and Annuity
<PAGE>
-8-
Income, and IRS Publication 590, Individual Retirement Arrangements. These
publications are available from your local IRS office or by calling
1-800-TAX-FORMS.
<PAGE>
[NAME OF SPONSOR]
PROTOTYPE PROFIT SHARING/401(k) PLAN
Model Salary Reduction Agreement
I, ___________________________________________________, an employee of
_______________________________________ (the "Employer"), have received written
information on the _____________________________ Prototype Profit Sharing/401(k)
Plan (the "Plan") and I understand the general requirements, including the
available salary reduction elections. All of the following elections are subject
to the express provisions and limitations in the Plan and the Employer's
adoption agreement (the "Adoption Agreement"). I hereby elect the following
salary reductions:
1. Deductible Voluntary
|_| I elect not to make Salary Reduction Contributions to the
Plan.
|_| I elect to make Salary Reduction Contributions to the Plan
equal to _______% [SPECIFY PERCENTAGE SELECTED IN ADOPTION
AGREEMENT].
NOTE: The aggregate Salary Reduction Contributions of any
taxable year of a participant may not exceed $7,000, as
adjusted pursuant to section 402(g)(5) of the Internal
Revenue Code.
2. Nondeductible Voluntary
|_| I elect to contribute ________% [SPECIFY PERCENTAGE SELECTED
IN ADOPTION AGREEMENT] as a nondeductible voluntary
contribution, such contribution to be in the form of salary
reductions.
|_| I understand that nondeductible employee contributions are not
permitted under the terms of the Employer's Adoption Agreement
[CHECK IF EMPLOYER OPERATES THE PLAN UNDER ADOPTION AGREEMENT
001].
<PAGE>
-2-
Receipt of this Salary Reduction Agreement is hereby acknowledged.
-----------------------------
Plan Administrator
<PAGE>
INSTRUCTIONS FOR PREPARING SALARY REDUCTION AGREEMENT
Each Employer who elects, in either Adoption Agreement 001 or Adoption
Agreement 002 for the Prototype Profit Sharing/401(k) Plan to permit
participants to make voluntary contributions, should have each participant
complete a Salary Reduction Agreement.
The Plan permits two type of voluntary employee contributions:
1. Nondeductible voluntary (not permitted under Adoption Agreement
001); and
2. Deductible voluntary, which are matched by the Employer.
The model Salary Reduction Agreement contains several sections where you
must fill in the blanks in accordance with the selections made in your Adoption
Agreement. You may then wish to have the Salary Reduction Agreement retyped to
delete the instructions to the Employer.
<PAGE>
NAME OF PLAN
Loan Application,
Truth-in-Lending Disclosure and
Promissory Note
Participant's Name: _____________________________________________________
Social Security Number: _____________________________________________________
Employee Number: _____________________________________________________
Office Phone Number: _____________________________________________________
================================================================================
I. Loan Application
I hereby apply for a loan from my total vested account balance in the
___________________________________ Plan (hereinafter referred to as the "Plan")
in the amount of _____________________________________________ dollars
($____________) to be repaid by me from each paycheck via regular payroll
deductions over a period of ___________________________ (_____) months (minimum
of one year but not to exceed five years, unless for the purchase of a primary
residence). I accept the below stated interest rate and authorize the
appropriate interest and principal payments be deducted by
__________________________ (hereinafter sometimes referred to as the "Employer")
from my biweekly salary payments over the term of the loan. I understand that
the principal amount may be pre-paid in its entirety without penalty but partial
pre-payments cannot be made. I understand that I may only take one loan in any
calendar year.
I understand that the loan will be withdrawn from my investment accounts
on a pro rata basis and that the loan amount will be less if the funds available
for the loan are less than the amount requested above. I will be notified if the
amount available is less than the requested amount.
<PAGE>
-2-
================================================================================
II. Truth-in-Lending Disclosure
- --------------------------------------------------------------------------------
Annual
Percentage
Rate Finance Charge Amount Financed Total of Payments
- --------------------------------------------------------------------------------
The cost of The dollar amount The amount of credit The amount you will
your credit as the credit will provided to your or have paid when you
a yearly rate cost you on your behalf have made all
payments as
scheduled
- --------------------------------------------------------------------------------
YOUR PAYMENT SCHEDULE WILL BE:
- --------------------------------------------------------------------------------
Number of Biweekly
Biweekly Deduction
Deductions Amounts Biweekly Deductions Due Accounting Beginning
- --------------------------------------------------------------------------------
First pay period 30 days after application is
received by Plan administrator
- --------------------------------------------------------------------------------
Itemization of the Amount Financed of $_____________________.
$_____________________ Amount given to you directly.
Security: You are giving a security interest of one-half (1/2) of your vested
account balance in the Plan.
Prepayment: If you pay off early, you will not have to pay a penalty.
================================================================================
III. Promissory Note/Pledge
For value received, the above mentioned employee of _____________________
and a participant in the Plan (hereinafter referred to as "Borrower") hereby
agrees to pay to the Plan the sum of _________________________________________
dollars ($_____________________).
Borrower shall have the right to pre-pay the principal amount in its
entirety without penalty but partial pre-payments are not permitted.
<PAGE>
-3-
Borrower agrees to pay interest at the rate of ___________________________
percent (______________%) per annum from the date hereof on the principal amount
and agrees to make biweekly principal and interest payments of
___________________________________ dollars ($_____________________) over the
term of the loan. Borrower authorizes the deduction of the appropriate principal
and interest payments by _______________________ from biweekly salary payments.
If for any reason the Borrower ceases to be an employee of
_______________________, the Borrower agrees to repay the loan in its entirety
within thirty (30) days of termination date. If the loan is not repaid, the
Borrower understands that the outstanding balance will be considered an early
distribution subject to income taxes and applicable early withdrawal penalties.
Any total plan distribution will be reduced by the amount of the outstanding
balance. If payroll deductions cease for any reason, the Borrower agrees to make
the appropriate payment of interest and principal biweekly in advance, or repay
the loan in its entirety.
If this note is referred to any attorney for collection, Borrower agrees
to pay all costs and expenses thereof, including attorney's fees and court
costs.
As a security for the payment of the principal and interest on this note,
the Plan shall have and is hereby granted a security interest and/or right of
set-off in an amount equal to one-half (1/2) of the borrower's vested account
balance in the Plan, including his or her employee contribution account (if
applicable) and Employer contribution account heretofore vested or which shall
thereafter become vested as determined from the effective date of this
instrument and throughout its duration. Borrower, his or her heirs, legal
representatives and beneficiaries agree to hold the Plan's Retirement Committee
and the Plan harmless against any and all claims against said Plan that may
arise by virtue of the enforcement of such security interest or any such
set-off.
Borrower agrees that if at any time the Borrower's vested account balance
is no longer at least twice the then loan obligation under this Agreement, the
loan will, to the extent permitted by the Plan, be considered an early
distribution subject to income taxes and applicable early withdrawal penalties,
to the extent necessary so that the Borrower's vested account balance will equal
twice such loan obligation.
Receipt of a copy of this note, appropriately filled in, is hereby
acknowledged by the Borrower.
<PAGE>
-4-
================================================================================
IV. Payroll Deduction Authorization
I authorize the Employer's accounting department to deduct from my base
salary the amount and number of payments and to make deductions according to the
payment schedule set forth above in the Truth-in-Lending Disclosure.
Expected Date of First Payment: ______________________________
================================================================================
V. Distribution of Loan Proceeds
___ Please send the loan check to the following address:
------------------------------------------------------------------
------------------------------------------------------------------
___ Please deliver the loan check to me personally at
_______________________ [name of Employer].
================================================================================
VI. Signature and Acknowledgement
I have received a completed copy of this Agreement, including the
Truth-in-Lending Disclosure, Promissory Note and Payroll Deduction Authorization
and I agree to fulfill the terms set forth in this Agreement.
- ----------------------------------------- -----------------------
Signature of Borrower Date
================================================================================
<PAGE>
-5-
VII. Retirement Committee Approval/Denial of Application
Subject to acceptance of the printed information by the above named
participant, the Retirement Committee has ___ Approved ___ Denied the
participant's loan request.
- ----------------------------------------- ------------------------------
Authorized Signature Date
- ----------------------------------
Date Received
<PAGE>
AMENDMENT TO THE INVESTMENT COMPANY INSTITUTE
PROTOTYPE PROFIT SHARING/401(k) PLAN
BASIC DOCUMENT #02
FIRST
The Plan is hereby amended by the word-for-word adoption of the model
language contained in Revenue Procedure 93-12, for distributions made on or
after January 1, 1993, as follows:
Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this provision, a Distributee may
elect, at the time and in the manner prescribed by the Plan Administrator, to
have any portion of an Eligible Rollover Distribution paid directly to an
Eligible Retirement Plan specified by the Distributee in a Direct Rollover.
Definitions
(a) Eligible Rollover Distribution. 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: 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 or the joint lives (or joint life expectancies) of the
Distributee and the Distributee's designated Beneficiary, or for a specified
period of ten (10) years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; and the portion of
any distribution that is not includable in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to employer
securities).
(b) Eligible Retirement Plan. An Eligible Retirement Plan is an individual
retirement account described in section 408(a) of the Code, an individual
retirement annuity described in section 408(b) of the Code, an annuity plan
described in section 403(a) of the Code, or a qualified trust described in
section 401(a) of the Code, that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover Distribution to the
surviving spouse, an Eligible Retirement Plan is an individual retirement
account or individual retirement annuity.
(c) Distributee. A Distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as
<PAGE>
defined in section 414(p) of the Code, are Distributees with regard to the
interest of the spouse or former spouse.
(d) Direct Rollover. A Direct Rollover is a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.
SECOND
The Plan is hereby amended by the word-for-word adoption of the model
language contained in Revenue Procedure 94-13 as follows:
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 Annual
Compensation Limit. The OBRA '93 Annual Compensation Limit is $150,000, as
adjusted by the Commissioner for increases in the cost-of-living in accordance
with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which Compensation is determined ("Determination Period") beginning
in such calendar year. If a Determination Period consists of fewer than 12
months, the OBRA '93 Annual Compensation Limit will be multiplied by a fraction,
the numerator of which is the number of months in the Determination Period, and
the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under section 401(a)(17) of the Code shall mean the
OBRA '93 Annual Compensation Limit set forth in this provision.
If Compensation for any prior Determination Period is taken into account
in determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior Determination Period is subject to the OBRA '93
Annual Compensation Limit in effect for that prior Determination Period. For
this purpose, for Determination Periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 Annual
Compensation Limit is $150,000.
<PAGE>
MODEL SUMMARY PLAN DESCRIPTION OF THE
[INSERT NAME OF EMPLOYER]
PROFIT SHARING/401(k) PLAN
(ADOPTION AGREEMENT #001)
<PAGE>
MODEL SUMMARY PLAN DESCRIPTION OF THE
[INSERT NAME OF EMPLOYER]
PROFIT SHARING/401(k) PLAN
(ADOPTION AGREEMENT #001)
TABLE OF CONTENTS
Page
----
I. INTRODUCTION...................................................... 1
II. DESCRIPTION OF PLAN BENEFITS AND REQUIREMENTS..................... 1
A. Terms With Special Meanings................................. 1
B. Participation............................................... 3
C. Individual Accounts......................................... 3
D. Contributions............................................... 4
E. Vesting..................................................... 5
F. Forfeitures................................................. 5
G. Distributions of Benefits................................... 5
H. Investment of Plan Assets................................... 8
I. Withdrawals................................................. 8
III. CLAIMS PROCEDURE.................................................. 9
IV. CHANGES TO THE PLAN............................................... 9
A. Amendment of the Plan....................................... 9
B. Termination of the Plan..................................... 9
C. Merger, Consolidation or Transfer of the Plan............... 10
V. GENERAL INFORMATION............................................... 10
VI. NON-APPLICATION OF PBGC GUARANTEES................................ 11
VII. SPECIAL RIGHTS UNDER ERISA........................................ 11
<PAGE>
MODEL
SUMMARY PLAN DESCRIPTION OF THE
[INSERT NAME OF EMPLOYER]
PROFIT SHARING/401(k) PLAN
(ADOPTION AGREEMENT #001)
I. INTRODUCTION
[INSERT NAME OF EMPLOYER] (the "Employer") is pleased to be able to
provide you with the [INSERT NAME OF EMPLOYER] Profit Sharing/401(k) Plan (the
"Plan" or the "Profit Sharing/401(k) Plan"). The Plan is effective as of [INSERT
EFFECTIVE DATE].
The Plan is a defined contribution plan, to which the Employer makes
contributions to an account held in your name. With this type of plan, the
retirement benefit you receive will depend on the investment performance of the
amounts that are in your account. The Plan is designed to provide retirement
income to employees who remain with the Employer until retirement and to those
who have a vested interest in their account when they terminate their employment
with the Employer.
Only the main features of the Plan are explained in this Summary Plan
Description. Any questions which are not answered here should be referred to
[INSERT NAME OF DEPARTMENT OR PERSONNEL RESPONSIBLE FOR PARTICIPANT
INFORMATION]. If there is any inconsistency between the Plan as described in
this Summary Plan Description and the Plan document itself, the terms of the
Plan document will govern. Copies of the Plan document and the Trust Agreement
are available for your inspection during regular working hours.
II. DESCRIPTION OF PLAN BENEFITS AND REQUIREMENTS
A. Terms With Special Meanings
Certain words and terms used in this Summary have special meanings.
Many of these terms are defined in this section, while others are explained in
the text of the Summary. To assist you in identifying these terms within the
text, they are capitalized.
1. Beneficiary. Your designated Beneficiary is the person you
name to receive your benefit distribution in the event of your death. If you are
married, you will need written consent from your spouse to name someone other
than your spouse as your Beneficiary.
<PAGE>
-2-
2. Break in Service. A Break in Service occurs if you complete less
than 501 Hours of Service with the Employer during a Plan Year.
3. Compensation. Compensation is the total compensation paid to you
by the Employer during any portion of a Plan Year during which you were a Plan
Participant. If you are self-employed, your Compensation is your earned income
less your deductible contributions to any qualified retirement plans.
Compensation is limited to a maximum dollar amount established under the
Internal Revenue Code.
4. Elective Deferrals. Contributions made to the Plan by the
Employer at the election of the Participant in lieu of cash Compensation and
that are made pursuant to a salary reduction agreement.
5. Hours of Service. Each hour for which you are paid or entitled to
be paid by the Employer. In addition, uncompensated authorized leaves of absence
that do not exceed two years, military leave while your reemployment rights are
protected by law, and absences from work for maternity or paternity reasons may
be credited as Hours of Service for the purpose of determining whether you had a
Break in Service.
6. Matching Contributions. Contributions made to the Plan by the
Employer by reason of the Participant's Elective Deferrals.
7. Participant. A Participant is an employee who has met the
requirements for participating in this Plan, and whose account has been neither
completely forfeited nor distributed.
8. Plan Year. The Plan Year is the 12-month period ending on the
date shown in section V of this Summary.
9. Sponsor. The Sponsor is the organization which has made this Plan
available to the Employer.
10. Trust. The Trust is a fund maintained by the Trustee for the
investment of Plan assets, including the amount in your account.
11. Year of Service. A Year of Service is the applicable 12-month
period during which you complete 1,000 or more Hours of Service. For eligibility
purposes, the applicable 12-month period is your first year of employment or any
Plan Year. For vesting purposes, the applicable 12-month period is the Plan
Year.
<PAGE>
-3-
B. Participation
You will be eligible to participate in the Plan after you have met
the following eligibility requirements: [CHECK ALL APPLICABLE ITEMS]
|_| You have reached age [INSERT AGE].
|_| You have completed one Year of Service.
The first entry date, or date in which you can first participate in
the Plan if you meet these requirements, is [INSERT EFFECTIVE DATE]. Thereafter,
the entry date(s) will be [INSERT DATES OF THE FIRST DAY OF THE PLAN YEAR AND
THE FIRST DAY OF THE SEVENTH MONTH OF THE PLAN YEAR] of each year.
C. Individual Accounts
A separate account will be maintained for you within the Plan. This
account will be further divided into subaccounts, which will be credited with
the different types of contributions that are described in the next section. The
subaccounts that will be maintained for you are as follows:
1. Elective Deferral Subaccount. This subaccount will be credited
with your elective deferral contributions, any distributions from this
subaccount, and the earnings and losses attributable to this subaccount.
2. Qualified Nonelective Contribution Subaccount. This subaccount
will be credited with your share of the Employer's qualified nonelective
contributions, any distributions from this subaccount, and the earnings and
losses attributable to this subaccount.
3. Matching Contribution Subaccount. This subaccount will be
credited with your share of the Employer's matching contributions, any
distributions from this subaccount, and the earnings and losses attributable to
this subaccount.
4. Trustee Transfer and Rollover Subaccounts. These subaccounts will
be credited with any rollover contributions or transfer contributions you may
make to the Plan, any distributions from the subaccount, and the earnings and
losses attributable to the subaccount.
D. Contributions
|_| 1. Employer Contributions. The Employer will make Matching
Contributions each Plan Year in accordance with the following
contribution formula: [CHECK ONE OF THE FOLLOWING]:
<PAGE>
-4-
|_| Contributions will be made in an amount equal to [INSERT
CONTRIBUTION PERCENTAGE] of the Elective Deferrals made
by each Participant.
|_| Contributions will be made in an amount equal to [INSERT
CONTRIBUTION PERCENTAGE] of the Elective Deferrals made
by each Participant up to the first [INSERT PERCENTAGE]
of the Participant's Compensation plus [INSERT
PERCENTAGE] of the Participant's Elective Deferrals.
NOTE: These contributions are subject to maximum
limitations as provided in the Plan and the Internal
Revenue Code.
NOTE: Under special minimum allocation rules, you may
receive a larger allocation than that which you would
otherwise receive for a Plan Year.
2. Employee Contributions.
a. Elective Deferrals. A Participant may elect to defer
[INSERT CONTRIBUTION PERCENTAGE] of his compensation, bonuses or other
nonregular compensation that would otherwise be payable to him. Elective
Deferrals will be made through the direct reduction of compensation in each
payroll period during which the election is in effect. Participants may change
the amounts designated to be deducted in accordance with the Plan provisions.
b. Rollover Contributions and Direct Transfers. If you have
participated in other pension or profit sharing plans, you will be permitted to
make a rollover contribution to the Plan of certain amounts you may receive from
those other plans.
You will also be permitted, with the approval of the Plan
Administrator, to authorize a direct transfer to the Plan of amounts that are
attributable to your participation in other pension or profit sharing plans.
E. Vesting.
Vesting refers to the nonforfeitable interest you have in each of
your subaccounts. In other words, your vested interest in your account is the
amount you will receive when your account is distributed to you.
<PAGE>
-5-
You will always have a 100% vested and nonforfeitable interest in
all of your subaccounts.
F. Forfeitures.
You have a 100% vested and nonforfeitable interest in the amounts in
your account at all times. Your account will therefore not be subject to
forfeitures.
G. Distribution of Benefits.
1. Eligibility for Distribution. You will be entitled to receive a
distribution of the vested amounts in your account upon occurrence of any of the
following:
o Your termination of employment with the Employer for any reason.
o Your total and permanent disability.
o Your death.
o Termination of the Plan.
o Your attainment of normal retirement age, which is:
|_| Age [insert normal retirement age]
|_| Age [insert normal retirement age] or the [insert anniversary
date] of the day you commenced participation in the plan.
2. Timing of Distributions. You will begin receiving benefit
distributions in accordance with the following:
o Generally, benefit distributions will commence not later than 60
days after the end of the Plan Year in which you become eligible to
receive benefits.
o In the event of your death, your spouse, if you are married, will
generally be entitled to receive your benefit distribution. If you
are unmarried, or if your spouse has given written consent, your
designated Beneficiary will receive your benefit distribution. If
you have no spouse or designated Beneficiary, your benefit
distribution will go to your estate.
<PAGE>
-6-
o If you so elect, you may defer commencement of the distribution of
your benefit beyond the date you first become eligible to receive
that distribution, to a date which you may specify. The date you
specify must not be later than the April 1 following the close of
your taxable year in which you attain age 70 1/2.
If you attained age 70 1/2 before January 1, 1988, special rules
apply to your distributions.
If you wish to receive benefit distributions before attaining age 59
1/2, you may be subject to a penalty tax, and you must notify the Plan
Administrator in writing that you are aware of the consequences of this tax.
3. Form of Distribution. If you are married, your benefit will
automatically be distributed in the form of a joint and survivor annuity, unless
you elect otherwise and your spouse consents in writing to one of the forms
below. If you are unmarried, your benefit will automatically be distributed in
the form of a life annuity, unless you elect any of the other distribution
options listed below.
o In a lump sum payment of cash, or a lump sum payment that includes
an in-kind distribution of all mutual fund shares credited to your
account.
o In substantially equal monthly, quarterly, or annual installment
payments of cash or distributions in kind of the mutual fund shares
credited to your account, over a period of years not to exceed your
life expectancy or the joint and survivor life expectancies of you
and your Beneficiary.
o In the form of an annuity, which is a level payment that you receive
at a fixed interval over a specified period of time. If you are
married, the annuity will automatically take the form of a joint and
survivor annuity, unless you elect otherwise, and your spouse
consents in writing, as described above. A joint and survivor
annuity is an annuity paid over the lives of both you and your
spouse. If your spouse survives you, the annuity payment your spouse
will receive will be at least 50% of the annuity payment you
received or would have received.
o In monthly, quarterly, or annual installment payments of cash, or
the distribution of shares in kind, so that the amount you receive
each Plan Year is equal to the amount in your account at the
beginning of that Plan Year divided by the joint and survivor life
expectancy of you and your Beneficiary for that Plan Year. Your
joint and survivor life expectancy will be recalculated each Plan
Year so that benefit payments will continue through your life and
that of your Beneficiary.
<PAGE>
-7-
4. Direct Rollovers
All benefits paid under the Plan (whether to a participant or
a beneficiary) will be subject to income tax withholding. A payment from the
Plan that is eligible for "rollover" can be taken in two ways. The payment can
be either (1) paid in a "direct rollover;" or (2) paid directly to you. A
rollover is a payment of Plan benefits to an individual retirement arrangement
(IRA) or to another employer plan. This choice will affect the tax you owe.
If you choose a direct rollover:
o the payment will not be taxed in the current year and no
income tax will be withheld;
o the payment will be made directly to the IRA or to another
employer plan that accepts rollovers;
o the payment will be taxed later when it is withdrawn from the
IRA or the employer plan.
If you choose to receive Plan benefits directly:
o You will receive only 80% of the payment because the Plan
administrator is required to withhold 20% of the payment and
send it to the Internal Revenue Service as income tax
withholding to be credited against your taxes;
o The payment will be taxed in the current year unless it is
rolled over. You might be able to use special tax rules that
could reduce the tax that is owed. However, if you receive the
payment before age 59 1/2, an additional 10% tax may have to
be paid.
o Within 60 days of receiving the payment it can be rolled over
by paying it to an IRA or to another employer plan that
accepts rollovers. The amount rolled over will not be taxed
until it is withdrawn from the IRA or employer plan.
o If you want to roll over 100% of the payment to an IRA or an
employer plan, other money must be found to replace the 20%
that was withheld. If only the 80% that is received is rolled
over, you will be taxed on the 20% that was withheld and that
is not rolled over.
<PAGE>
-8-
H. Investment of Plan Assets
All contributions made to the Plan are kept in the Trust. A separate
account, including all of the subaccounts described in the section on
"Participant accounts," is maintained for you within that Trust. The assets of
the Trust are invested as follows:
o You must direct the Plan Administrator to invest the amounts in all of your
subaccounts in specified investments offered by the Sponsor.
I. Withdrawals
You may make the following types of withdrawals from your account:
[CHECK ALL APPLICABLE ITEMS]:
|_| If you have made Elective Deferrals to the Plan, you will be
permitted to withdraw the amounts in your Elective Deferral
subaccount if you have reached age 59 1/2.
|_| In the event of an immediate and heavy financial need due to the
purchase of or imminent foreclosure upon or eviction from a primary
residence, or the educational or medical expenses of you or a member
of your immediate family, you will be permitted to make a hardship
withdrawal of amounts credited to your Elective Deferral subaccount.
Such withdrawals can only be made after exhausting all other
reasonable sources of funds, such as distributions and nontaxable
loans from all of the employer's plans. The amount withdrawn cannot
be greater than the amount of the immediate and heavy financial
need. In addition, your ability to make future elective deferrals
will be limited. If you are married, your spouse must consent to any
withdrawals.
III. CLAIMS PROCEDURE
You or your Beneficiary may file a written claim for benefits under this
Plan with the Plan Administrator at any time. If your claim is denied to any
extent by the Plan Administrator, a written notification must be sent to you
within 90 days. If you choose to appeal the decision, a request for review must
be made in writing to the Plan Administrator within 60 days of receipt of
written notification of the denial. Within 60 days after the appeal is filed, or
within 120 days, if there are special circumstances involved, the Plan
Administrator will issue a written decision.
<PAGE>
-9-
IV. CHANGES TO THE PLAN
A. Amendment of the Plan
The Employer, together with the Sponsor, reserves the right to amend
the Plan at any time. You will be kept informed of any material amendments to
the Plan by updates to this Summary Plan Description.
B. Termination of the Plan
The Employer intends to continue this Plan indefinitely. However,
the Employer reserves the right to terminate the Plan at any time. If a
termination takes place, or if the Employer discontinues making contributions to
the Plan, you will have a 100% vested and nonforfeitable interest in all of the
amounts in your account. These amounts may be distributed to you at that time,
or may be distributed in accordance with the benefit distribution rules.
C. Merger, Consolidation or Transfer of the Plan
In the event of the merger, consolidation or transfer of assets or
liabilities of the Plan to any other plan, your benefits will not be decreased
from what they would have been prior to such an event.
V. GENERAL INFORMATION
Name of Plan: [INSERT NAME OF EMPLOYER] Profit
Sharing/401(k) Plan
Employer: [INSERT NAME, ADDRESS AND TELEPHONE
NUMBER OF EMPLOYER]
Type of Plan: Profit Sharing/401(k) Plan
Type of Administration: Trusteed
Employer's Fiscal Year: [INSERT EMPLOYER'S FISCAL YEAR]
Plan Year End: [INSERT PLAN YEAR END]
Plan Administrator: [INSERT NAME, ADDRESS AND TELEPHONE
NUMBER OF PLAN ADMINISTRATOR]
<PAGE>
-10-
Trustees: [INSERT NAME, TITLE, ADDRESS AND PHONE
NUMBER OF PRINCIPAL PLACE OF BUSINESS OF
EACH TRUSTEE]
Agent for Service of
Legal Process: [INSERT NAME AND ADDRESS OF PERSON
DESIGNATED AS AGENT FOR SERVICE OF LEGAL
PROCESS]
Employer Identification
Number: [INSERT EIN]
Plan Number: [INSERT PLAN NUMBER]
Also, a complete list of the employers and employee organizations sponsoring the
Plan may be obtained by participants and beneficiaries upon written request to
the Plan administrator, and is available for examination by participants and
beneficiaries, as required by Labor Reg. ss.2520.104b-1 and ss.2520.104b-30.
VI. NON-APPLICATION OF PBGC GUARANTEES
Because this Plan is a defined contribution plan, the benefits you will
receive are exempt from and not insured by the Pension Benefit Guaranty
Corporation.
VII. SPECIAL RIGHTS UNDER ERISA
As a participant in the [INSERT NAME OF EMPLOYER] Profit Sharing/401(k)
Plan, you are entitled to certain rights and protections under the Employee
Retirement Income Security Act of 1974 (ERISA). ERISA provides that all Plan
Participants shall be entitled to:
o Examine, without charge, at the Plan Administrator's office and at
other specified locations, all Plan documents, including insurance
contracts, affecting the individual making the request, and copies
of all documents filed by the Plan with the U.S. Department of
Labor, such as detailed annual reports and Plan descriptions.
o Obtain copies of all Plan documents and other Plan information upon
written request to the Plan Administrator. The Plan Administrator
may make a reasonable charge for the copies.
<PAGE>
-11-
o Receive a summary of the Plan's annual financial report. The Plan
Administrator is required by law to furnish each Participant with a
copy of this summary annual report.
o Obtain a statement of the total value of your account under the Plan
and your vested (nonforfeitable) portion of this account. This
statement must be requested in writing and is not required to be
given more than once a year. The Plan will provide the statement
free of charge.
In addition to creating rights for Plan Participants, ERISA imposes
duties upon the people who are responsible for the operation of the Plan. These
people who operate your plan, called "fiduciaries" of the Plan, have a duty to
do so prudently and in the interest of you and other Plan Participants and
Beneficiaries. No one, including your Employer, or any other person, may fire
you or otherwise discriminate against you in any way to prevent you from
obtaining a benefit under this Plan or exercising your rights under ERISA. If
your claim for a benefit is denied in whole or in part you must receive a
written explanation of the reason for the denial. You have the right to have the
Plan review and reconsider your claim.
Under ERISA, there are steps you can take to enforce the above
rights. For instance, if you request materials from the Plan and do not receive
them within 30 days, you may file suit in a federal court. In such a case, the
court may require the Plan Administrator to provide the materials and pay you up
to $100 a day until you receive the materials unless the materials were not sent
because of reasons beyond the control of the Plan Administrator. If you have a
claim for benefits which is denied or ignored, in whole or in part, you may file
suit in a state or federal court. If it should happen that Plan fiduciaries
misuse the Plan's money, or if you are discriminated against for asserting your
rights, you may seek assistance from the U.S. Department of Labor, or you may
file suit in a federal court. The court will decide who should pay court costs
and legal fees. If you lose, the court may order you to pay these costs and
fees, for example, if it finds your claim is frivolous. If you have any
questions about your Plan, you should contact the Plan Administrator. If you
have any questions about this statement or about your rights under ERISA, you
should contact the nearest Area Office of the U.S. Labor-Management Services
Administration, Department of Labor.
<PAGE>
MODEL
SUMMARY PLAN DESCRIPTION OF THE
[INSERT NAME OF EMPLOYER]
PROFIT SHARING/401(k) PLAN
(ADOPTION AGREEMENT #002)
<PAGE>
MODEL
SUMMARY PLAN DESCRIPTION OF THE
[INSERT NAME OF EMPLOYER]
PROFIT SHARING/401(k) PLAN
(ADOPTION AGREEMENT #002)
TABLE OF CONTENTS
Page
----
I. INTRODUCTION ......................................................... 1
II. DESCRIPTION OF PLAN BENEFITS AND REQUIREMENTS ........................ 1
A. Terms With Special Meanings ..................................... 1
B. Participation ................................................... 3
C. Individual Accounts ............................................. 3
D. Contributions ................................................... 4
E. Allocations ..................................................... 6
F. Vesting ......................................................... 9
G. Forfeitures ..................................................... 11
H. Distributions of Benefits ....................................... 11
I. Investment of Plan Assets ....................................... 14
J. Withdrawals ..................................................... 15
K. Loans ........................................................... 16
L. Insurance ....................................................... 16
III. CLAIMS PROCEDURE ..................................................... 17
IV. CHANGES TO THE PLAN .................................................. 17
A. Amendment of the Plan ........................................... 17
B. Termination of the Plan ......................................... 17
C. Merger, Consolidation or Transfer of the Plan ................... 17
V. GENERAL INFORMATION .................................................. 18
VI. NON-APPLICATION OF PBGC GUARANTEES ................................... 18
<PAGE>
-ii-
VII. SPECIAL RIGHTS UNDER ERISA ........................................... 19
<PAGE>
MODEL
SUMMARY PLAN DESCRIPTION OF THE
[INSERT NAME OF EMPLOYER]
PROFIT SHARING/401(k) PLAN
(ADOPTION AGREEMENT #002)
I. INTRODUCTION
[INSERT NAME OF EMPLOYER] (the "Employer") is pleased to be able to
provide you with the [INSERT NAME OF EMPLOYER] Profit Sharing/401(k) Plan (the
"Plan" or the "Profit Sharing/401(k) Plan"). The Plan is effective as of [INSERT
EFFECTIVE DATE].
The Plan is a defined contribution plan, to which the Employer makes
contributions to an account held in your name. With this type of plan, the
retirement benefit you receive will depend on the investment performance of the
amounts that are in your account. The Plan is designed to provide retirement
income to employees who remain with the Employer until retirement and to those
who have a vested interest in their account when they terminate their employment
with the Employer.
Only the main features of the Plan are explained in this Summary Plan
Description. Any questions which are not answered here should be referred to
[INSERT NAME OF DEPARTMENT OR PERSONNEL RESPONSIBLE FOR PARTICIPANT
INFORMATION]. If there is any inconsistency between the Plan as described in
this Summary Plan Description and the Plan document itself, the terms of the
Plan document will govern. Copies of the Plan document and the Trust Agreement
are available for your inspection during regular working hours.
II. DESCRIPTION OF PLAN BENEFITS AND REQUIREMENTS
A. Terms With Special Meanings
Certain words and terms used in this Summary have special meanings.
Many of these terms are defined in this section, while others are explained in
the text of the Summary. To assist you in identifying these terms within the
text, they are capitalized.
1. Beneficiary. Your designated Beneficiary is the person you
name to receive your benefit distribution in the event of your death. If you are
married, you will need written consent from your spouse to name someone other
than your spouse as your Beneficiary.
<PAGE>
-2-
2. Break in Service. A Break in Service occurs if you complete
less than 501 Hours of Service with the Employer during a Plan Year.
3. Compensation. Compensation is the total compensation paid to
you by the Employer during any portion of a Plan Year during which you were a
Plan Participant. If you are self-employed, your Compensation is your earned
income less your deductible contributions to any qualified retirement plans.
Compensation is limited to a maximum dollar amount established under the
Internal Revenue Code.
4. Elective Deferrals. Contributions made to the Plan by the
Employer at the election of the Participant in lieu of cash Compensation and
that are made pursuant to a salary reduction agreement.
5. Hours of Service. Each hour for which you are paid or entitled
to be paid by the Employer. In addition, uncompensated authorized leaves of
absence that do not exceed two years, military leave while your reemployment
rights are protected by law, and absences from work for maternity or paternity
reasons may be credited as Hours of Service for the purpose of determining
whether you had a Break in Service.
6. Matching Contributions. Contributions made to the Plan by the
Employer by reason of the Participant's Elective Deferrals.
7. Participant. A Participant is an employee who has met the
requirements for participating in this Plan, and whose account has been neither
completely forfeited nor distributed.
8. Plan Year. The Plan Year is the 12-month period ending on the
date shown in section V of this Summary.
9. Sponsor. The Sponsor is the organization which has made this Plan
available to the Employer.
10. Trust. The Trust is a fund maintained by the Trustee for the
investment of Plan assets, including the amount in your account.
11. Year of Service. A Year of Service is the applicable 12-month
period during which you complete [INSERT NUMBER OF HOURS] or more Hours of
Service. For eligibility purposes, the applicable 12-month period is your first
year of employment or any Plan Year. For vesting purposes, the applicable
12-month period is the Plan Year.
<PAGE>
-3-
B. Participation
You will be eligible to participate in the Plan after you have met
the following eligibility requirements: [CHECK ALL APPLICABLE ITEMS]
|_| You have reached age [INSERT AGE].
|_| You have completed one Year of Service.
|_| You are not a member of a collective bargaining unit.
|_| You are not a nonresident alien.
The first entry date, or date in which you can first participate in
the Plan if you meet these requirements, is [INSERT EFFECTIVE DATE]. Thereafter,
the entry date(s) will be [INSERT DATES OF THE FIRST DAY OF THE PLAN YEAR AND
THE FIRST DAY OF THE SEVENTH MONTH OF THE PLAN YEAR] of each year.
Once you become a Participant, you will remain a Participant as long
as you do not incur a Break in Service. If you do incur a Break in Service, and
are later reemployed by the Employer, you will be reinstated as a Participant
and any previous Hours of Service will be reinstated as of the date of your
reemployment.
C. Individual Accounts
A separate account will be maintained for you within the Plan. This
account will be further divided into subaccounts, which will be credited with
the different types of contributions that are described in the next section. The
subaccounts that will be maintained for you are as follows:
1. Profit Sharing Contribution Subaccount. This subaccount will
be credited with your share of Employer profit sharing contributions,
forfeitures (if any), distributions from this subaccount, and the earnings and
losses attributable to this subaccount.
2. Nondeductible Voluntary Contribution Subaccount. This
subaccount will be credited with your voluntary employee contributions, any
distributions from this subaccount, and the earnings and losses attributable to
this subaccount.
3. Elective Deferral Subaccount. This subaccount will be credited
with your elective deferral contributions, any distributions from this
subaccount, and the earnings and losses attributable to this subaccount.
<PAGE>
-4-
4. Qualified Nonelective Contribution Subaccount. This subaccount
will be credited with your share of the Employer's qualified nonelective
contributions, any distributions from this subaccount, and the earnings and
losses attributable to this subaccount.
5. Matching Contribution Subaccount. This subaccount will be
credited with your share of the Employer's matching contributions, any
distributions from this subaccount, and the earnings and losses attributable to
this subaccount.
6. Trustee Transfer and Rollover Subaccounts. These subaccounts
will be credited with any rollover contributions or transfer contributions you
may make to the Plan, any distributions from the subaccount, and the earnings
and losses attributable to the subaccount.
D. Contributions
1. Employer Contributions. The Employer will make the following
types of contributions. These contributions will be allocated to the appropriate
subaccounts within your account: [CHECK APPLICABLE ITEMS]
|_| a. Profit Sharing Contributions. The Employer will make
profit sharing contributions to the Plan each Plan Year
in accordance with the following contribution formula:
|_| Contributions will be made in an amount to be determined
each year by the Employer.
|_| Contributions will be made in an amount equal to [INSERT
CONTRIBUTION PERCENTAGE] of each Participant's
Compensation, plus any discretionary amount the Employer
may choose to contribute.
|_| b. Matching Contributions. The Employer will make Matching
Contributions each Plan Year in accordance with the
following contribution formula: [CHECK ONE OF THE
FOLLOWING]
|_| Contributions will be made in an amount equal to [INSERT
CONTRIBUTION PERCENTAGE] of the Elective Deferrals made
by each Participant.
|_| Contributions will be made in an amount equal to [INSERT
CONTRIBUTION PERCENTAGE] of the Elective Deferrals made
by each Participant up to the first [INSERT PERCENTAGE]
of the
<PAGE>
-5-
Participant's Compensation plus [INSERT PERCENTAGE] of
the Participant's Elective Deferrals.
NOTE: These contributions are subject to maximum
limitations as provided in the Plan and the Internal
Revenue Code.
2. Employee Contributions. [CHECK THE FOLLOWING ITEM IF YOUR PLAN
PERMITS VOLUNTARY EMPLOYEE CONTRIBUTIONS]:
|_| a. Voluntary Nondeductible Employee Contributions. To
increase your retirement benefits from this Plan, you
may choose to make voluntary contributions to the Plan
of up to [INSERT MAXIMUM VOLUNTARY EMPLOYEE CONTRIBUTION
PERCENTAGE] of your Compensation. The minimum
contribution you must make if you choose to make a
voluntary contribution is as follows: [CHECK ONE OF THE
FOLLOWING ITEMS]
|_| The minimum voluntary contribution is [INSERT MINIMUM
VOLUNTARY CONTRIBUTION PERCENTAGE]
|_| There is no minimum voluntary contribution.
b. Elective Deferrals. A Participant may elect to defer
[INSERT CONTRIBUTION PERCENTAGE] of his compensation, bonuses or other
nonregular compensation that would otherwise be payable to him. Elective
Deferrals will be made through the direct reduction of compensation in each
payroll period during which the election is in effect. Participants may change
the amounts designated to be deducted in accordance with the Plan provisions.
c. Rollover Contributions and Direct Transfers. If you have
participated in other pension or profit sharing plans, you will be permitted to
make a rollover contribution to the Plan of certain amounts you may receive from
those other plans.
You will also be permitted, with the approval of the Plan
Administrator, to authorize a direct transfer to the Plan of amounts that are
attributable to your participation in other pension or profit sharing plans.
E. Allocations
1. Eligibility for Allocations. Each Plan Year the Employer will
make a profit sharing contribution to the Plan in accordance with the formula
described in the previous section. Your account will be allocated a share of
that contribution
<PAGE>
-6-
|_| Unless you terminate your employment during the Plan Year with
not more than [insert Hours of Service requirement] Hours of
Service and you are not an employee as of the last day of the
Plan Year. (You will receive an allocation, however, if you
die, retire or become disabled during the Plan Year).
Under some circumstances, special minimum allocation rules may result in your
receiving an allocation, even if you do not meet any of the requirements set
forth above.
2. Amount of Allocation. If you are eligible, your account will be
credited with a portion of the profit sharing contribution as follows: [CHECK
ONE OF THE FOLLOWING ITEMS]
[Choose if your plan is not integrated with Social Security]
|_| Your account will be credited with a portion of the profit
sharing contribution that is equal to the ratio of your
Compensation to the Compensation of all Participants for such
year.
For example, if your Compensation for a Plan Year was $10,000
and the total Compensation of all Participants was $100,000,
your account would be credited with $10,000/$100,000 = 1/10 of
the total contribution made by the Employer for that Plan
Year.
[Choose If Your Plan Is Integrated With Social Security]
|_| Profit Sharing Contributions will be allocated to eligible
Participants in four steps as follows:
Step One: Your account will be credited with a portion of the
Profit Sharing Contribution that is equal to the ratio of your
Compensation to the Compensation of all Participants for such
year (just as if the Plan were not integrated with Social
Security), but only up to a maximum of three percent of each
Participant's Compensation.
Step Two: Your account will be credited with a portion of the
balance of the Profit Sharing Contribution (after the
allocation in Step One) that is equal to the ratio of your
Compensation in excess of the Plan's Integration Level to the
Compensation in excess of the Plan's Integration Level of all
Participants for such year, but only up to a maximum of three
percent of any Participant's Compensation in excess of the
Plan's Integration Level.
<PAGE>
-7-
For example, if the Plan's Integration Level were $51,300 and
your Compensation were $61,300, your Compensation in excess of
the Integration Level would be $10,000. If the total
Compensation in excess of the Integration Level of all
Participants were $70,000, your account would be credited with
$10,000/$70,000 = 1/7 of the total allocation made under Step
Two (but only up to a maximum of three percent of your
Compensation in excess of the Plan's Integration Level, or
$300).
Step Three: Your account will be credited with a portion of
the balance of the Profit Sharing Contribution (after the
allocations in Step One and Step Two) that is equal to the
ratio that the sum of your Compensation plus your Compensation
in excess of the Plan's Integration Level bears to the sum of
all Participant's Compensation plus their Compensation in
excess of the Plan's Integration Level for such year, up to a
maximum of the Maximum Profit Sharing Disparity Rate.
The Maximum Profit Sharing Disparity Rate is 2.7 percent if
the Integration Level equals the annual earnings subject to
Social Security (FICA) tax (the taxable wage base). If the
Integration Level is lower (see below), then the Maximum
Profit Sharing Disparity Rate is determined by the following
formula:
If the Integration is:
The Applicable
More Than But Not More Than Percentage Is:
--------- ----------------- --------------
$0 X 2.7%
X */ of TWB 80% of TWB 1.3%
-
80% of TWB Y **/ 2.4%
--
*/ X = the greater of $10,000 or 20% of the Taxable Wage
- Base.
**/ Y = any amount more than 80% of the Taxable Wage Base
-- but less than 100% of the Taxable Wage Base.
"TWB" means the Taxable Wage Base.
For example, if the Maximum Profit Sharing Disparity Rate is
2.7 percent, your Compensation is $61,300, the Plan's
Integration Level is $51,300, the total Compensation of all
Participants is $700,000 and the Compensation of all
<PAGE>
-8-
Participants that is in excess of the Plan's Integration Level
is $70,000, then the ratio applied under Step Three would be:
(61,300 + 10,000)/(700,000 + 70,000) = 9.25%
However, this exceeds the Maximum Profit Sharing Disparity
Rate, so 2.7 percent is applicable instead.
Step Four: Your account will be credited with a portion of the
balance of the Profit Sharing Contribution (after the
allocations in Step One, Step Two and Step Three) that is
equal to the ratio of your Compensation to the Compensation of
all Participants for such year.
The Plan's Integration Level is equal to: [CHECK ONE OF
THE FOLLOWING ITEMS]
|_| The taxable wage base, which is the annual earnings
subject to Social Security (FICA) tax.
|_| A dollar amount equal to [INSERT $ AMOUNT].
|_| A percentage of the taxable wage base equal to _____% of
the annual earnings subject to Social Security (FICA)
tax.
Under some circumstances, special minimum allocation rules may result in your
receiving a larger allocation than you normally would. The amount that can be
allocated to your account in any Plan Year, including forfeitures (if any), is
limited by rules applying to all qualified plans.
F. Vesting
Vesting refers to the nonforfeitable interest you have in each of
your subaccounts. In other words, your vested interest in your account is the
amount you will receive when your account is distributed to you.
You will always have a 100% vested and nonforfeitable interest in the
amounts you have in your:
o Trustee transfer and rollover subaccounts.
o Elective Deferral subaccount.
<PAGE>
-9-
[CHECK THE FOLLOWING ITEM ONLY IF YOUR PLAN PERMITS VOLUNTARY EMPLOYEE
CONTRIBUTIONS]:
|_| Nondeductible voluntary contribution subaccount.
You will earn a vested interest in your profit sharing contribution and
Matching Contribution subaccounts in accordance with the following: [CHECK ONE
OF THE FOLLOWING ITEMS]:
|_| You will always have a 100% vested and nonforfeitable interest in
your profit sharing and Matching Contribution subaccounts.
|_| You will have a 100% vested and nonforfeitable interest in your
profit sharing and Matching Contribution subaccounts in the event of
any of the following:
you reach your retirement date
you die or become disabled
Otherwise, you will earn a vested interest in your profit sharing and
Matching Contribution subaccounts in accordance with the following schedule:
[CHECK ONE OF THE FOLLOWING ITEMS]
|_| Years of Service Vested Percentage
---------------- -----------------
1 year 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 or more years 100%
For example, if you are employed for six years, you will be entitled
to the entire amount in your profit sharing and Matching
Contribution subaccounts. However, if you terminate employment with
the Employer after only four years, even though you return to
employment with the Employer six years later, you will be entitled
to receive only 60% of that amount.
|_| You will be 100% vested after three years of service. If you
terminate employment prior to three years you will not have any
vested amount in your profit sharing and Matching Contribution
subaccounts.
<PAGE>
-10-
|_| Years of Service Vested Percentage
---------------- -----------------
1 year ______%
2 years ______% (not less than 20)
3 years ______% (not less than 40)
4 years ______% (not less than 60)
5 years ______% (not less than 80)
6 or more years ______% (not less than 100)
Any portion of your profit sharing and Matching Contribution subaccounts
in which you do not have a vested interest will be forfeited by you as of the
last day of the Plan Year in which your fifth consecutive Break in Service
occurs.
G. Forfeitures [CHECK ONE OF THE FOLLOWING ITEMS]:
|_| You have a 100% vested and nonforfeitable interest in the amounts in
your account at all times. You will therefore not be subject to
forfeitures.
|_| Forfeitures occur when you terminate employment before becoming
fully vested in your account, as explained in the section on
"Vesting." Effective for the first Plan Year beginning after 1984,
any portion of your account that is not vested will be forfeited as
of the last day of the Plan Year in which your fifth consecutive
Break in Service occurs. Forfeited amounts will not be reinstated,
even if you return to service with the Employer. Such forfeitures
will be allocated among the profit sharing contributions.
H. Distribution of Benefits.
1. Eligibility for Distribution. You will be entitled to receive a
distribution of the vested amounts in your account upon occurrence of any of the
following:
o Your termination of employment with the Employer for any
reason.
o Your total and permanent disability.
o Your death.
o Termination of the Plan.
o Your attainment of normal retirement age, which is: [CHECK ONE
OF THE FOLLOWING ITEMS]
<PAGE>
-11-
|_| Age [INSERT NORMAL RETIREMENT AGE].
|_| Age [INSERT NORMAL RETIREMENT AGE] or the [INSERT ANNIVERSARY
DATE] of the day you commenced participation in the Plan.
[CHECK THE FOLLOWING IF YOUR PLAN PERMITS EARLY RETIREMENT]:
|_| If you elect early retirement, attainment of your early retirement
date, which is the first day of the month coincident with or next
following the date you reach age [INSERT EARLY RETIREMENT AGE] and
complete [INSERT NUMBER OF YEARS] Years of Service.
2. Timing of Distributions. You will begin receiving benefit
distributions in accordance with the following:
o Generally, benefit distributions will commence not later than
60 days after the end of the Plan Year in which you become
eligible to receive benefits.
o In the event of your death, your spouse, if you are married,
will generally be entitled to receive your benefit
distribution. If you are unmarried, or if your spouse has
given written consent, your designated Beneficiary will
receive your benefit distribution. If you have no spouse or
designated Beneficiary, your benefit distribution will go to
your estate.
o If you so elect, you may defer commencement of the
distribution of your benefit beyond the date you first become
eligible to receive that distribution, to a date which you may
specify. The date you specify must not be later than the April
1 following the close of your taxable year in which you attain
age 70 1/2.
If you attained age 70 1/2 before January 1, 1988, special rules apply to
your distributions.
If you wish to receive benefit distributions before attaining age 59 1/2,
you may be subject to a penalty tax, and you must notify the Plan Administrator
in writing that you are aware of the consequences of this tax.
3. Form of Distribution. If you are married, your benefit will
automatically be distributed in the form of a joint and survivor annuity, unless
you elect otherwise and your spouse consents in writing to one of the forms
below. If you are unmarried, your benefit will automatically be distributed in
the form of a life annuity, unless you elect any of the other distribution
options listed below.
<PAGE>
-12-
o In a lump sum payment of cash, or a lump sum payment that
includes an in-kind distribution of all mutual fund shares
credited to your account.
o In substantially equal monthly, quarterly, or annual
installment payments of cash or distributions in kind of the
mutual fund shares credited to your account, over a period of
years not to exceed your life expectancy or the joint and
survivor life expectancies of you and your Beneficiary.
o In the form of an annuity, which is a level payment that you
receive at a fixed interval over a specified period of time.
If you are married, the annuity will automatically take the
form of a joint and survivor annuity, unless you elect
otherwise, and your spouse consents in writing, as described
above. A joint and survivor annuity is an annuity paid over
the lives of both you and your spouse. If your spouse survives
you, the annuity payment your spouse will receive will be at
least 50% of the annuity payment you received or would have
received.
o In monthly, quarterly, or annual installment payments of cash,
or the distribution of shares in kind, so that the amount you
receive each Plan Year is equal to the amount in your account
at the beginning of that Plan Year divided by the joint and
survivor life expectancy of you and your Beneficiary for that
Plan Year. Your joint and survivor life expectancy will be
recalculated each Plan Year so that benefit payments will
continue through your life and that of your Beneficiary.
4. Direct Rollovers
All benefits paid under the Plan (whether to a participant or
a beneficiary) will be subject to income tax withholding. A payment from the
Plan that is eligible for "rollover" can be taken in two ways. The payment can
be either (1) paid in a "direct rollover;" or (2) paid directly to you. A
rollover is a payment of Plan benefits to an individual retirement arrangement
(IRA) or to another employer plan. This choice will affect the tax you owe.
If you choose a direct rollover:
o the payment will not be taxed in the current year and no
income tax will be withheld;
o the payment will be made directly to the IRA or to another
employer plan that accepts rollovers;
<PAGE>
-13-
o the payment will be taxed later when it is withdrawn from the
IRA or the employer plan.
If you choose to receive Plan benefits directly:
o You will receive only 80% of the payment because the Plan
administrator is required to withhold 20% of the payment and
send it to the Internal Revenue Service as income tax
withholding to be credited against your taxes;
o The payment will be taxed in the current year unless it is
rolled over. You might be able to use special tax rules that
could reduce the tax that is owed. However, if you receive the
payment before age 59 1/2, an additional 10% tax may have to
be paid.
o Within 60 days of receiving the payment it can be rolled over
by paying it to an IRA or to another employer plan that
accepts rollovers. The amount rolled over will not be taxed
until it is withdrawn from the IRA or employer plan.
o If you want to roll over 100% of the payment to an IRA or an
employer plan, other money must be found to replace the 20%
that was withheld. If only the 80% that is received is rolled
over, you will be taxed on the 20% that was withheld and that
is not rolled over.
I. Investment of Plan Assets
All contributions made to the Plan are kept in the Trust. A separate
account, including all of the subaccounts described in the section on
"Participant accounts," is maintained for you within that Trust. The assets of
the Trust are invested as follows: [CHECK ONE OF THE FOLLOWING ITEMS]
|_| All of the assets of the Trust are invested in shares or other
investments offered by the Sponsor.
|_| [INSERT PERCENTAGE] of the assets of the Trust are invested in
shares or other investments offered by the Sponsor. The remaining
assets are invested in such other investments as are acceptable to
the Trustee.
|_| You [INSERT "may" or "must"] direct the Plan Administrator to invest
the amounts in the following subaccount in specified investments
offered by the Sponsor: [CHECK THE APPLICABLE ITEMS]:
<PAGE>
-14-
|_| The amounts in your nondeductible voluntary contribution
subaccount.
|_| The amounts in your elective deferral subaccount.
|_| The amounts in your profit sharing contribution subaccount.
|_| The amounts in your trustee transfer and rollover subaccounts.
|_| The amounts in your matching contribution subaccount.
|_| The amounts in your qualified nonelective contribution
subaccount.
J. Withdrawals
You may make the following types of withdrawals from your account:
[CHECK ALL APPLICABLE ITEMS]:
|_| If you have made voluntary employee contributions to the Plan, you
will be permitted to withdraw the amounts in your nondeductible
voluntary contribution subaccount. If you are married, your spouse
must consent to the withdrawal.
|_| If you have made Elective Deferrals to the Plan, you will be
permitted to withdraw the amounts in your Elective Deferral
subaccount if you have reached age 59 1/2.
|_| In the event of an immediate and heavy financial need due to the
purchase of or imminent foreclosure upon or eviction from a primary
resident, or the educational or medical expenses of you or a member
of your immediately family, you will be permitted to make a hardship
withdrawal of amounts credited to your Elective Deferral subaccount.
Such withdrawals can only be made after prior withdrawal of all
amounts in your nondeductible voluntary contribution subaccount and after
exhausting all other reasonable sources of funds, such as distributions and
nontaxable loans, from all of the employer's plans. The amount withdrawn cannot
be greater than the amount of the immediate and heavy financial need. In
addition, your ability to make future elective deferrals will be limited. If you
are married, your spouse must consent to any withdrawals.
[CHECK THE FOLLOWING ITEM IF PLAN LOANS ARE PERMITTED]
<PAGE>
-15-
|_| K. Loans
The Plan contains provisions that permit you to borrow from the Plan
part of your vested interest in your account. Such a loan will not be made,
however, if the total of all outstanding loans to you from all pension and
profit sharing plans of the Employer exceed the lesser of $50,000 (taking into
account the highest principal balance of any loan outstanding at any time during
the preceding 12 months) or one-half of the value of your vested interest in
your account.
The Plan Administrator will set the terms of all loans. The maximum
payment term for any loan will generally be five years.
[CHECK THE FOLLOWING ITEM IF YOUR PLAN PERMITS PARTICIPANTS TO PURCHASE LIFE
INSURANCE]:
|_| L. Insurance
The Plan contains provisions permitting you to designate a portion
of the amounts in your profit sharing contribution subaccount and matching
contribution subaccount to purchase life insurance. The portion of your profit
sharing contribution and matching contribution subaccounts which may be used to
purchase life insurance is equal to [INSERT PERCENTAGE] of that subaccount.
III. CLAIMS PROCEDURE
You or your Beneficiary may file a written claim for benefits under this
Plan with the Plan Administrator at any time. If your claim is denied to any
extent by the Plan Administrator, a written notification must be sent to you
within 90 days. If you choose to appeal the decision, a request for review must
be made in writing to the Plan Administrator within 60 days of receipt of
written notification of the denial. Within 60 days after the appeal is filed, or
within 120 days, if there are special circumstances involved, the Plan
Administrator will issue a written decision.
IV. CHANGES TO THE PLAN
A. Amendment of the Plan
The Employer, together with the Sponsor, reserves the right to amend
the Plan at any time. You will be kept informed of any material amendments to
the Plan by updates to this Summary Plan Description.
<PAGE>
-16-
B. Termination of the Plan
The Employer intends to continue this Plan indefinitely. However,
the Employer reserves the right to terminate the Plan at any time. If a
termination takes place, or if the Employer discontinues making contributions to
the Plan, you will have a 100% vested and nonforfeitable interest in all of the
amounts in your account. These amounts may be distributed to you at that time,
or may be distributed in accordance with the benefit distribution rules.
C. Merger, Consolidation or Transfer of the Plan
In the event of the merger, consolidation or transfer of assets or
liabilities of the Plan to any other plan, your benefits will not be decreased
from what they would have been prior to such an event.
V. GENERAL INFORMATION
Name of Plan: [INSERT NAME OF EMPLOYER] Profit Sharing/401(k)
Plan
Employer: [INSERT NAME, ADDRESS AND TELEPHONE NUMBER OF
EMPLOYER]
Type of Plan: Profit Sharing/401(k) Plan
Type of Administration: Trusteed
Employer's Fiscal Year: [INSERT EMPLOYER'S FISCAL YEAR]
Plan Year End: [INSERT PLAN YEAR END]
Plan Administrator: [INSERT NAME, ADDRESS AND TELEPHONE NUMBER OF
PLAN ADMINISTRATOR]
Trustees: [INSERT NAME, TITLE, ADDRESS AND PHONE NUMBER
OF PRINCIPAL PLACE OF BUSINESS OF EACH TRUSTEE]
<PAGE>
-17-
Agent for Service of
Legal Process: [INSERT NAME AND ADDRESS OF PERSON DESIGNATED
AS AGENT FOR SERVICE OF LEGAL PROCESS]
Employer Identification
Number: [INSERT EIN]
Plan Number: [INSERT PLAN NUMBER]
Also, a complete list of the employers and employee organizations sponsoring the
Plan may be obtained by participants and beneficiaries upon written request to
the Plan administrator, and is available for examination by participants and
beneficiaries, as required by Labor Reg. ss.2520.104b-1 and ss.2520.104b-30.
VI. NON-APPLICATION OF PBGC GUARANTEES
Because this Plan is a defined contribution plan, the benefits you will
receive are exempt from and not insured by the Pension Benefit Guaranty
Corporation.
VII. SPECIAL RIGHTS UNDER ERISA
As a participant in the [INSERT NAME OF EMPLOYER] Profit Sharing/401(k)
Plan, you are entitled to certain rights and protections under the Employee
Retirement Income Security Act of 1974 (ERISA). ERISA provides that all Plan
Participants shall be entitled to:
o Examine, without charge, at the Plan Administrator's office and at other
specified locations, all Plan documents, including insurance contracts,
affecting the individual making the request, and copies of all documents
filed by the Plan with the U.S. Department of Labor, such as detailed
annual reports and Plan descriptions.
o Obtain copies of all Plan documents and other Plan information upon
written request to the Plan Administrator. The Plan Administrator may make
a reasonable charge for the copies.
o Receive a summary of the Plan's annual financial report. The Plan
Administrator is required by law to furnish each Participant with a copy
of this summary annual report.
<PAGE>
-18-
o Obtain a statement of the total value of your account under the Plan and
your vested (nonforfeitable) portion of this account. This statement must
be requested in writing and is not required to be given more than once a
year. The Plan will provide the statement free of charge.
In addition to creating rights for Plan Participants, ERISA imposes duties
upon the people who are responsible for the operation of the Plan. These people
who operate your plan, called "fiduciaries" of the Plan, have a duty to do so
prudently and in the interest of you and other Plan Participants and
Beneficiaries. No one, including your Employer, or any other person, may fire
you or otherwise discriminate against you in any way to prevent you from
obtaining a benefit under this Plan or exercising your rights under ERISA. If
your claim for a benefit is denied in whole or in part you must receive a
written explanation of the reason for the denial. You have the right to have the
Plan review and reconsider your claim.
Under ERISA, there are steps you can take to enforce the above rights. For
instance, if you request materials from the Plan and do not receive them within
30 days, you may file suit in a federal court. In such a case, the court may
require the Plan Administrator to provide the materials and pay you up to $100 a
day until you receive the materials unless the materials were not sent because
of reasons beyond the control of the Plan Administrator. If you have a claim for
benefits which is denied or ignored, in whole or in part, you may file suit in a
state or federal court. If it should happen that Plan fiduciaries misuse the
Plan's money, or if you are discriminated against for asserting your rights, you
may seek assistance from the U.S. Department of Labor, or you may file suit in a
federal court. The court will decide who should pay court costs and legal fees.
If you lose, the court may order you to pay these costs and fees, for example,
if it finds your claim is frivolous. If you have any questions about your Plan,
you should contact the Plan Administrator. If you have any questions about this
statement or about your rights under ERISA, you should contact the nearest Area
Office of the U.S. Labor-Management Services Administration, Department of
Labor.
INVESTMENT COMPANY INSTITUTE
PROTOTYPE PROFIT SHARING/401(k) TRUST
Revised February 1990
<PAGE>
INVESTMENT COMPANY INSTITUTE
PROTOTYPE PROFIT SHARING/401(k) TRUST
TABLE OF CONTENTS
Page
----
ARTICLE I ACCOUNTS
1.1 Establishing Accounts....................................... 1
1.2 Charges Against Accounts.................................... 1
1.3 Prospectus to be Provided................................... 2
ARTICLE II RECEIPT OF CONTRIBUTIONS.................................... 2
ARTICLE III INVESTMENT POWERS OF THE TRUSTEE
3.1 Investment of Account Assets................................ 3
3.2 Directed Investments........................................ 3
3.3 General Investment Powers................................... 5
3.4 Investment in Combined Funds................................ 5
3.5 Other Powers of the Trustee................................. 6
3.6 General Powers.............................................. 7
3.7 Valuation of Trust.......................................... 7
3.8 Bonding..................................................... 7
3.9 Duties not Assigned......................................... 7
ARTICLE IV DISTRIBUTIONS FROM A PARTICIPANT'S ACCOUNT.................. 7
ARTICLE V REPORTS OF THE TRUSTEE AND THE PLAN
ADMINISTRATOR............................................ 8
ARTICLE VI TRUSTEE'S FEES AND EXPENSES OF THE TRUST.................... 8
ARTICLE VII DUTIES OF THE EMPLOYER AND THE PLAN ADMINISTRATOR
7.1 Information and Data to be Furnished the Trustee............ 9
7.2 Limitation of Duties........................................ 9
ARTICLE VIII LIABILITY OF THE TRUST
<PAGE>
-ii-
8.1 Trustee's Liability......................................... 9
ARTICLE IX DELEGATION OF POWERS
9.1 Delegation by the Trustee...................................11
9.2 Delegation with Employer Approval...........................12
ARTICLE X AMENDMENT...................................................12
ARTICLE XI RESIGNATION OR REMOVAL OF TRUSTEE...........................12
ARTICLE XII TERMINATION OF THE TRUST
12.1 Term of the Trust...........................................13
12.2 Termination by the Trustee..................................13
ARTICLE XIII MISCELLANEOUS
13.1 No Diversion of Assets......................................14
13.2 Notices.....................................................14
13.3 Multiple Trustees...........................................14
13.4 Conflict with Plan..........................................14
13.5 Applicable Law..............................................14
13.6 Returned Contributions......................................15
13.7 General Undertaking.........................................15
13.8 Invalidity of Certain Provision.............................15
13.9 Counterpart Originals.......................................15
<PAGE>
TRUST AGREEMENT
The Employer has established a Plan for the benefit of Participants
therein pursuant to section 401 of the Internal Revenue Code of 1986. As part of
the Plan, the Employer has requested such person or persons (individual,
corporate, or other entity), as may be designated in the Adoption Agreement, to
serve as Trustee pursuant to the Trust established for the investment of
contributions under the Plan upon the terms and conditions set forth in this
Trust Agreement.
Unless the context of this Trust Agreement clearly indicates otherwise,
the terms defined in ARTICLE 2 of the Plan entered into by the Employer, of
which this Trust Agreement forms a part, shall, when used herein, have the same
meaning as in the Plan.
ARTICLE I
ACCOUNTS
1.1 Establishing Accounts. The Trustee shall open and maintain a Trust
account for the Plan and, as part thereof, Participants' Accounts for such
individuals as the Plan Administrator shall, from time to time, give written
notice to the Trustee as being Participants in the Plan. The Trustee shall also
open and maintain such other subaccounts as may be appropriate or desirable to
aid in the administration of the Plan. Separate subaccounts shall be maintained
for each Participant and shall be credited with the contributions made by the
Employer and with forfeitures allocated to each such Participant pursuant to the
Plan (and all earnings thereon). If nondeductible voluntary contributions by
Participants are permitted by the Plan, the Trustee shall open and maintain as a
part of the Trust a separate subaccount for each Participant who makes such
nondeductible voluntary contributions, each such subaccount to be credited with
the Participant's voluntary contributions (and all earnings attributable to such
contributions). If trustee transfers or rollover contributions from another
qualified plan are received, the Trustee shall open and maintain a separate
rollover subaccount for each Participant, each such subaccount to be credited
with the Participant's trustee transfers or rollover contributions (and all
earnings attributable to such contributions).
1.2 Charges Against Accounts. Upon receipt of written instructions from
the Administrator, the Trustee shall charge the appropriate subaccount of the
Participant for any withdrawals or distributions made under the Plan and any
forfeiture, which may be required under the Plan, of unvested interests
attributable to Employer Contributions. The Plan Administrator will give written
instructions to the Trustee specifying the manner in which Employer
Contributions and any forfeiture of the nonvested portion of Accounts, as
allocated by the Plan
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Administrator in accordance with the provisions of the Plan, are to be credited
to the various Accounts maintained for Participants.
1.3 Prospectus to be Provided. The Plan Administrator shall ensure that a
Participant who makes a nondeductible voluntary contribution has previously
received or receives a copy of the then current prospectus relating to the
Shares. Delivery of such a nondeductible voluntary contribution, pursuant to the
provisions of the Plan by the Plan Administrator to the Trustee shall entitle
the Trustee to assume that the Participant has received such a prospectus.
ARTICLE II
RECEIPT OF CONTRIBUTIONS
The Trustee shall accept and hold in the Trust contributions made by the
Employer and Participants under the Plan. The Administrator shall give written
instructions to the Trustee specifying the Participants' Accounts to which
contributions are to be credited, the amount of each such credit which is
attributable to Employer Contributions, and the amount, if any, which is
attributable to the Participant's nondeductible voluntary contributions. If
written instructions are not received by the Trustee, or if such instructions
are received but are deemed by the Trustee to be unclear, upon notice to the
Employer, the Trustee may elect to hold all or part of any such contribution in
cash, without liability for rising security prices or distributions made,
pending receipt by it from the Plan Administrator of written instructions or
other clarification, or the Trustee may return the contribution to the Employer.
If any contributions or earnings are less than any minimum which the then
current prospectus for the Shares requires, the Trustee may hold the specified
portion of contributions or earnings in cash, without interest, until such time
as the proper amount has been contributed or earned so that the investment in
the Shares required under the Plan may be made. All payments to the Trust shall
be remitted in U.S. currency or other property to the Trustee at the address
specified by it. Any payments not in U.S. currency may, in the sole discretion
of the Trustee, be refused.
ARTICLE III
INVESTMENT POWERS OF THE TRUSTEE
3.1 Investment of Account Assets. The Trustee shall invest the amount of
each contribution made hereunder and all earnings on the Trust in full and
fractional Shares in accordance with the current prospectus for such Shares, in
such amounts and proportions as shall from time to time be designated by the
Plan Administrator on forms provided by the Sponsor, and shall credit such
Shares to the Accounts of each Participant on whose behalf or by whom the
contributions are made and any forfeitures are allocated. All dividends and
capital gain distributions received on the Shares held by the Trustee in each
Account, shall, if received in cash,
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be reinvested in such Shares in accordance with the current prospectus for such
Shares and shall in any event be credited to such Account. If any distribution
on Shares may be received at the election of the shareholder in additional
Shares, the Trustee shall so elect. The Trustee shall deliver, or cause to be
executed and delivered, to the Plan Administrator, all notices, prospectuses,
financial statements, proxies, and proxy soliciting materials relating to Shares
held hereunder. The Trustee shall not vote any of the Shares held hereunder,
except in accordance with the written instructions of the Plan Administrator. If
no such written instructions are received, such Shares shall not be voted. The
obligations of the Trustee hereunder may be delegated by it as provided in
sections 9.1 and 9.2.
The Trustee shall sell Shares and purchase Shares to accomplish any change
in investments desired by the Employer as indicated on any amended Adoption
Agreement or other instructions in accordance with the terms of the Plan.
Notwithstanding the above, if periodic payments are being made to a
Participant pursuant to ARTICLE IV hereof, any dividends received on Shares held
in such Participant's Account, which dividends are invested at an offering price
which includes a sales charge, need not be invested in additional Shares but may
be held for distribution to the Participant in periodic payments. In such
instances, the Trustee may make any election necessary to receive any such
dividends in cash.
3.2 Directed Investments. When so instructed by the Plan Administrator,
the Trustee shall invest all or any portion of the individual Account of any
Participant in accordance with the direction of the Employer or such Participant
in lieu of participation in the general assets of the Trust. Such directed
investments shall be accounted for separately for each Participant. Except as
otherwise provided herein, the Trustee shall not have any discretion, and is
specifically prohibited from exercising any control or discretion, with respect
to such directed investments. Each Participant who directs the investment of his
Account shall be solely and absolutely responsible for the investment or
reinvestment of all directed investment assets held on his behalf in Trust, and,
except as otherwise provided herein, the Trustee shall not question any such
direction, review any securities or other such assets, or make suggestions with
respect to the investment, retention or disposition of any such assets; provided
that:
(a) If any contributions are transmitted to or otherwise received
or held as directed investment assets without investment directions from the
Participant, the Trustee may retain such amounts in a noninterest-bearing
savings account in a federally insured institution for the benefit of the
Participant.
(b) The Trustee may establish such reasonable rules and
regulations, applied on a uniform basis to all Participants, with respect to the
requirements for, and the form and manner of, effectuating any transaction with
respect to directed investment assets including, without
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limitation, minimum amounts, rules applicable to conversion of directed
investments into general assets of the Trust, and appropriate adjustments (based
on fair market values) to Accounts to reflect any such conversion, as the
Trustee shall determine to be consistent with the purposes of the Plan. Any such
rules and regulations shall be binding upon all persons interested in the Trust.
(c) The Trustee may establish a procedure for the periodic review of
directed investment assets to determine, in light of the facts and circumstances
reasonably known to it, whether any actual or proposed investment of such assets
constitutes or would constitute a prohibited transaction as that term is defined
in sections 406-408 of ERISA and the corresponding provisions of the Code. If
the Trustee determines that any investment constitutes or would constitute a
prohibited transaction, the Trustee shall promptly communicate this
determination to the Plan Administrator, and shall recommend that the investment
be prevented or disposed of, as the case may be, and may recommend any other
action authorized or required by law, to prevent or remedy the transaction.
(d) In accordance with and pursuant to uniform and nondiscriminatory
rules established under and in accordance with the Plan, the Trustee may deny
the Plan Administrator's application to allow a directed investment proposed by
a Participant.
(e) Notwithstanding anything herein to the contrary, in no event
shall the Trustee engage in any transaction that would be prohibited under
ERISA.
3.3 General Investment Powers. Subject to any investment limitations or
minimum requirements for investments in Shares imposed by the Sponsor, and
subject to investment instructions given by the Employer, the Trustee shall be
authorized and empowered to invest and reinvest all or any part of the Trust in
any property, real or personal or mixed, including, but not being limited to,
capital or common stock (whether voting or nonvoting or whether or not currently
paying a dividend), preferred or preference stock (whether voting or nonvoting
or whether or not currently paying a dividend), Shares of regulated investment
companies, convertible securities, corporate and governmental obligations,
leaseholds, ground rents, mortgages, and other interests in realty, trust, and
participation certificates, oil, mineral or gas properties, royalty interests or
rights, including equipment pertaining thereto, notes and other evidences of
indebtedness or ownership, secured or unsecured, contracts, choses in action,
and warrants, and other instruments entitling the owner thereof to subscribe to
or purchase any of the aforesaid. Subject to any investment limitations or
requirements imposed by the Sponsor relating to the type of permissible
investments in the Trust or the minimum percentage of Trust assets to be
invested in Shares, and subject to the provisions of ARTICLE VIII hereof, in
making and retaining such investments and reinvestments pursuant hereto, the
Trustee shall not be bound as to the character of any investments by any
statute, rule of court, or custom governing the investment of Trust funds.
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3.4 Investment in Combined Funds. If the Trustee is a banking institution,
subject to any investment limitations or minimum requirements for investment in
Shares imposed by the Sponsor, and subject to investment instructions given by
the Employer, it may, subject to the election of the Sponsor or the Employer,
cause funds of this Trust to be invested in its commingled funds for qualified
employee benefit plan trusts and such commingled funds are hereby adopted and
made a part of the Plan of which this Trust is a part, and any funds of this
Trust invested in any such commingled funds shall be subject to all the
provisions thereof, as the same may be amended from time to time.
3.5 Other Powers of the Trustee. The Trustee is authorized and empowered
with respect to the Trust:
(a) Subject to any investment limitations or minimum requirements
for investment in Shares imposed by the Sponsor, and subject to investment
instructions given by the Employer, to sell, exchange, convey, transfer, or
otherwise dispose of, either at public or private sale, any property, real or
personal or mixed, at any time held by it, for such consideration and on such
terms and conditions as to credit or otherwise as the Trustee may deem best.
(b) Subject to the provisions of section 3.1, to vote in person or
by proxy any stocks, bonds, or other securities held by it; to exercise any
options appurtenant to any stocks, bonds, or other securities, or to exercise
any rights to subscribe for additional stocks, bonds, or other securities, and
to make any and all necessary payments therefor, to join in, or to dissent from,
and to oppose, the reorganizations, consolidation, liquidation, sale, or merger
of corporations, or properties in which it may be interested as Trustee, upon
such terms and conditions as it may deem wise.
(c) To make, execute, acknowledge, and deliver any and all documents
of transfer and conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted.
(d) To register any investment held in the Trust in the name of the
Trust or in the name of a nominee, and to hold any investment in bearer form,
but the books and records of the Trustee shall at all times show that all such
investments are part of the Trust.
(e) To employ suitable agents and counsel (who may also be agents
and/or counsel for the Employer or the Sponsor) and to pay their reasonable
expenses and compensation.
(f) To borrow or raise monies for the purpose of the Trust from any
source and, for any sum so borrowed to issue its promissory note as Trustee and
to secure the repayment thereof by pledging all or any part of the Trust fund,
but nothing herein contained shall obligate the Trustee to render itself liable
individually for the amount of any such borrowing; and no
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person loaning money to the Trustee shall be bound to see to the application of
money loaned or to inquire into the validity or propriety of any such borrowing.
Each and all of the foregoing powers may be exercised without a court
order or approval. No one dealing with the Trustee need inquire concerning the
validity or propriety of anything that is done or need see to the application of
any money paid or property transferred to or upon the order of the Trustee.
3.6 General Powers. The Trustee shall have all of the powers necessary or
desirable to do all acts, take all such proceedings, and exercise all such
rights and privileges, whether or not expressly authorized herein, which it may
deem necessary or proper for the administration and protection of the property
of the Trust and to accomplish any action provided for in the Plan.
3.7 Valuation of Trust. The Trustee, as of the Valuation Date, and at such
other time or times as it determines, shall determine the net worth of the
assets of the Trust. In determining such net worth, the assets of the Trust
shall be evaluated at their fair market value and all expenses shall be
deducted. The Trustee may adopt such methods of valuation as it deems advisable.
3.8 Bonding. Except to the extent otherwise required by law, the Trustee
shall not be required to obtain any bonds in connection with its duties
hereunder. The cost of any bond obtained may be charged as an expense of the
Trust, but if not so charged, shall be paid by the Employer.
3.9 Duties not Assigned. The duties of the Trustee with respect to the
Plan are limited to those assumed by the Trustee by the terms of this Trust. The
Trustee shall not be deemed, by virtue hereof, to be the administrator or
sponsor of the Plan, and shall not be responsible for filing reports, returns or
disclosures with any government agency except as may otherwise be required by
its duties as Trustee under applicable law.
ARTICLE IV
DISTRIBUTIONS FROM A PARTICIPANT'S ACCOUNT
Distributions from the Trust shall be made by the Trustee in accordance
with proper written directions of the Plan Administrator in accordance with the
provisions of section 15.2 of the Plan, and the Plan Administrator shall have
the sole responsibility for determining that the directions given conform to
provisions of the Plan and applicable law, including (without limitation)
responsibility for calculating the vested interests of the Participant, for
calculating the amounts payable to a Participant pursuant to ARTICLE 11 of the
Plan, and for determining the proper person to whom benefits are payable under
the Plan. Except to the extent otherwise
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provided in the Plan, the interest of Participants and Beneficiaries in the
Trust and in the net earnings and profits thereof may not be assigned or used by
a Participant or Beneficiary as collateral for a loan and shall not be subject
to garnishment, attachment, levy or execution of any kind for the debts or
defaults of the Trustee or of any person, natural or legal, having interest in
the Trust.
ARTICLE V
REPORTS OF THE TRUSTEE AND THE PLAN ADMINISTRATOR
The Trustee shall keep accurate and detailed records of all receipts,
investments, disbursements, and other transactions required to be performed
hereunder with respect to the Trust. The Trustee shall file with the Plan
Administrator a written report or reports reflecting the receipts,
disbursements, and other transactions effected by it with respect to the Trust
during such Plan Year and the assets and liabilities of the Trust at the close
of the Plan Year. Such report or reports shall be open to inspection by any
Participant for a period of one hundred eighty (180) days immediately following
the date on which it is filed with the Plan Administrator. Except as otherwise
prescribed by ERISA, upon the expiration of such one hundred eighty (180) day
period, the Trustee shall be forever released and discharged from all liability
and accountability to anyone with respect to its acts, transactions, duties,
obligations, or responsibilities as shown in or reflected by such report, except
with respect to any such acts or transactions as to which the Plan Administrator
shall have filed written objections with the Trustee within such one hundred
eighty (180) day period, and except for willful misconduct or lack of good faith
on the part of the Trustee.
ARTICLE VI
TRUSTEE'S FEES AND EXPENSES OF THE TRUST
The Trustee's fees for performing its duties hereunder shall be such
reasonable amounts as shall be respectively established by it from time to time.
The Trustee shall furnish the Employer with its current schedule of fees and
shall give written notice to the Employer whenever its fees are changed or
revised. Such fees, any taxes of any kind whatsoever which may be levied or
assessed upon or in respect of the Trust, to the extent incurred by the Trustee
and any and all expenses incurred by the Trustee in the performance of its
duties, including fees for legal services rendered to the Trustee, shall, unless
paid by the Employer, be paid from the Trust in the manner provided in the Plan.
Unless paid by the Employer, all fees of the Trustee and taxes and other
expenses charged to a Participant's Account may be collected by the Trustee from
the amount of any contribution to
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be credited or distribution to be charged to such Account or may be paid by
redeeming or selling assets credited to such Account.
ARTICLE VII
DUTIES OF THE EMPLOYER AND THE PLAN ADMINISTRATOR
7.1 Information and Data to be Furnished the Trustee. In addition to
making the contributions called for in ARTICLE II hereof, the Employer, through
the Plan Administrator, agrees to furnish the Trustee with such information and
data relative to the Plan as is necessary for the proper administration of the
Trust established hereunder.
7.2 Limitation of Duties. Neither the Employer nor any of its officers,
directors, or partners, nor the Plan Administrator shall have any duties or
obligations with respect to this Trust Agreement, except those expressly set
forth herein and in the Plan.
ARTICLE VII
LIABILITY OF THE TRUST
8.1 Trustee's Liability.
(a) The Employer shall indemnify and save the Trustee (including its
affiliates, representatives and agents) harmless from and against any liability,
cost or other expense, including, but not limited to, the payment of attorneys'
fees that the Trustee may incur in connection with this Trust Agreement or the
Plan unless such liability, cost or other expense (whether direct or indirect)
arises from the Trustee's own willful misconduct or gross negligence. The
Employer recognizes that a burden of litigation may be imposed upon the Trustee
as a result of some act or transaction for which it has no responsibility or
over which it has no control under this Trust Agreement. Therefore, the Employer
agrees to indemnify and hold harmless and, if requested, defend the Trustee
(including its affiliates, representatives and agents) from any expenses
(including counsel fees, liabilities, claims, damages, actions, suits or other
charges) incurred by the Trustee in prosecuting or defending against any such
litigation.
(b) The Trustee shall not be liable for, and the Employer will
indemnify and hold harmless the Trustee (including its affiliates,
representatives and agents) from and against all liability or expense (including
counsel fees) because of (i) any investment action taken or omitted by the
Trustee in accordance with any direction of the Employer or a Participant, or
investment inaction in the absence of directions from the Employer or a
Participant or (ii) any investment action taken by the Trustee pursuant to an
order to purchase or sell securities placed by the Employer or a Participant
directly with a broker, dealer or issuer. It is understood that although,
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when the Trustee is subject to the direction of the Employer or a Participant
the Trustee will perform certain ministerial duties with respect to the portion
of the Fund subject to such direction (the "Directed Fund"), such duties do not
involve the exercise of any discretionary authority or other authority to manage
and control assets of the Directed Fund and will be performed in the normal
course of business by officers and employees of the Trustee or its affiliates,
representatives or agents who may be unfamiliar with investment management. It
is agreed that the Trustee is not undertaking any duty or obligation, express or
implied, to review, and will not be deemed to have any knowledge of or
responsibility with respect to, any transaction involving the investment of the
Directed Fund as a result of the performance of its ministerial duties.
Therefore, in the event that "knowledge" of the Trustee shall be a prerequisite
to imposing a duty upon or determining liability of the Trustee under the Plan
or this Trust or any law or regulation regulating the conduct of the Trustee
with respect to the Directed Fund, as a result of any act or omission of the
Employer or any Participant, or as a result of any transaction engaged in by any
of them, then the receipt and processing of investment orders and other
documents relating to Plan assets by an officer or other employee of the Trustee
or its affiliates, representatives or agents engaged in the performance of
purely ministerial functions shall not constitutes "knowledge" of the Trustee.
(c) Notwithstanding the foregoing provisions of this Trust
Agreement, the Trustee shall discharge its duties hereunder with the care,
skill, prudence and diligence under the circumstances then prevailing that a
prudent man acting in a like capacity and familiar with such matters would use
in the conduct of an enterprise of a like character and with like aims. Any
investments selected by the Trustee without specific direction from the Employer
shall be selected to diversify the investments of the Trust fund so as to
minimize the risk of large losses, unless in the circumstances it is clearly
prudent not to do so. The Trustee shall perform its duties in accordance with
this Trust Agreement insofar as this Trust Agreement is consistent with the
provisions of ERISA. To the extent not prohibited by ERISA, the Trustee shall
not be responsible in any way for any action or omission of the Employer or the
Plan Administrator with respect to the performance of their duties and
obligations set forth in the Plan. To the extent not prohibited by ERISA, the
Trustee shall not be responsible for any action or omission of any of its
agents, or with respect to reliance upon advice of its counsel (whether or not
such counsel is also counsel to the Employer or to the Plan Administrator),
provided that such agents or counsel were prudently chosen by the Trustee and
that the Trustee relied in good faith upon the action of such agent or the
advice of such counsel. The Trustee shall be indemnified and held harmless by
the Employer against liability or losses occurring by reason of any act or
omission of the Trustee under this Trust Agreement, unless such act or omission
is due to its own willful nonfeasance, malfeasance, or misfeasance or other
breach of duty under ERISA, to the extent that such indemnification does not
violate ERISA or any other federal or state laws.
<PAGE>
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ARTICLE IX
DELEGATION OF POWERS
9.1 Delegation by the Trustee. With respect to Shares held by the Plan,
the Trustee hereby delegates to the custodian or other agent designated by the
Sponsor the functions designated in (a) through (d) hereunder, other than the
investment, management or control of the Trust assets. With respect to assets
other than Shares, the Trustee may delegate in writing pursuant to a procedure
permitted and established by the Sponsor, to a person (individual, corporate, or
other entity) designated by the Sponsor as an agent or custodian, any of the
powers or functions of the Trustee hereunder other than the investment,
management or control of the Trust assets, including (without limitation):
(a) custodianship of all or any part of the assets of the Trust;
(b) maintaining and accounting for the Trust and for Participants
and other Accounts as a part thereof;
(c) distribution of benefits as directed by the Plan Administrator;
and
(d) Preparation of the annual report on the status of the Trust.
The agent or custodian so appointed may act as agent for the Trustee,
without investment responsibility, for fees to be mutually agreed upon by the
Employer and the agent or custodian and paid in the same manner as Trustee's
fees. The Trustee shall not be responsible for any act or omission of the agent
or custodian arising from any such delegation, except to the extent provided in
section 8.1.
9.2 Delegation with Employer Approval. The Trustee (whether or not a bank
or trust company) and the Employer may, by mutual agreement, arrange for the
delegation by the Trustee to the Plan Administrator or any agent of the Employer
of any powers or functions of the Trustee hereunder other than the investment
and custody of the Trust assets. The Trustee shall not be responsible for any
act or omission of such person or persons arising from any such delegation,
except to the extent provided in ARTICLE VIII.
ARTICLE X
AMENDMENT
As provided in section 16.1 of the Plan, and subject to the limitations
set forth therein, the prototype Adoption Agreement, Plan and Trust Agreement
may be amended at any time, in whole or in part, by the Sponsor. The Trustee
hereby delegates authority to the Sponsor, and to any
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successor Sponsor, to so amend the prototype Adoption Agreement, Plan and Trust
Agreement and the Trustee hereby agrees that it shall be deemed to have
consented to any amendment so made which does not increase the duties of the
Trustee without its consent.
ARTICLE XI
RESIGNATION OR REMOVAL OF TRUSTEE
The Trustee may resign at any time upon thirty (30) days notice in writing
to the Employer, and may be removed by the Sponsor or Employer at any time upon
thirty (30) days notice in writing to the Trustee. Upon such resignation or
removal, the Sponsor or Employer shall appoint a successor Trustee or Trustees.
Upon receipt by the Trustee of written acceptance of such appointment by the
successor Trustee, the Trustee shall transfer and pay over to such successor the
assets of the Trust and all records pertaining thereto, provided that any
successor Trustee shall agree not to dispose of any such records without the
Trustee's consent. The successor Trustee shall be entitled to rely on all
accounts, records, and other documents received by it from the Trustee, and
shall not incur any liability whatsoever for such reliance. The Trustee is
authorized, however, to reserve such sum of money or property as it may deem
advisable for payment of all its fees, compensation, costs, and expenses, or for
payment of any other liabilities constituting a charge on or against the assets
of the Trust or on or against the Trustee, with any balance of such reserve
remaining after the payment of all such items to be paid over to the successor
Trustee. Upon the assignment, transfer, and payment over of the assets of the
Trust, and obtaining a receipt thereof from the successor Trustee, the Trustee
shall be released and discharged from any and all claims, demands, duties, and
obligations arising out of the Trust and its management thereof, excepting only
claims based upon the Trustee's willful misconduct or lack of good faith. The
successor Trustee shall hold the assets paid over to it under terms similar to
those of this Trust Agreement under a trust that will qualify under section 401
of the Code. If within thirty (30) days after the Trustee's resignation or
removal, the Employer or Sponsor has not appointed a successor Trustee which has
accepted such appointment, the Trustee shall, unless it elects to terminate the
Trust pursuant to ARTICLE XII, appoint such successor itself.
ARTICLE XII
TERMINATION OF THE TRUST
12.1 Term of the Trust. This Trust shall continue as to the Employer so
long as the Plan is in full force and effect. If the Plan ceases to be in full
force and effect, this Trust shall thereupon terminate unless expressly extended
by the Employer.
12.2 Termination by the Trustee. The Trustee may elect to terminate the
Trust if within thirty (30) days after its resignation or removal pursuant to
ARTICLE XI the Employer or
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Sponsor has not appointed a successor Trustee which has accepted such
appointment. Termination of the Trust shall be effected by distributing all
assets thereof to the Participants or other persons entitled thereto pursuant to
the directions of the Plan Administrator (or, in the absence of such direction,
as determined by the Trustee) as provided in section 16.3 of the Plan, subject
to the Trustee's right to reserve funds as provided in ARTICLE XI hereof. Upon
the completion of such distribution, the Trustee shall be relieved from all
further liability with respect to all amounts so paid, other than any liability
arising out of the Trustee's willful misconduct.
ARTICLE XIII
MISCELLANEOUS
13.1 No Diversion of Assets. At no time shall it be possible for any part
of the assets of the Trust to be used for or diverted to purposes other than for
the exclusive benefit of Participants and their Beneficiaries or revert to the
Employer, except as specifically provided in the Plan or this Trust Agreement.
13.2 Notices. Any notice from the Trustee to the Employer or from the
Employer to the Trustee provided for in the Plan and Trust shall be effective if
sent by first class mail to their respective last address of record.
13.3 Multiple Trustees. In the event that there shall be two (2) or more
Trustees serving hereunder, any action taken or decision made by any such
Trustee may be taken or made by a majority of them with the same effect as if
all had joined therein, if there be more than two (2), or unanimously if there
be two (2).
13.4 Conflict With Plan. In the event of any conflict between the
provisions of the Plan and those of this Trust Agreement, the Plan shall
prevail.
13.5 Applicable Law. Except to the extent otherwise required by ERISA, as
amended, this Trust Agreement shall be construed in accordance with the laws of
the state where the Trustee has its principal place of business.
13.6 Returned Contributions.
(a) A contribution made by the Employer by a mistake of fact shall,
if the Administrator so directs, be returned to the Employer within one (1) year
after its payment. The Administrator shall, in its sole discretion, determine
whether the contribution was made by mistake of fact based upon such evidence as
it deems appropriate.
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(b) A contribution made by the Employer that is conditioned on
deductibility under section 404 of the Code shall, to the extent such deduction
is disallowed, be returned to the Employer within one (1) year after the
disallowance, if the Administrator so directs.
13.7 General Undertaking. All parties to this Trust and all persons
claiming any interest whatsoever hereunder agree to perform any and all acts and
execute any and all documents and papers which may be necessary or desirable for
the carrying out of the Trust or any of its provisions.
13.8 Invalidity of Certain Provisions. If any provision of this Trust
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof and the Trust shall be construed
and enforced as if such provisions had not been included.
13.9 Counterpart Originals. This Trust may be executed in one or more
counterpart originals.
IN WITNESS WHEREOF, the Employer and the Trustee(s) have signed this Trust
effective as of the date specified in the Adoption Agreement.
Attest:
------------------------------------------
[NAME OF EMPLOYER]
By:
- ------------------------------- ------------------------------------------
Secretary President
TRUSTEE(S)
------------------------------------------
------------------------------------------
------------------------------------------
<PAGE>
-14-
)
) ss
)
I, ______________________________________, a notary public in and
for the jurisdiction above named, do hereby certify that _______________________
________________________________________________________________________________
________________________________________________________________________________
did personally appear before me and do acknowledge that they executed the
foregoing Trust as their free act and deed.
Subscribed and sworn to before me this ___________ day of
__________________________, 19_____.
------------------------------------------
Notary Public
My Commission
Expires:_____________________________
<PAGE>
PROFIT SHARING/SECTION 401(k) ADOPTION AGREEMENT
FOR PROTOTYPE DEFINED CONTRIBUTION PLAN
#001 SPONSORED BY [Name of Sponsor]
Adoption Agreement #001
This is the Adoption Agreement for defined contribution plan #001 of basic plan
document #02, which is a prototype profit sharing/section 401(k) plan.
NOTE: Before executing this Adoption Agreement, the Employer should consult with
a tax advisor or attorney. Failure to properly complete this Adoption Agreement
may result in Plan disqualification.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
The Employer hereby establishes a profit sharing/section 401(k) plan and trust
upon the respective terms and conditions contained in the prototype defined
contribution plan (the "Plan") and the Trust Agreement annexed hereto and
appoints as Trustee of such trust the person(s) who have executed this Adoption
Agreement evidencing their acceptance of such appointment. The Plan, the Trust
Agreement, and the Custody Agreement, if applicable, shall be supplemented and
modified by the terms and conditions contained in this Adoption Agreement and
shall be effective on the Effective Date.
The Sponsor will inform the Employer of any amendments made to the Plan or the
discontinuance or abandonment of the Plan.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
I. SPONSOR DATA
A. __________________________________________________________________
Name of Sponsor (or authorized representative)
B. __________________________________________________________________
Address
__________________________________________________________________
C. __________________________________________________________________
Telephone Number
<PAGE>
-2-
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
II. EMPLOYER DATA
A. __________________________________________________________________
Name of Employer and Employer Identification Number
B. __________________________________________________________________
Address
__________________________________________________________________
C. __________________________________________________________________
Telephone Number
D. __________________________________________________________________
Employer's Taxable Year End
E. __________________________________________________________________
Plan Year End
F. The Employer is: |_| a corporate entity
|_| a noncorporate entity
|_| a corporation electing to be taxed under
Subchapter S
G. The effective date will be the first day of the Plan Year in which
the Plan is adopted.
H. If this is an amendment of an existing plan, complete the following:
__________________________________________________________________
Effective Date of Amendment (Should be first day of a Plan Year)
__________________________________________________________________
Name of Prior Plan
__________________________________________________________________
Effective Date of Prior Plan
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
<PAGE>
-3-
III. ELIGIBILITY
Employees shall be eligible to participate in the Plan upon completion of
the eligibility requirements (complete A and B) (Plan section 3.1):
A. Years of Service. The Employee must complete [check one box]:
|_| One Year of Service.
|_| No service requirement.
B. Age. The Employee must attain age _____ (not greater than age 21).
NOTE: For purposes of this section III, the term "Employee" includes
all employees of this Employer or any employer aggregated with this
Employer under sections 414(b), (c), (m) or (o) of the Code and
individuals who are Leased Employees required to be considered
Employees of any such employer under section 414(n) or (o) of the
Code.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
IV. CREDITED SERVICE
The Plan provides that a Year of Service requires at least 1,000 hours
during any Plan Year. No credit will be given for service with a
predecessor employer except that if this is a continuation of a
predecessor plan, service under the predecessor plan must be counted.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
V. COMPENSATION
A. Compensation (choose 1 or 2) (Plan section 2.7):
|_| 1. shall include
- or -
|_| 2. shall not include
Employer Contributions made pursuant to a salary reduction agreement which
are not includable in the gross income of the Employee under sections 125,
402(a)(8), 402(h) or 403(b) of the Code.
<PAGE>
-4-
B. The effective date of the election in A. above shall be
____________________ (but not earlier than the first day of the
first Plan Year beginning after 1986).
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
VI. CONTRIBUTIONS
A. Matching Contributions (Plan section 4.1(b)):
The Employer shall make a Matching Contribution equal to ____% of
the Elective Deferrals made by each Participant up to the first
____% of such Participant's Compensation plus ____% of each such
Participant's additional Elective Deferrals.
NOTE: These contributions are subject to maximum limitations on
contributions as provided in the Plan and the Internal Revenue Code.
Employer Contributions, Elective Deferrals and Matching
Contributions in the aggregate may not exceed 15% of all
Participants' Compensation. Additional limitations are included in
the Plan where the Employer also has another qualified retirement
plan. An individual Participant's limit on contributions and
forfeitures, per year, is generally the lesser of 25% of
compensation or $30,000.
NOTE: Minimum allocations may be required to Participants who do not
receive an allocation of 3% of their Compensation. To the extent
required, these allocations shall be provided by a separate profit
sharing contribution from the Employer.
B. Elective Deferrals (Plan section 4.4)
Elective Deferrals not in excess of ____________% of a Participant's
Compensation shall be contributed in accordance with a compensation
reduction agreement signed by the Participant.
NOTE: The aggregate Elective Deferrals of a Participant for any
taxable year of that Participant shall be limited to $7,000, with
such amount adjusted for cost-of-living to the extent permitted
under sections 402(g)(5) and 415(d) of the Code.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
<PAGE>
-5-
VII. DISTRIBUTIONS
A. Normal Retirement Age is (choose 1 or 2) (Plan section 2.30):
|_| 1. The date a Participant reaches age ___ (not more than 65 or
less than 55). If no age is indicated, normal retirement age
shall be 65.
- or -
|_| 2. The later of age ____ (not more than 65) or the _____ (not
more than 5th) anniversary of the participation commencement
date. The participation commencement date is the first day of
the first Plan Year in which the Participant commenced
participation in the Plan.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
VIII. CLAIM FOR EXCESS ELECTIVE DEFERRALS (Plan section 4.9)
Participants who claim excess Elective Deferrals for the preceding
calendar year must submit their claims in writing to the Plan
Administrator by March 15.
NOTE: Excess Elective Deferrals distributed after April 15 are not only
includable in the Participant's gross income for the taxable year made,
but are also includable in income again in the year distributed.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
IX. OPTIONAL FEATURES
A. Hardship Withdrawals (choose 1 or 2) (Plan section 12.3):
|_| 1. Hardship withdrawals will be permitted.
- or -
|_| 2. Hardship withdrawals will not be permitted.
B. Loans to Participants are not permitted (Plan ARTICLE 13).
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
<PAGE>
-6-
X. VESTING
A Participant shall be fully (100%) vested in Employer Contributions upon
his commencement of participation in the Plan (Plan section 8.3).
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
XI. INVESTMENT CHOICES
|_| [A. Investments of Trust assets may be selected only from
Shares or other investments offered by the Sponsor.]
|_| [B. % of the Trust assets must be invested in Shares or other
investments offered by the Sponsor with the remainder in such
other investments as may be acceptable within the discretion of
the Trustee.]
|_| [C. 50% of the Trust assets must be invested in Shares or other
investments offered by the Sponsor with the remainder in such
other investments as may be acceptable within the discretion of
the Trustee.]
|_| [D. 25% of the Trust assets must be invested in Shares or other
investments offered by the Sponsor with the remainder in such
other investments as may be acceptable within the discretion of
the Trustee.]
NOTE: The Sponsor may impose additional limitations relating to the
type of permissible investments in the Trust (Plan section 7.3).
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
XII. INVESTMENT AUTHORITY (Plan section 7.2)
Contributions to the Plan shall be invested by the Trustee in accordance
with instructions of the Employer or Plan Administrator except that each
Participant shall direct that amounts voluntarily contributed by such
Participant pursuant to sections 4.3 and 4.4 of the Plan, rollover
contributions pursuant to section 4.5 of the Plan, and direct transfers
pursuant to section 4.6 of the Plan, if any, and Employer Contributions on
the Participant's behalf shall be invested in specified investments
offered by the Sponsor. Participants may make or change such directions by
giving written notice to the Plan Administrator. Reasonable restrictions
may be imposed on this privilege by the Plan Administrator or the Sponsor
for purposes of administrative convenience.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
<PAGE>
-7-
XIII. TOP-HEAVY PROVISIONS
Participants who are eligible to receive the minimum allocation provided
by section 5.2 of the Plan shall receive a minimum allocation of
contributions and forfeitures under this Plan equal to three percent (3%)
of Compensation, or if lesser, the largest percentage of Compensation
allocated on behalf of any Key Employee for the Plan Year.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
XIV. ALLOCATION LIMITATIONS
COMPLETE THIS SECTION ONLY IF YOU MAINTAIN OR EVER MAINTAINED ANOTHER
QUALIFIED PLAN IN WHICH ANY PARTICIPANT IN THIS PLAN IS (OR WAS) A
PARTICIPANT OR COULD BECOME A PARTICIPANT. THIS SECTION MUST ALSO BE
COMPLETED IF THE EMPLOYER MAINTAINS A WELFARE BENEFIT FUND, AS DEFINED IN
SECTION 419(e) OF THE CODE, OR AN INDIVIDUAL MEDICAL ACCOUNT, AS DEFINED
IN SECTION 415(l)(2) OF THE CODE, UNDER WHICH AMOUNTS ARE TREATED AS
ANNUAL ADDITIONS WITH RESPECT TO ANY PARTICIPANT IN THIS PLAN.
A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer other than a master or
prototype plan (choose 1 or 2) (Plan section 6.3).
|_| 1. The provisions of section 6.2 will apply as if the other
plan were a master or prototype plan.
- or -
|_| 2. (On an attachment, provide the method under which the plans
will limit total annual additions to the maximum permissible
amount, and will properly reduce any excess amounts, in a
manner that precludes Employer discretion).
B. If the Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, attach an explanation of
the method under which the plan involved will satisfy the 1.0
limitation in a manner that precludes Employer discretion.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
<PAGE>
-8-
XV. ADMINISTRATION
A. The Plan administrator will be (choose [1], [2], [3], or [4]) (Plan
sections 2.34 and 15.4):
|_| [1. The Trustee]
NOTE: If the Trustee designated in section XVI of this Adoption Agreement
is the Sponsor's designated Trustee, it may not be appointed as Plan
Administrator.
- or -
|_| [2. The Employer]
- or -
|_| [3. An individual Plan Administrator designated by the Employer:
Name: _________________________________________________________
Address: _________________________________________________________]
|_| [4. A committee of two or more Employees designated by the
Employer:
____________________________________________________________
Name & Title
____________________________________________________________
Signature
____________________________________________________________
Name & Title
____________________________________________________________
Signature
____________________________________________________________
<PAGE>
-9-
Name & Title
____________________________________________________________]
Signature
NOTE: If no Plan Administrator has ben designated or serving
at any time, the Employer will be deemed the Plan
Administrator. (Plan section 15.4).
B. The Plan Administrator (including all members of a committee, if a
committee is named) is a Named Fiduciary for the Plan. If other
persons are also to be Named Fiduciaries, their names and addresses
are:
Name: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
Name: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
Name: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
C. The Named Fiduciaries have all of the powers set forth in the Plan.
If any powers or duties are to be allocated among them, or delegated
to third parties, indicate below what the powers or duties are and
to whom they are to be delegated (Plan section 15.3):
<PAGE>
-10-
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
XVI. THE TRUSTEE
[A. The Employer hereby appoints the following to serve as Trustee
(Plan section 2.45):
Name: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
Dated: ______________________ ______________________________
(Signature of) Trustee
Name: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
Dated: ______________________ ______________________________
(Signature of) Trustee
<PAGE>
-11-
Name: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
Dated: ______________________ ______________________________
(Signature of) Trustee]
[B. The Employer hereby appoints the Sponsor's designated trustee(s)
to serve as Trustee(s):
Name: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
Dated: ______________________ ______________________________
(Signature of) Trustee
Name: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
Dated: ______________________ ______________________________
(Signature of) Trustee
Name: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
Dated: ______________________ ______________________________
(Signature of) Trustee
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
<PAGE>
-12-
XVII. EMPLOYER SIGNATURE
The Employer acknowledges receipt of the current prospectus of the
investment companies designated by the Employer for its initial
investments under the Plan and represents that it has delivered a copy
thereof to each Participant in the Plan, and that it will deliver to each
Participant making contributions and each new Participant, a copy of the
then current prospectus of such investment companies. The Employer further
represents that the information in this Adoption Agreement shall become
effective only when approved and countersigned by the Trustee. The right
to reject this Adoption Agreement for any reason is reserved.
This Adoption Agreement must be used only in conjunction with basic plan
document #02.
NOTE: An Employer who has ever maintained or who later adopts any plan
(including, after December 31, 1985, a welfare benefit fund, as defined in
section 419(e) of the Code, which provides post-retirement medical
benefits allocated to separate accounts for Key Employees, as defined in
section 419A(d)(3) of the Code or an individual medical account, as
defined in section 415(l)(2) of the Code) in addition to this Plan, may
not rely on the opinion letter issued by the National Office of the
Internal Revenue Service as evidence that this Plan is qualified under
section 401 of the Internal Revenue Code. If the Employer who adopts or
maintains multiple plans wishes to obtain reliance that the plans are
qualified, application for a determination letter should be made to the
appropriate Key District Director of Internal Revenue.
This Adoption Agreement consists of 13 pages.
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed by its duly authorized officers this __________ day of
_________________________, ______.
__________________________________________
(Name of Employer)
By: __________________________________________
(Name and Title)
<PAGE>
PROFIT SHARING/SECTION 401(k) ADOPTION AGREEMENT
FOR PROTOTYPE DEFINED CONTRIBUTION PLAN
#002 SPONSORED BY [Name of Sponsor]
Adoption Agreement #002
This is the Adoption Agreement for defined contribution plan #002 of basic plan
document #02, which is a prototype profit sharing/section 401(k) plan.
NOTE: Before executing this Adoption Agreement, the Employer should consult with
a tax advisor or attorney. Failure to properly complete this Adoption Agreement
may result in Plan disqualification.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
The Employer hereby establishes a profit sharing/section 401(k) plan and trust
upon the respective terms and conditions contained in the prototype defined
contribution plan (the "Plan") and the Trust Agreement annexed hereto and
appoints as Trustee of such trust the person(s) who have executed this Adoption
Agreement evidencing their acceptance of such appointment. The Plan, the Trust
Agreement, and the Custody Agreement, if applicable, shall be supplemented and
modified by the terms and conditions contained in this Adoption Agreement and
shall be effective on the Effective Date.
The sponsor will inform the Employer of any amendments made to the Plan or the
discontinuance or abandonment of the Plan.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
I. SPONSOR DATA
A. __________________________________________________________________
Name of Sponsor (or authorized representative)
B. __________________________________________________________________
Address
__________________________________________________________________
C. __________________________________________________________________
Telephone Number
<PAGE>
-2-
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
II. EMPLOYER DATA
A. __________________________________________________________________
Name of Employer and Employer Identification Number
B. __________________________________________________________________
Address
__________________________________________________________________
C. __________________________________________________________________
Telephone Number
D. __________________________________________________________________
Employer's Taxable Year End
E. __________________________________________________________________
Plan Year End
F. The Employer is: |_| a corporate entity
|_| a noncorporate entity
|_| a corporation electing to be taxed under
Subchapter S
G. The effective date will be the first day of the Plan Year in which
the Plan is adopted.
H. If this is an amendment of an existing plan, complete the following:
__________________________________________________________________
Effective Date of Amendment (Should be first day of a Plan Year)
__________________________________________________________________
Name of Prior Plan
__________________________________________________________________
Effective Date of Prior Plan
<PAGE>
-3-
I. __________________________________________________________________
Limitation Year, if different from E. above
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
III. ELIGIBILITY
Employees shall be eligible to participate in the Plan upon completion of
the eligibility requirements (complete A and B) (Plan section 3.1):
A. Years of Service. The Employee must complete [check one box]:
|_| One Year of Service.
|_| No service requirement.
B. Age. The Employee must attain age __________ (not greater than age
21).
C. The following Employees will not be eligible to participate in the
Plan (Plan section 3.1):
|_| Union Employees. Employees included in a unit of employees
covered by a collective bargaining agreement between the
Employer and Employee representatives (as defined in section
3.1(b)(i) of the Plan), if retirement benefits were the
subject of good faith bargaining.
|_| Nonresident Aliens. Employees who are nonresident aliens and
who receive no earned income from the Employer which
constitutes income from sources within the United States.
For purposes of this section III, the term "Employee" includes
all employees of this Employer or any employer aggregated with
this Employer under sections 414(b), (c), (m) or (o) of the
Code and individuals who are Leased Employees required to be
considered Employees of any such employer under section 414(n)
or (o) of the Code.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
<PAGE>
-4-
IV. CREDITED SERVICE
A. The Plan provides that a Year of Service requires at least 1,000
hours during any Plan Year. If a lower number of hours is desired,
state the number here: _____ (Plan section 2.48).
B. The Plan permits Hours of Service to be determined by the use of
service equivalencies under one of the methods selected below
(choose one method) (Plan section 2.23):
|_| 1. On the basis of actual hours for which an Employee is paid
or entitled to payment.
|_| 2. On the basis of days worked. An Employee will be credited
with 10 Hours of Service if under section 2.23 of the Plan
such Employee would be credited with at least one Hour of
Service during the day.
|_| 3. On the basis of weeks worked. An Employee will be credited
with 45 Hours of Service if under section 2.23 of the Plan
such Employee would be credited with at least one Hour of
Service during the week.
|_| 4. On the basis of semi-monthly payroll periods. An Employee
will be credited with 95 Hours of Service if under section
2.23 of the Plan such Employee would be credited with at least
one Hour of Service during the semi-monthly payroll period.
- or -
|_| 5. On the basis of months worked. An Employee will be credited
with 190 Hours of Service if under section 2.23 of the Plan
such Employee would be credited with at least one Hour of
Service during the month.
C. Service with a predecessor employer (choose 1 or 2) (Plan
sections 3.3 and 8.5):
|_| 1. No credit will be given for service with a predecessor
employer.
- or -
|_| 2. Credit will be given for service with the following
predecessor employer(s):
<PAGE>
-5-
____________________________________________________________
____________________________________________________________
NOTE: The Plan provides that if this is a continuation of a
predecessor plan, service under the predecessor plan must be
counted.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
V. COMPENSATION
A. Compensation (choose 1 or 2) (Plan section 2.7):
|_| 1. shall include
- or -
|_| 2. shall not include
Employer Contributions made pursuant to a salary reduction agreement which
are not includable in the gross income of the Employee under sections 125,
402(a)(8), 402(h) or 403(b) of the Code.
B. The effective date of the election in A. above shall be
_______________ (but not earlier than the first day of the first
Plan Year beginning after 1986).
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
VI. CONTRIBUTIONS
A. Employer Contributions Other Than Matching Contributions (choose
1 or 2) (Plan section 4.1(a)):
|_| 1. Discretionary, pursuant to Employer resolution. If no
resolution is adopted, then _____% of each Participant's
Compensation.
- or -
|_| 2. _____% of a Participant's Compensation, plus discretionary
amounts, if any, made by Employer resolution.
<PAGE>
-6-
B. Matching Contributions (choose (1) or (2)) (Plan section 4.1(b))
|_| 1. The Employer shall make a Matching Contribution equal to
_______% of the Elective Deferrals made by each Participant
- or -
|_| 2. The Employer shall make a Matching Contribution equal to
_____% of the Elective Deferrals made by each Participant up
to the first _____% of such Participant's Compensation plus
_____% of each Participant's additional Elective Deferrals.
NOTE: If you wish to make Matching Contributions based on a
Participant's Elective Deferrals it is recommended that
Elective Deferrals be limited to no more than six percent of
Compensation.
NOTE: These contributions are subject to maximum limitations
on contributions as provided in the Plan and the Internal
Revenue Code. Employer Contributions, including Elective
Deferrals and Matching Contributions, in the aggregate may not
exceed 15% of all Participants' Compensation, plus up to 10%
credit carryover in certain circumstances. Additional
limitations are included in the Plan where the Employer also
has another qualified retirement plan. An individual
Participant's limit on contributions and forfeitures, per
year, is generally the lesser of 25% of compensation or
$30,000.
NOTE: Minimum allocations may be required to Participants who
do not receive an allocation of 3% of their Compensation. To
the extent required, these allocations shall be provided by a
separate profit sharing contribution from the Employer.
C. Employee Contributions
|_| 1. Nondeductible Voluntary (choose a or b) (Plan section 4.3):
|_| a. Each Participant may make nondeductible voluntary
contributions. The minimum voluntary contribution, if
any, is _____%.
- or -
|_| b. Nondeductible voluntary contributions are not permitted.
<PAGE>
-7-
|_| 2. Elective Deferrals (Plan section 4.4). Elective Deferrals
not in excess of _____% of a Participant's Compensation shall
be contributed in accordance with a compensation reduction
agreement signed by the Participant.
NOTE: The aggregate Elective Deferrals of a Participant for
any taxable year of that Participant shall be limited to
$7,000, with such amount adjusted for cost-of-living to the
extent permitted under sections 402(g)(5) and 415(d) of the
Code.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
VII. ALLOCATION OF EMPLOYER CONTRIBUTIONS
A. Formula -- (Choose 1 or 2) (Plan section 5.3(a)). Note: If you
provide for hardship withdrawals you must use Formula 1.
|_| 1. Non-Integrated Plan -- Employer Contributions shall be
allocated to the accounts of all eligible Participants
prorated upon Compensation.
- or -
|_| 2. Integrated Plan -- Employer contributions and forfeitures
shall be integrated with Social Security and allocated in
accordance with the provisions of Plan section 5.3(a). The
Plan's Integration Level shall be (choose (a), (b) or (c)):
|_| a. Taxable Wage Base. (The maximum amount considered as
wages for such year under section 3121(a)(1) of the
Internal Revenue Code (the Social Security taxable wage
base) as of the beginning of the Plan Year).
- or -
|_| b. $___________________ (a dollar amount not to exceed
the Taxable Wage Base).
- or -
|_| c. ___________% of the Taxable Wage Base (not to exceed
100%).
NOTE: If you maintain any other plan in addition to this Plan, only
one plan may be integrated with Social Security.
<PAGE>
-8-
B. Contribution Eligibility (Plan section 4.1(c)):
The Plan provides that all Participants will share in Employer
Contributions for the Plan Year, except the following (if elected):
|_| Participants who terminate employment during the Plan Year
with not more than 500 Hours of Service and who are not
Employees as of the last day of the Plan Year (other than
Participants who die, retire or become Totally and Permanently
Disabled).
If a fewer number of hours than 500 is desired, state the number
here: _____.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
VIII. DISTRIBUTIONS
A. Normal Retirement Age is (choose 1 or 2) (Plan section 2.30):
|_| 1. The date a Participant reaches age _____ (not more than 65
or less than 55). If no age is indicated, normal retirement
age shall be 65.
- or -
|_| 2. The later of age _____ (not more than 65) or the _____ (not
more than 5th) anniversary of the day the Participant
commenced participation in the Plan. The participation
commencement date is the first day of the first Plan Year in
which the Participant commenced participation in the Plan.
B. Early Retirement (choose 1 or 2) (Plan section 2.10):
|_| 1. Early Retirement Date is the first day of the month
coincident with or next following the date upon which a
Participant reaches age _____ (not less than 55) and completes
_____ years of service (not more than 15).
- or -
|_| 2. Early retirement will not be permitted under the Plan.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
<PAGE>
-9-
IX. CLAIM FOR EXCESS ELECTIVE DEFERRALS (Plan section 4.9)
Participants who claim excess Elective Deferrals for the preceding
calendar year must submit their claims in writing to the Plan
Administrator by March 15.
NOTE: Excess Elective Deferrals distributed after April 15 are not only
includable in the Participant's gross income for the taxable year made,
but are also includable in income again in the year distributed.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
X. OPTIONAL FEATURES
A. Hardship Withdrawals (choose 1 or 2) (Plan section 12.3):
|_| 1. Hardship withdrawals will be permitted.
- or -
|_| 2. Hardship withdrawals will not be permitted.
NOTE: The Plan may not provide hardship withdrawals if integration with
Social Security is elected in section VII.A.2.
[B. Loans (choose 1 or 2) (Plan ARTICLE 13)
|_| 1. Loans will be permitted to be made to Participants.
- - or -
|_| 2. Loans will not be permitted to be made to Participants.
NOTE: The Plan may not permit loans to Owner-Employees of
noncorporate entities or to Shareholder-Employees of
subchapter S corporations. If Plan loans are permitted, the
Trustee designated in section XVII of this Adoption Agreement
may not be the Sponsor's designated Trustee.]
<PAGE>
-10-
[C. Insurance (choose 1 or 2) (Plan ARTICLE 14)
|_| 1. The Plan permits Participants to designate a portion of
their Account to purchase life insurance contracts. (MUST NOT
be selected if Sponsor's designated trustee is appointed as
Trustee).
The percentage of the Employer Contributions which may be
applied to purchase life insurance contracts shall be equal to
_____%.
- or -
|_| 2. The Plan does not permit Participants to designate a
portion of their Account to purchase life insurance contracts.
NOTE: Section 14.5 of the Plan provides certain limits on the
amount of Employer Contributions that can be applied to
purchase life insurance contracts.]
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
XI. VESTING
Employer Contributions and Matching Contributions will become vested if
the Participant terminates employment for any reasons other than
retirement, death or disability pursuant to the following schedule (choose
A, B, C or D) (Plan section 8.3).
|_| A. Years of Service Vested Percentage
1 year 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 or more years 100%
- or -
|_| B. 100 percent vesting immediately after satisfaction of the
eligibility requirements.
- or -
|_| C. 100 percent vesting after three Years of Service.
<PAGE>
-11-
- or -
|_| D. Years of Service Vested Percentage
---------------- -----------------
1 year __%
2 years __% (not less than 20)
3 years __% (not less than 40)
4 years __% (not less than 60)
5 years __% (not less than 80)
6 years __% (not less than 100)
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
XII. INVESTMENT CHOICES
|_| [A. Investments of Trust assets may be selected only from
Shares or other investments offered by the Sponsor.]
|_| [B. _________% of the Trust assets must be invested in Shares
or other investments offered by the Sponsor with the remainder in
such other investments as may be acceptable within the discretion
of the Trustee.]
|_| [C. 50% of the Trust assets must be invested in Shares or other
investments offered by the Sponsor with the remainder in such
other investments as may be acceptable within the discretion of
the Trustee.]
|_| [D. 25% of the Trust assets must be invested in Shares or other
investments offered by the Sponsor with the remainder in such
other investments as may be acceptable within the discretion of
the Trustee.]
NOTE: The Sponsor may impose additional limitations relating to the
type of permissible investments in the Trust (Plan section 7.3).
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
XIII. INVESTMENT AUTHORITY
[Contributions to the Plan shall be invested by the Trustee in accordance
with instructions of the Employer or Plan Administrator except that (choose [A],
[B] or [C])] (Plan section 7.2):
<PAGE>
-12-
|_| [A. No exceptions; the Employer or Plan Administrator shall
make all investment selections.]
- or -
|_| [B. The Employer delegates all investment responsibility to the
Trustee. (MUST NOT be selected if Sponsor's designated trustee
is appointed as Trustee).]
- or -
|_| [C. Each Participant may, shall direct that:
|_| 1. amounts voluntarily contributed by such Participant
pursuant to sections 4.3 and 4.4 of the Plan, rollover
contributions pursuant to section 4.5 of the Plan and direct
transfers pursuant to section 4.6 of the Plan, if any,
and/or
|_| 2. Employer Contributions on the Participant's behalf
shall be invested in specified investments offered by the Sponsor.
Participants may make or change such directions by giving written notice
to the Plan Administrator. Reasonable restrictions may be imposed on this
privilege by the Plan Administrator or the Sponsor for purposes of
administrative convenience.]
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
XIV. TOP-HEAVY PROVISIONS
Participants who are eligible to receive the minimum allocation provided
by section 5.2 of the Plan shall receive a minimum allocation of
contributions and forfeitures under this Plan equal to three percent (3%)
of Compensation, or if lesser, the largest percentage of Compensation
allocated on behalf of any Key Employee for the Plan Year.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
XV. ALLOCATION LIMITATIONS
COMPLETE THIS SECTION ONLY IF YOU MAINTAIN OR EVER MAINTAINED ANOTHER
QUALIFIED PLAN IN WHICH ANY PARTICIPANT IN THIS PLAN IS (OR WAS) A
PARTICIPANT OR COULD BECOME A PARTICIPANT. THIS SECTION MUST ALSO BE
COMPLETED IF THE EMPLOYER MAINTAINS A
<PAGE>
-13-
WELFARE BENEFIT FUND, AS DEFINED IN SECTION 419(e) OF THE CODE, OR AN
INDIVIDUAL MEDICAL ACCOUNT, AS DEFINED IN SECTION 415(l)(2) OF THE CODE,
UNDER WHICH AMOUNTS ARE TREATED AS ANNUAL ADDITIONS WITH RESPECT TO ANY
PARTICIPANT IN THIS PLAN.
A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer other than a master or
prototype plan (choose either 1 or 2) (Plan section 6.3).
|_| 1. The provisions of section 6.2 will apply as if the other
plan were a master or prototype plan.
- or -
|_| 2. (On an attachment, provide the method under which the plans
will limit total annual additions to the maximum permissible
amount, and will properly reduce any excess amounts, in a
manner that precludes Employer discretion).
B. If the Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, attach an explanation of
the method under which the plan involved will satisfy the 1.0
limitation in a manner that precludes Employer discretion.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
XVI. ADMINISTRATION
A. The Plan administrator will be (choose [1], [2], [3] or [4]) (Plan
sections 2.34 and 15.4):
|_| [1. The Trustee]
NOTE: If the Trustee designated in section XVII of this Adoption Agreement
is the Sponsor's designated Trustee, it may not be appointed as Plan
Administrator.
- or -
|_| [2. The Employer]
- or -
<PAGE>
-14-
|_| [3. An individual Plan Administrator designated by the
Employer:
____________________________________________________________
Name
____________________________________________________________
Address
____________________________________________________________]
|_| [4. A committee of two or more Employees designated by
the Employer:
____________________________________________________________
Name & Title
____________________________________________________________
Signature
____________________________________________________________
Name & Title
____________________________________________________________
Signature
____________________________________________________________
Name & Title
____________________________________________________________
Signature
NOTE: If no Plan Administrator has been designated or serving
at any time, the Employer will be deemed the Plan
Administrator. (Plan section 15.4).
B. The Plan Administrator (including all members of a committee, if a
committee is named) is a Named Fiduciary for the Plan. If other
persons are also to be Named Fiduciaries, their names and addresses
are:
<PAGE>
-15-
____________________________________________________________
Name
____________________________________________________________
Address
____________________________________________________________
____________________________________________________________
Name
____________________________________________________________
Address
____________________________________________________________
____________________________________________________________
Name
____________________________________________________________
Address
____________________________________________________________
C. The Named Fiduciaries have all of the powers set forth in the Plan.
If any powers or duties are to be allocated among them, or delegated
to third parties, indicate below what the powers or duties are and
to whom they are to be delegated (Plan section 15.3):
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
<PAGE>
-16-
XVII. THE TRUSTEE
[A. The Employer hereby appoints the following to serve as Trustee
(Plan section 2.45):
Name: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
Dated: ______________________ ______________________________
(Signature of) Trustee
Name: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
Dated: ______________________ ______________________________
(Signature of) Trustee
Name: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
Dated: ______________________ ______________________________
(Signature of) Trustee]
[B. The Employer hereby appoints the Sponsor's designated trustee(s)
to serve as Trustee(s):
<PAGE>
-17-
Name: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
Dated: ______________________ ______________________________
(Signature of) Trustee
Name: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
Dated: ______________________ ______________________________
(Signature of) Trustee
Name: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
Dated: ______________________ ______________________________
(Signature of) Trustee]
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
XVIII. EMPLOYER SIGNATURE
The Employer acknowledges receipt of the current prospectus of the
investment companies designated by the Employer for its initial
investments under the Plan and represents that it has delivered a copy
thereof to each Participant in the Plan, and that it will deliver to each
Participant making contributions and each new Participant, a copy of the
then current prospectus of such investment companies. The Employer further
represents that the information in this Adoption Agreement shall become
effective only when approved and countersigned by the Trustee. The right
to reject this Adoption Agreement for any reason is reserved.
<PAGE>
-18-
This Adoption Agreement must be used only in conjunction with basic plan
document #02.
NOTE: An Employer who has ever maintained or who later adopts any plan
(including, after December 31, 1985, a welfare benefit fund, as defined in
section 419(e) of the Code, which provides post-retirement medical
benefits allocated to separate accounts for Key Employees, as defined in
section 419A(d)(3) of the Code, or an individual medical account, as
defined in section 415(l)(2) of the Code) in addition to this Plan, may
not rely on the opinion letter issued by the National Office of the
Internal Revenue Service as evidence that this Plan is qualified under
section 401 of the Internal Revenue Code. If the Employer who adopts or
maintains multiple plans wishes to obtain reliance that the plans are
qualified, application for a determination letter should be made to the
appropriate Key District Director of Internal Revenue.
This Adoption Agreement consists of 19 pages.
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed by its duly authorized officers this ______ day of
_________________________, _____.
__________________________________________
(Name of Employer)
By: __________________________________________
(Name and Title)
Exhibit 14d
Zweig EUCLID
Mutual Funds MUTUAL FUNDS
[LOGOS]
403(b)(7)
Tax-Sheltered Custodial
Account Agreement
<PAGE>
================================================================================
ZWEIG/EUCLID MUTUAL FUNDS 403(b)(7)
Tax-Sheltered Custodial Account Agreement
================================================================================
o Please read this booklet carefully with your tax advisor.
o Complete the Account Application Form. Please make certain that you sign
the "Acceptance" section of the form.
o Complete the Initial Designation of Beneficiary Form.
o If you are transferring amounts from another 403(b) arrangement to Zweig
Series Trust or Euclid Mutual Funds, complete the 403(b)(7)
Transfer/Direct Rollover Request Form contained in the booklet.
o If you are rolling over amounts from another 403(b) agreement to Zweig
Series Trust or Euclid Mutual Funds, complete the 403(b)(7)
Transfer/Direct Rollover Form contained in the booklet.
o Complete the 403(b)(7) Distribution Request Form only if you are
requesting a distribution from your Zweig Series Trust or Euclid Mutual
Funds Tax-Sheltered Custodial Account.
o Complete the (Sample) Salary Reduction Agreement only if your employer
does not provide you with a company form. If you complete the (Sample)
Salary Reduction Agreement provided in this booklet please give it to your
employer.
o (Sample) Worksheets are provided to assist you in determining contribution
amounts.
o Mail Completed Application and Beneficiary Form and any other forms
described above to: State Street Bank and Trust Company
P.O. Box 8505
Boston, MA 02266-8505
o For assistance please call 1 (800) 272-2700
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Facts About Your 403(b)(7)...................................2
Tax Sheltered Custodial Account Agreement..................3-8
Account Application......................................9A-9B
Initial Designation of Beneficiary Form..................9C-9D
Transfer/Direct Rollover Request Form..................10A-10B
Distribution Request Form..............................11A-11C
Worksheets (Samples from IRS Publication 571)..........12A-12D
Salary Reduction Agreement (Sample)........................ 13
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
ZWEIG/EUCLID MUTUAL FUNDS
Facts About Your 403(b)(7) Custodial Account
================================================================================
- --------------------------------------------------------------------------------
Why is the Zweig/Euclid Mutual Funds 403(b)(7) Tax Sheltered
- --------------------------------------------------------------------------------
It is a special retirement program which allows employees of certain tax-exempt
employers to have a specified portion of their salary withheld and contributed
to a special custodial account on their behalf. The amount you elect to have
withheld, and any earnings on that amount, will not be subject to federal (and
in most cases, State and local) income taxes until it's actually distributed.
Thus, contributions are made with pre-tax dollars. This money will, however, be
subject to Social Security taxes at all times.
- --------------------------------------------------------------------------------
Who is an eligible employer?
- --------------------------------------------------------------------------------
An eligible employer must be either a public school system or an organization
which is exempt from tax under Section 501(c)(3) of the Internal Revenue Code.
Such organizations include non-profit hospitals, private and parochial schools,
colleges, scientific and research foundations, and churches.
- --------------------------------------------------------------------------------
How are contributions made?
- --------------------------------------------------------------------------------
Once you determine the amount to be set aside from your salary each pay period,
your employer will handle the payroll deduction and send those amounts
(contributions) to State Street Bank & Trust Company to be deposited into a
special custodial account on your behalf.
- --------------------------------------------------------------------------------
How is money invested?
- --------------------------------------------------------------------------------
According to law, money contributed under a 403(b)(7) arrangement can only be
invested in mutual funds. Under this program, you can invest in any of the
mutual fund portfolios making up the Zweig Mutual Funds or Euclid Mutual Funds.
Each portfolio has distinct investment objectives and policies.
Please read the prospectus for a description of each Zweig/Euclid Mutual Fund
currently available.
- --------------------------------------------------------------------------------
How much can I contribute each year?
- --------------------------------------------------------------------------------
The IRS has prescribed a formula that takes several factors into account to
arrive at your maximum contribution. The general rule of thumb is that you can
contribute up to the lesser of $9,500 or one-sixth of your gross salary. The
$9,500 annual salary reduction limit is reduced, dollar for dollar, by salary
reduction contributions to a 401(k) plan, Simplified Employee Pension (SEP) or
other similar salary reduction arrangement.
A special increased salary reduction limit exists for employees who have
completed 15 years of service with an educational organization, a hospital, a
home health service agency, a church, a convention or association of churches,
or a health and welfare service agency. Furthermore, these employees can elect
one of three special calculations which allow greater credit for prior years of
service.
To assist you in calculating your contributions, we have provided a
"Contribution Worksheet" in this booklet. For more information, please contact
your tax advisor. Also, read IRS Publication 571, "Tax Sheltered Annuity
Programs", which can be obtained from any IRS office.
- --------------------------------------------------------------------------------
What happens if I contribute too much?
- --------------------------------------------------------------------------------
There are two types of over contributions. The first is an "excess contribution"
and the second is an "excess elective deferral".
If you contribute more than you exclusion allowance you will have an excess
contribution subject to an IRS 6% penalty tax for each year that the excess
remains in your account. An excess contribution may be corrected by removing the
excess contribution or by contributing less than you are permitted in a
subsequent year. If the refund of the excess contribution is made before the end
of the year the contribution was made, the 6% penalty tax can be avoided.
If your salary reduction amounts exceed $9,500 (under all plans) you will have
an excess elective deferral. These excess amounts are includible in your income
in the taxable year in which the deferral was made. You are permitted to
determine the amount of the excess deferral by the following March 1 and can
withdraw these amounts with earnings by April 15. If you fail to withdraw the
excess deferrals, they (plus attributable income) are includible in your income
in the year of the deferral and in the year of distribution (usually, when you
retire). Thus, excess deferrals should be timely removed to avoid double
taxation.
- --------------------------------------------------------------------------------
Can I change the amount of my salary reduction contribution?
- --------------------------------------------------------------------------------
Yes. You can increase or decrease the contribution rate (only once each year) by
completing a new salary reduction agreement with your employer. You may
terminate the agreement at any time with respect to salary not yet earned.
- --------------------------------------------------------------------------------
When can I withdraw money?
- --------------------------------------------------------------------------------
With the exception of death, disability or financial hardship you cannot
withdraw any money prior to age 59 1/2 or termination of employment.
In the case of hardship, the distribution of any income attributable to salary
reduction contributions is not permitted for tax years beginning after 1988.
The general rule is that you must start taking distributions by April 1
following the calendar year in which you reach age 70 1/2. However, in the case
of a governmental or church plan, the required beginning date is the later of
(1) the date under the general rule or (2) April 1 of the calendar year
following the calendar year in which you retire.
- --------------------------------------------------------------------------------
What are the annual fees?
- --------------------------------------------------------------------------------
The annual custodial fee is $10. This fee will be deducted from your custodial
account. The maximum annual maintenance fee per annum will not exceed $20.00 per
Social Security number.
<PAGE>
================================================================================
ZWEIG/EUCLID MUTUAL FUNDS 403(b)(7)
Tax-Sheltered Custodial Account Agreement
================================================================================
This Agreement allows you to establish a tax-sheltered custodial account
authorized under Section 403(b)(7) of the Internal Revenue Code. By electing to
reduce your compensation and have your Employer contribute into your
tax-sheltered custodial Account, you will not be taxed on the amounts
contributed or earnings attributable to such amounts until the funds are
withdrawn from your Account.
SECTION ONE: DEFINITIONS
The following words and phrases when used in this Agreement with initial capital
letters shall have the meanings set forth below.
1.01 Account - Means the tax-sheltered custodial Account established pursuant to
this Agreement for the benefit of the Participant and when the context so
implies refers to the assets, if any, then held by the Custodian hereunder.
1.02 Agreement - Means this 403(b)(7) Tax-Sheltered Custodial Account Agreement.
1.03 Beneficiary - Means the person or persons designated by the Participant in
accordance with Section 4.04 to receive any distributions from the Account upon
the Participant's death.
1.04 Code - Means the Internal Revenue Code of 1986, as amended from time to
time.
1.05 Custodian - Means State Street Bank & Trust Co., Inc.,or any successor
thereto which qualifies to serve as Custodian in the manner prescribed by
Section 401(f)(2) of the Code.
1.06 Employer - Means the entity so designated on this Agreement. The Employer
must be an entity described in Section 501(c)(3) of the Code which is exempt
from tax under Section 501(a) of the Code, an educational organization described
in Section 170(b)(1)(A)(ii) of the Code or any other entity eligible under
Section 403(b) of the Code to make contributions to tax-sheltered custodial
accounts.
1.07 Participant - Means any person who is regularly employed by the Employer
who elects to participate in this Agreement by completing and signing a Salary
Deferral Agreement or such other form as may be acceptable to the Employer.
1.08 Salary Deferral Agreement - Means the Salary Deferral Agreement signed by
the Employee and delivered to the Employer whereby the Employee authorizes a
deferral of salary to be contributed by the Employer to the Employee's Account
established hereunder.
1.09 Sponsor - Means Zweig Series Trust or Euclid Mutual Funds.
1.10 Payor - Means State Street Bank and Trust Company
SECTION TWO: CONTRIBUTIONS
2.01 Salary Deferral Agreement - The Custodian may accept contributions from the
Employer on behalf of a Participant made pursuant to a Salary Deferral
Agreement. A Participant shall designate the amount or percentage by which such
Participant's compensation is to be deferred in the Salary Deferral Agreement.
Such amount or percentage shall be effective until otherwise modified in writing
by the Participant. A Participant may amend or terminate his or her Salary
Deferral Agreement at such times as may be permitted by the Employer, however
the Participant may not change his or her election more than once per tax year
unless permitted by the Employer in a uniform and nondiscriminatory manner.
<PAGE>
2.02 Maximum Contribution Limits - In no event shall the contributions to the
Account for a tax year on behalf of a Participant exceed the maximum allowable
deferrals permitted under current law or regulation.
a. The maximum salary deferral made during a tax year on behalf of a
Participant, when aggregated with other salary deferral amounts made through the
Employer (or controlled group of Employers under IRC 414(b), (c), (m) or (o)),
shall not exceed the lesser of the maximum permitted amount for a Participant
under Sections 403(b)(2) and 415(c) of the Code for that year.
b. The maximum of all Salary Deferrals made during the Participant's tax
year shall not exceed the limitations set forth in Section 402(g) of the Code.
c. The maximum salary deferrals may be based on a valid election by the
Participant to use available special increase options.
2.03 Transfer to Custodial Account - The Participant may transfer (or arrange
for the transfer of) assets from another annuity contract or custodial account
described in Section 403(b) of the Code to this Account. The transfer shall be
accepted by the Custodian if the Participant certifies the transaction satisfies
all current requirements for such a transaction. The Custodian may request the
Participant to provide such information it deems necessary prior to accepting
the transfer. The Custodian shall not be responsible for determining whether any
transfer is proper.
SECTION THREE: INVESTMENT OF CONTRIBUTIONS
3.01 Shares of Regulated Investment Companies - All Contributions by a
Participant to his or her Account shall be invested by the Custodian pursuant to
written instructions concerning investments delivered by the Participant to the
Custodian prior to or at the time a contribution is made to the Account. The
Custodian shall, within a reasonable time following receipt of written
instructions from the Participant, invest such contributions in full or
fractional shares of certain regulated investment companies.
For purposes of this Agreement, "regulated investment companies" means any
regulated investment company or companies within the meaning of Section 851(a)
of the Code or any series issued by such company which has an investment
advisory agreement and/or a distribution agreement with the company, or any of
its affiliated or associated companies and which has agreed to offer shares for
use as funding vehicles for the Account.
If the investment instructions provided by the Participant to the
Custodian are not received by the Custodian or are, in the opinion of the
Custodian, ambiguous, the Custodian may hold or return all or a portion of the
contribution uninvested without liability for loss of income or appreciation,
without liability for interest, dividends or any other gain whatsoever, pending
receipt of proper instructions or clarification. The Custodian shall advise the
Participant of the form and manner in which investment instructions must be
given.
3.02 Participant Change of Investment - Subject to rules and procedures adopted
by the Custodian, a Participant may, at his or her election, direct the
Custodian to redeem any or all regulated investment company shares held by the
Custodian pursuant to this Agreement and to reinvest the proceeds in such other
regulated investment company shares as directed. Transactions of this character
must conform with the provisions of the current prospectus for the regulated
investment company shares subject to purchase.
3.03 Dividends and Distributions - Dividends and other distributions received by
the Custodian on shares of any regulated investment company held in the Account
shall be reinvested in additional shares of the regulated investment company
from which the dividend or other distribution originates, unless the Participant
directs the Custodian to act otherwise. Should a Participant have the choice of
receiving a distribution of shares from a regulated investment company in
additional shares, cash or other property, the Custodian shall nonetheless elect
to receive such distribution in additional shares.
3.04 Registered Owner, Voting Rights - All regulated investment company shares
acquired by the Custodian pursuant to this Agreement shall be registered in the
name of the Custodian or its nominee. The Custodian shall deliver or cause to be
executed and delivered to the Participant all notices, prospectuses, financial
statements, proxies and related proxy information. The Custodian shall vote the
shares in accordance with instructions from the Participant.
3.05 Sales Charges - All sales charges transfer fees, investment fees or other
administrative charges associated with the purchase of, transfer of or sale of
regulated investment company shares shall be charged to the Account of the
Participant.
<PAGE>
SECTION FOUR: DISTRIBUTIONS
4.01 Limitations on Distributions - Subject to the limitations described in this
Agreement, a Participant may request a distribution from the Account. A
Participant's Account may not be distributed prior to the Participant's
(a) attainment of age 59 1/2,
(b) incurring a disability within the meaning of Section 72(m)(7) of the
Code,
(c) death,
(d) encountering a financial hardship, or
(e) separation from service.
No distribution shall be made to a Participant (or Beneficiary, if
applicable) until he or she completes such written forms and provides such
additional information and documentation as the Custodian, in its sole
discretion, may deem necessary.
If the value of the Account immediately preceding the 1989 Plan Year is
ascertainable, such pre-1989 amounts are not subject to the limitations of
Section 4.01.
4.02 Financial Hardship - For purposes of this Agreement, "financial hardship"
shall include a financial need incurred by the Participant due to illness,
temporary disability, purchase of a home, or educational expenses of the
Participant or any member of his or her immediate family, or any other immediate
and heavy financial need of the Participant; provided, however, no financial
hardship shall exceed or otherwise not conform to the requirements of Section
403(b)(7) of the Code. No distributions on account of financial hardship shall
exceed the amount determined to be required to meet the immediate financial need
created by the hardship which cannot be otherwise reasonably accommodated from
other resources of the Participant. Any distribution made on account of a
Participant's financial hardship shall be made to such Participant in a single
sum payment in cash pursuant to written instructions in a form acceptable to the
Custodian, and delivered to the Custodian as may be provided in Section
403(b)(7) of the Code.
Hardship distributions may consist only of the amounts contributed
pursuant to a Participant's Salary Deferral Agreement.
4.03 Form of Distribution - Distributions for other than a financial hardship
shall be made in any one or more or any combination of the following forms:
(a) single lump sum payment;
(b) monthly, quarterly, semiannual or annual payments over a period
elected by the Participant not to extend beyond the Participant's life
expectancy; or
(c) in monthly, quarterly, semiannual or annual payments over a period
selected by the Participant not to exceed the joint life and last survivor
expectancy of the Participant and his or her Beneficiary.
At any time prior to commencement of distribution, the Participant may
make or change the foregoing distribution forms by delivering a written notice
to the Custodian.
Notwithstanding any other provision to the contrary, the Custodian may
make an immediate single sum distribution to the Participant or Beneficiary (if
applicable) if the value of the Account does not exceed $3,500.
At the discretion of the Custodian, other forms of distribution, if allowed
under applicable provisions of the Code, may be allowed.
In the event a Participant does not elect any of the methods of
distributions described above on or before such Participant's 70 1/2 birthday,
the Participant shall be deemed to have elected distribution made on his or her
70 1/2 birthday in the form of periodic payments over the single life expectancy
of the participant using the declining years method of determining the
Participant's life expectancy multiple; provided, however, the Custodian shall
have no liability to the Participant for any tax penalty or other damages which
may result from any inadvertent failure by the Custodian to make such a
distribution.
Notwithstanding anything in this Agreement to the contrary distributions
shall conform to the minimum distribution requirements of Section 401(a)(9) of
the Code and the regulations thereunder, including Treasury Regulations Sections
1.401(a)(9)-2 and 1.403(b)-2.
If the value of the Account prior to 1987 is determinable, the pre-1987
amount need not be subject to a required minimum distribution until the calendar
year the Participant attains age 75, or such later date as may be allowed by law
or regulation.
<PAGE>
4.04 Designation of Beneficiary - Each Participant may designate, upon a form
provided by the Custodian, any person or persons (including an entity other than
a natural person) as primary or contingent Beneficiary to receive all or a
specified portion of the Participant's Account in the event of the Participant's
death. A Participant may change or revoke such Beneficiary designation from time
to time by completing and delivering the proper form to the Custodian.
4.05 Distribution Upon Death of Participant - If a Participant dies before his
or her entire interest in the Account is distributed to him or her, or if
distribution has commenced to the Participant and his or her surviving spouse
and such surviving spouse dies before the entire interest is distributed to such
spouse, the entire interest or remaining undistributed balance of such interest
shall be distributed in the form of a single sum cash payment, or other form of
payment as permitted under current applicable code or regulations, to the
Beneficiary or Beneficiaries, if any, designated by the Participant or his or
her spouse as the case may be. In the event no such Beneficiary has been
designated, the Participant's estate shall receive the balance of the Account.
4.06 Distribution of Excess Amounts - The Custodian may make distribution of any
excess to the Participant.
4.07 Eligible Rollover Distributions - At the election of a Participant (or the
surviving spouse Beneficiary of a deceased Participant) the Custodian shall pay
any eligible rollover distribution to an individual retirement plan described in
Section 408 of the Code or another annuity contract or custodial account
described in Section 403(b) of the Code in a direct rollover for that
Participant (or beneficiary). The term "eligible rollover distribution" shall
have the meaning set forth in Sections 402(c)(2) and (4) of the Code and Q&A-3
through Q&A-8 of Treasury Regulations Section 1.402(c)-2T.
The Participant (or surviving spouse beneficiary) who desires a direct
rollover must specify the individual retirement plan or 403(b) plan to which the
eligible rollover distribution is to be paid and satisfy such other reasonable
requirements as the Custodian may impose.
SECTION FIVE: ADMINISTRATION
5.01 Duties of the Custodian - The Custodian shall have the following
obligations and responsibilities:
(a) To hold contributions to the Account it receives, invest such
contributions pursuant to the Participant's instructions and
distribute Account assets pursuant to this Agreement;
(b) To register any property held by the Custodian in its own name, or
in nominal bearer form, that will pass delivery;
(c) To maintain records of all relevant information as may be necessary
for the proper administration of the Account;
(d) To allocate earnings, if any, realized from such contributions and
such other data information as may be necessary;
(e) To file such returns, reports and other information with the
Internal Revenue Service and other government agencies as may be
required of the Custodian under applicable laws and regulations.
5.02 Reports - As soon as practicable after December 31st of each calendar year,
and whenever required by regulations under the Code, the Custodian shall deliver
to the Participant a written report of the Custodian's transactions relating to
the Account during the period from the last previous accounting and shall file
such other reports as may be required under the Code.
On receipt of the Custodian's report referenced in the preceding paragraph
a Participant shall have a period of 60 days following receipt to deliver a
written objection to the Custodian concerning information provided in the
report. In the event the Participant neglects to file such written objection,
the report shall be deemed approved and in such case, the Custodian shall be
forever released and discharged with respect to all matters and things included
herein.
5.03 Custodian Not Responsible for Certain Actions - Notwithstanding the
foregoing, the Custodian shall have no responsibility for determining the amount
of or collecting contributions to the Account made pursuant to this Agreement;
determining the amount, character or timing of any distribution to a Participant
under this Agreement; determining a Participant's maximum contribution amount;
maintaining or defending any legal action in connection with this Agreement,
unless agreed upon by the Custodian, Employer and Participant.
<PAGE>
5.04 Indemnification of Custodian - The Employer and Participant shall, to the
extent permitted under law, indemnify and hold the Custodian harmless from and
against any liability which may occur in the administration of the Account
unless arising from the Custodian's breach of its responsibilities under this
Agreement. By execution of this Agreement, it is the specific intention of the
parties that no fiduciary duties be conferred upon the Custodian nor shall any
be implied from this Agreement or the acts of this Custodian.
5.05 Custodian's Fees and Expenses - The Custodian may charge fees in connection
with the Account. In addition, the Custodian has the right to be reimbursed for
any taxes or expenses incurred by or on behalf of the Account. All such fees,
taxes or expenses may be charged against the Account or, at the option of the
Custodian, may be paid directly by the Participant or Employer. The Custodian
reserves the right to change its fee schedule, or add new fees, at any time upon
30 days prior written notice to the Participant.
SECTION SIX: AMENDMENT AND TERMINATION
6.01 Amendment of Agreement - This Agreement may be amended by an agreement in
writing between the Employee and Custodian. In addition, by execution of this
Agreement, the Employer and the Participant delegate to the Custodian all
authority to amend this Agreement by written notification from the Custodian to
the Participant as to any term hereof, at any time (including retroactively)
except that no amendment shall be made which may operate to disqualify the
Account under Section 403(b)(7) of the Code. The effective date of any amendment
hereto shall be the date specified in said amendment or 30 days subsequent to
the time notification of amendment is delivered by the Custodian to the
Participant.
6.02 Termination by Participant - The Participant reserves the right to
terminate further contributions to his or her Account pursuant to this Agreement
by executing and delivering to the Custodian an executed copy of an agreement
terminating said contributions. The Participant further reserves the right to
terminate his or her adoption of this Agreement in the event that he or she
shall be unable to secure a favorable ruling from the Internal Revenue Service
with respect to the Agreement. In the event of such termination, the Custodian
shall distribute the Account to the Participant.
6.03 Resignation or Removal of Custodian - The Custodian may resign as Custodian
of any Participant's Account upon 30 days written notice to the Participant. The
Participant may remove a Custodian upon 30 days prior written notice. Upon such
resignation or removal, a successor Custodian shall be named. Upon designation
of a successor Custodian, the Custodian shall transfer the assets held pursuant
to the terms of this Agreement to the successor Custodian. The Custodian may
retain a portion of the assets to the extent necessary to cover reasonable
administrative fees and expenses.
Where the Custodian is serving as a nonbank custodian pursuant to Section
1.401-12(n) of the Treasury Regulations, the Participant will appoint a
successor custodian upon notification by the Commissioner of Internal Revenue
that such substitution is required because the Custodian has failed to comply
with the requirements of Section 1.401-12(n) or is not keeping such records or
making such returns or rendering such statements as are required by forms or
regulations.
SECTION SEVEN: MISCELLANEOUS
7.01 Applicable Law - This Agreement is established with the intention that it
qualify as a tax-sheltered custodial account under Section 403(b)(7) of the Code
and that contributions to the same be treated accordingly. To the extent not
governed by Federal law, this Agreement shall be construed, administered and
enforced in accordance with the laws of the Custodian's state of incorporation.
If any provision of this Agreement shall for any reason be deemed invalid
or unenforceable, the remaining provisions shall, nevertheless, continue in full
force in effect and shall not be invalidated.
7.02 Nonalienation - The assets of a Participant in his or her Account shall be
nonforfeitable at all times and shall not be subject to alienation, assignment,
trustee process, garnishment, attachment, execution or levy of any kind, nor
shall such assets be subject to the claims of the Participant's creditors.
7.03 Terms of Employment - Neither the fact of the implementation of this
Agreement nor the fact that a common law employee has become a Participant,
shall give to such employee any right to continued employment; nor shall either
fact limit the right of the
<PAGE>
Employer to discharge or to deal otherwise with an employee without regard to
the effect such treatment may have upon the employee's rights as a Participant
under this Agreement.
7.04 Notices - Any notice or other communication which the Custodian may give
to a Participant shall be deemed given when sent by first class mail to the
Participant's last known address on the Custodian's records. Any notice or other
communication to the Custodian shall not become effective until the Custodian
actually receives it.
7.05 Matters Relating to Divorce - Upon receipt of a domestic relations order,
the Custodian may retain an independent third party to determine whether the
order is a Qualified Domestic Relations Order pursuant to Section 414(p) of the
Code. The Custodian may charge to the Account any and all expenses associated
with the determination.
<PAGE>
================================================================================
ZWEIG/EUCLID MUTUAL FUNDS 403(b)(7 )
ACCOUNT APPLICATION
================================================================================
The undersigned Employee represents that he/she has read the foregoing Code
Section 403(b)(7) Tax-Sheltered Custodial Account Agreement and understands the
terms and provisions thereof and hereby establishes an Account pursuant to said
Agreement. The Employee hereby directs State Street Bank & Trust Company, 2
Heritage Drive, Quincy, MA 02171, to serve as Custodian in accordance with this
Agreement. The annual Custodian fee of $10.00 has been disclosed to the Employee
and the Employee hereby consents to payment of the same. The maximum annual
custodial fee will not exceed $20.00 per social security number.
BE SURE TO COMPLETE THE INITIAL BENEFICIARY DESIGNATION FORM ON PAGE 9C-D
- --------------------------------------------------------------------------------
--------------------
BFDS Social Code 773
--------------------
1. EMPLOYEE DATA
Name______________________________________________Date of Birth_________________
Address: ________________________________________Social Security Number________
City _______________________________ State ___________________Zip Code__________
Effective date for commencement of contributions
-------------------------------
Month Day Year
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. TYPE OF TRANSACTION
|_| Rollover (Please complete pages 9 C-D, 10A-B, in addition to this
application)
|_| Transfer from another custodian (Please complete pages 9C-D, 10A-B,
in addition to this application)
|_| New Account (Complete this application and Initial Designation of
Beneficiary Form pages 9C-D)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. EMPLOYER DATA
Employer is a |_| 501(c)(3) Organization (specify)
|_| Public School
Name of Employer________________________________________________________________
Contact Person _________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
Telephone Number ( )_________________________________________________________
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<PAGE>
- --------------------------------------------------------------------------------
4. INVESTMENT SELECTION
I elect to have my contributions invested as follows:
A. Fund Name: ___________________________________________________
|_| Class A |_| Class B |_| Class C
B. Fund Name: ___________________________________________________
|_| Class A |_| Class B |_| Class C
C. Fund Name: ___________________________________________________
|_| Class A |_| Class B |_| Class C
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. DEALERS AND ADVISERS Only. If the information below is furnished, duplicate
statements of the Custodial Account will be sent to the person designated.
________________________________________________________________________________
Account Executive's Name Account Executive Number
________________________________________________________________________________
Dealer/Adviser's Name Telephone Number
________________________________________________________________________________
Branch Address Branch Number
________________________________________________________________________________
City State Zip Code
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- --------------------------------------------------------------------------------
6. ACCEPTANCE
I, the undersigned Employee, hereby agrees to the terms and conditions set forth
in the Zweig/Euclid Mutual Funds 403(b)(7) Tax Sheltered Custodial Account
Agreement. I knowingly assume responsibility for any tax consequences and
penalties which may result from contributions to, transactions with or without
distributions from the Account. I acknowledge receipt of a copy of this
Agreement.
________________________________________________________________________________
Employee Signature Date
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This application will be maintained by State Street Bank and Trust Company as
Custodian.
The complete application must be sent to: STATE STREET BANK AND TRUST COMPANY
P.O. BOX 8505
BOSTON, MA 02266-8505
Questions should be directed to 1-(800) 272-2700.
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<PAGE>
================================================================================
ZWEIG/EUCLID MUTUAL FUNDS 403(b)(7)
================================================================================
- --------------------------------------------------------------------------------
(Select One) |_| INITIAL DESIGNATION OF BENEFICIARY
|_| CHANGE IN BENEFICIARY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. EMPLOYEE DATA
Name of Employee ____________________________ Telephone Number _________________
Address _____________________________________ Account Number ___________________
_____________________________________ Social Security Number ___________
Date of Birth _______________________________ Name of Employer _________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. CURRENT MARITAL STATUS
|_| I Am Not Married
I understand that if I become married in the future, my spouse will
be my primary beneficiary unless I complete a new Designation of
Beneficiary form and my spouse consents to my designation.
|_| I Am Married
I understand that my spouse will be my primary beneficiary. However,
I understand I may designate a primary beneficiary other than my
spouse on the space below if my spouse signs Section 3 below
entitled "Spousal Signature."
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. SPOUSAL SIGNATURE (Required only in community property states when designted
beneficiary is other than spouse.)
The signature of the spouse must be witnessed by a notary public.
WITNESS: Subscribed and sworn to before me on this ____ day of ___________, 19__
NOTARY SIGNATURE_______________________________________________________
EMPLOYEE SIGNATURE_____________________________________ DATE___________
WITNESS SIGNATURE______________________________________ DATE___________
I consent to the designation of beneficiary below. I understand that if anyone
other than me is designated as primary beneficiary on this form, I am waiving
any rights I may have to receive benefits under the plan when my spouse dies.
PARTICIPANT'S SPOUSE S SIGNATURE_____________________________DATE_______________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. PARTICIPANT'S SIGNATURE
- --------------------------------------------------------------------------------
The payor may rely fully on this designation and I agree to promptly notify the
payor if there is any change in the status of any primary or contingent
beneficiary.
PARTICIPANT'S SIGNATURE_______________________________________DATE______________
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
5. DESIGNATION OF BENEFICIAIRES
The following individual(s) shall be my beneficiary(ies). (Please check primary
or contingent for each individual beneficiary.) If neither is checked, the
individual will be deemed to be a primary beneficiary.
If any primary or contingent beneficiary dies before me, his or her interest and
the interest of his or her heirs shall terminate completely, and the percentage
share of any remaining beneficiary(ies) shall be increased on a pro rata basis.
If no primary beneficiary(ies) survive me, the contingent beneficiary(ies) shall
acquire the designated share of my 403(b).
=====================================
Primary |_| Contingent |_|
NAME___________________________________ SOCIAL SECURITY NO._____________________
ADDRESS________________________________ DATE OF BIRTH_____________SHARE________%
_______________________________________ RELATIONSHIP___________________________
Primary |_| Contingent |_|
NAME___________________________________ SOCIAL SECURITY NO._____________________
ADDRESS________________________________ DATE OF BIRTH_____________SHARE________%
_______________________________________ RELATIONSHIP___________________________
Primary |_| Contingent |_|
NAME___________________________________ SOCIAL SECURITY NO._____________________
ADDRESS________________________________ DATE OF BIRTH_____________SHARE________%
_______________________________________ RELATIONSHIP___________________________
Primary |_| Contingent |_|
NAME___________________________________ SOCIAL SECURITY NO._____________________
ADDRESS________________________________ DATE OF BIRTH_____________SHARE________%
_______________________________________ RELATIONSHIP___________________________
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<PAGE>
================================================================================
ZWEIG/EUCLID MUTUAL FUNDS 403(b)(7)
TRANSFER/DIRECT ROLLOVER REQUEST FORM
================================================================================
- --------------------------------------------------------------------------------
(Select One) |_| Transfer
|_| Direct Rollover
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INSTRUCTIONS
o Complete the Zweig/Euclid Mutual Funds 403(b)(7) Account Application, the
Initial Designation of Beneficiary Form and the Transfer / Direct Rollover
Request Form.
o If you are liquidating an insurance company annuity contract, enclose the
contract and a signed cash surrender form (this can be obtained from the
insurance company)
o Be sure to sign all Forms. A Signature Guarantee may be required for the
Transfer Request Form by the Transferor/Resigning Trustee/Custodian. Be
sure to check with them.
o Send all forms to: State Street Bank and Trust Company
P.O. Box 8505
Boston, MA 02266-8505
o Questions regarding this Form should be directed to 1 (800) 272-2700
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. (Select One) |_| Transfer
|_| Direct Rollover
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. PARTICIPANT DATA
Name________________________________________Date of Birth_______________________
Address_____________________________________Phone_______________________________
City________________________________________State_____________Zip Code__________
Social Security Number__________________________________________________________
Employer Name __________________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. TRANSFEROR/RESIGNING TRUSTEE OR CUSTODIAN DATA
Name of Resigning Trustee_______________________________________________________
Name of Contact Person__________________________________________________________
Address_____________________________________Phone_______________________________
City________________________________________State_____________Zip Code__________
Account Name________________________________SSN_________________________________
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<PAGE>
- --------------------------------------------------------------------------------
4 INSTRUCTIONS TO TRANSFEROR TRUSTEE/CUSTODIAN
|_| Liquidate my annuity contract and forward a check payable to State Street
Bank and Trust Company for the net surrender proceeds. Provide Annuity Contract
Policy Number__________________________
|_| Liquidate ALL Mutual Fund Shares and forward a check made payable to State
Street Bank and Trust Company for the proceeds.
|_| Liquidate ONLY the Mutual Fund Shares listed below and forward a check made
payable to State Street Bank and Trust Company for the proceeds.
________________________________________________________________________________
Name of Investment Account No. $ or % to Transfer
________________________________________________________________________________
Name of Investment Account No. $ or % to Transfer
________________________________________________________________________________
Name of Investment Account No. $ or % to Transfer
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. ZWEIG/EUCLID MUTUAL FUNDS INVESTMENT SELECTION - I elect to have my
contributions invested as follows:
A. Fund Name:__________________________________________________
|_| Class A |_| Class B |_| Class C
B. Fund Name:__________________________________________________
|_| Class A |_| Class B |_| Class C
C. Fund Name:__________________________________________________
|_| Class A |_| Class B |_| Class C
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. SIGNATURE I hereby request a Transfer or Direct Rollover of my 403(b) Plan to
the Zweig/Euclid Mutual Funds 403(b)(7) Tax-Sheltered Custodial Account. I
agree to submit additional information if requested to effectuate this
transaction.
Participant_______________________________________________________Date__________
Signature Guarantee (if required)_______________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WITHHOLDING
Do not withhold Federal Income Tax or State Income Tax since withholding
election does not apply to Revenue Ruling 90-24 transfers
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY accepts its appointment as Custodian.
State Street Bank and Trust Company________________________________Date_________
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
ZWEIG/EUCLID MUTUAL FUNDS 403(b)(7)
DISTRIBUTION REQUEST FORM
================================================================================
- --------------------------------------------------------------------------------
Mail this distribution request form to: State Street Bank & Trust Company
P.O. Box 8505
Boston, MA 02266-8505
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEE IMPORTANT INFORMATION ON PAGE 11C BEFORE YOU COMPLETE THIS REQUEST FORM
Questions should be directed to Zweig/Euclid Shareholder Servicing
at 1 (800) 272-2700.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. GENERAL INFORMATION
Name of Employer________________________________________________________________
Address ________________________________________________________________________
City ________________________________________________ State _____Zip Code_______
Name of Participant or Beneficiary __________________ Date of Birth ____________
Home Address ________________________________________ Phone Number _____________
City ________________________________________________ State _____Zip Code_______
Social Security Number ______________________________ Account Number ___________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. DISTRIBUTION SELECTION (See Section 3 if you are age 70 1/2)
|_| Normal Retirement Age |_| Disability |_| Death |_| Termination of
Employment |_| Hardship
|_| Other ______________________________________________________________________
Form of Payment: (select one)
|_| Single Sum Cash Payment - Amount $______________
|_| Partial Payment - Amount $__________________________
|_| Systematic Withdrawal Plan - You may receive a check periodically as
you indicate below. The minimum is $25. There must be a minimum of
$5,000 in the selected Series to initiate the plan. Under this plan
dividends and distributions must be reinvested.
|_| Monthly |_| Quarterly |_| Semi-Annually |_| Annually
Star Date: Month_______________ Year_________________
Amount of Distribution $______________________
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<PAGE>
- --------------------------------------------------------------------------------
3.DISTRIBUTION SELECTION FOR PARTICIPANTS ATTAINING AGE 70 1/2
Shareholders must begin to take a "REQUIRED MINIMUM DISTRIBUTION" by April 1 of
the year following the calendar year in which the participant reaches age 70
1/2. However, in the case of governmental or church plans the required beginning
date is the later of April 1 of the year following the calendar year in which
the participant reaches age 70 1/2 or April 1 of the calendar year following the
calendar year in which the participant retires, which ever is later. Please
check with your employer.
Form of Payment: (select one)
|_| Single Sum Cash Payment - Amount $______________
|_| Partial Payment - Amount $__________________________
|_| Systematic Withdrawal Plan (See box 2 for a description of the Plan)
|_| Monthly |_| Quarterly |_| Semi-Annually |_| Annually
Star Date: Month_______________ Year_________________
The Amount of Distribution: (Select One)
|_| Provided by the participant $______________ or,
|_| As calculated by the Custodian based upon: |_| Individual
Life Expectancy
|_| Joint Life
Expectancy
(I elect |_| to |_| not to recalculate the life expectancy
used to determine required minimum distribution)
If you checked "Joint Life Expectancy" please answer the following questions:
Name of Oldest Primary Beneficiary ________________________ S.S.N. _____________
Date of Birth _____________________________________________ Relationship _______
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. WITHHOLDING ELECTION
This Withholding Election section only applies (for Federal withholding
purposes) to distributions that are not eligible rollover distributions. See the
Withholding Notice and Instructions on page 11C. If the box below is checked,
Federal and State (if applicable) income tax will not be withheld from your
distribution.
|_| Do not withhold Federal Income Tax
|_| Do not withhold State Income Tax
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. SIGNATURES
I hereby request payment from the 403(b) plan designated above in the manner
indicated.
I certify that all information provided by me is true and accurate, and I agree
to submit additional information if requested by the Employer or Payor. No tax
advice has been given to me by either the Employer or Payor. All decisions
regarding this payout are my own. I expressly assume the responsibility for any
adverse consequences which may arise from this distribution and I agree that the
Employer and Payor shall in no way be responsible for those consequences.
Participant or Beneficiary Signature ___________________________ Date __________
Payor Signature ________________________________________________ Date __________
- --------------------------------------------------------------------------------
<PAGE>
IMPORTANT INFORMATION AND INSTRUCTIONS
INSTRUCTIONS FOR DIRECT ROLLOVER OF ELIGIBLE ROLLOVER DISTRIBUTIONS
Payments from the 403(b) plan that are eligible rollover distributions can be
taken in two ways. You may have all or any portion of your eligible rollover
distribution either (1) paid in a direct rollover to an IRA or another 403(b)
plan or (2) be paid to you. If you chose to have your plan benefit paid to you,
you will receive only 80% of the payment, because the Payor is required to
withhold 20% of the payment and send it to the IRS as income tax withholding to
be credited against your taxes. You cannot waive that withholding.
Eligible rollover distributions are all distributions from the plan except the
following:
o required minimum distributions;
o certain distributions that are part of a series of equal (or almost equal)
periodic payments that will last for your lifetime (or joint lives of you
and your beneficiary) or for a specified period of 10 years or more;
o distributions to nonspouse beneficiaries of deceased participants; and
o distributions of after-tax employee contributions.
If you want the Payor to make a direct rollover of your plan payment to an IRA
or another 403(b) plan, you must provide certain information about that IRA or
403(b). The Payor will specify that information. The Payor may ask you to
complete and attach a Zweig/Euclid Mutual Funds Transfer/Direct Rollover Request
or similar form.
WITHHOLDING NOTICE AND INSTRUCTIONS
Distributions from your 403(b) plan are subject to Federal (and in some cases,
State) income tax withholding. For some distributions, you can elect not to have
withholding apply. However, you cannot waive withholding on any eligible
rollover distribution that is paid to you. See the information above for the
definition of eligible rollover distribution and a description of the mandatory
20% withholding.
DISTRIBUTIONS THAT ARE NOT ELIGIBLE ROLLOVER DISTRIBUTIONS
Election of No Withholding
If your distribution is not an eligible rollover distribution (see the
definition of eligible rollover distribution above) you may elect not to have
withholding apply. Check the withholding box (or boxes) if you do not want any
Federal (or State, if applicable) income tax withheld from your distribution.
Even if you do not have income tax withheld, you are liable for payments of
income tax on the taxable portion of your distribution. You also may be subject
to tax penalties under the estimated tax payment rules if your payments or
estimated tax and withholding, if any, are not adequate.
Periodic Distributions
For purposes of the withholding rules on distributions that are not eligible
rollover distributions, a periodic distribution is one that is includible in
your income for tax purposes and that you receive in installments at regular
intervals (e.g., annually, quarterly, monthly, etc.) over a period of time
(generally, at least 10 years).
Periodic distributions are treated as wages for purposes of withholding. If you
do not waive withholding on your periodic distributions, Federal income tax will
be withheld from each payment as if you were a married individual claiming three
withholding allowances. However, you can change the amount of the withholding by
filling in the blanks below:
Number of allowances on which withholding is to be computed. ___________________
Additional dollar amount to be withheld from each payment $_____________________
Non-periodic Distributions
If you do not waive withholding on any non-periodic distribution that is not an
eligible rollover distribution, Federal income tax will be withheld at the rate
of 10% unless you specify a greater rate here: Rate: ______% (not less than 10%)
CAUTION: Remember that there are penalties for not paying enough tax during the
year, either through withholding or estimated tax payments. New retirees,
especially, should see Publication 505. It explains the estimated tax
requirements and penalties in detail. You may be able to avoid quarterly
estimated tax payments by having enough tax withheld from your pension or
annuity using Form W4-P.
<PAGE>
================================================================================
(SAMPLE only) ZWEIG/EUCLID MUTUAL FUNDS 403(b)(7)
SALARY DEFERRAL AGREEMENT
================================================================================
- --------------------------------------------------------------------------------
INSTRUCTIONS
Please contact your employer regarding the implementation of salary deferral.
This form is merely a sample salary deferral agreement. Your employer may
provide you with a salary deferral agreement which is more appropriate. If your
employer does not provide you with such a form, you may use this sample salary
deferral agreement. Please send this sample salary deferral agreement to your
employer if the employer does not provide you with a form.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1.PARTICIPANT INFORMATION
Name___________________________________________SSN______________________________
Address________________________________________Phone____________________________
City___________________________________________State__________Zip Code__________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. EMPLOYER INFORMATION
Name of Employer________________________________________________________________
Address_________________________________________________________________________
City___________________________________________State___________Zip Code_________
- --------------------------------------------------------------------------------
I, the undersigned Participant, hereby agree to defer the following amount or
percentage of my pay into a 403(b)(7) Tax-Sheltered Custodial Account each pay
period by way of payroll deduction: (check and complete one)
|_| $_______________ Specify dollar amount
|_| ________________ % Specify percentage of pay
|_| I wish to change my deferral to __________% or $________ of my compensation
(do not complete both) per pay period
|_| I decline participation
Date effective: ____________
I agree that my pay will be reduced by the amount or percentage I have indicated
above and that my employer will contribute dollars to my Zweig/Euclid Mutual
Funds 403(b)(7) Tax-Sheltered Custodial Account. Employer must send the
contribution to State Street Bank and Trust Company, P.O. Box 8505, Boston, MA
02266-8505. Please be sure to provide the Zweig or Euclid Mutual Fund Account
Number.
This Salary Deferral Agreement is effective only with respect to compensation
not yet earned by the Participant, and not with respect to compensation already
earned by the Participant on the date of execution of the Agreement. The
Employer or the Participant may terminate this Agreement at any time, with
respect to compensation not yet earned by the Participant at the date of
termination, by giving written notice to the other party. The Participant may
make only one Salary Deferral Agreement with the employer during any taxable
year of the Participant. This means that, after termination of this Agreement,
the Participant may reinstate this Agreement (with the same or a different
salary deferral amount) in any taxable year of the Participant following the
taxable year in which the Agreement was terminated. Also, the Participant may
modify the amount of salary deferral elected above at any time by giving the
Employer written notice specifying the new salary deferral amount; however, any
such modification may not be made during the same taxable year of the
Participant in which the Participant originally signed a Salary Deferral
Agreement or in any taxable year of the Participant during which the Participant
has already modified his or her salary deferral amount.
- --------------------------------------------------------------------------------
SIGNATURES
This agreement shall be effective for the pay period which begins on
(Date)____________________________________.
________________________________________________________________Date____________
Signature of Participant
________________________________________________________________Date____________
Signature of Employer
Title
- --------------------------------------------------------------------------------
<PAGE>
----------
SPONSOR
----------
Zweig/Euclid Mutual Funds
900 Third Avenue
31st Floor
New York, NY 10022
-------------------
TRANSFER AGENT
-------------------
(Mailing Address) (Courier Address)
Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 8505 2 Heritage Drive
Boston, MA 02266-8505 3rd Floor
North Quincy, MA 02171
ALL QUESTIONS SHOULD BE DIRECTED TO 1-(800) 272-2700
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This booklet is authorized for use only when
accompanied or preceded by a current prospectus.
--------------------------------------------------------
Exhibit 15
EUCLID MUTUAL FUNDS
Class B Shares
RULE 12b-1 DISTRIBUTION PLAN
This distribution plan (the "Rule 12b-1 Distribution Plan" or the
"Plan") has been adopted by the sole shareholder of the Class B Shares of Euclid
Market Neutral Fund which is a series of Euclid Mutual Funds (the "Trust"), a
Delaware business trust, on April 22, 1998, pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "Act").
W H E R E A S:
The Trust is an open-end management investment company and is
registered as such under the Act. The Trust has the above listed series which is
currently being offered, and the Board of Trustees may establish and offer
additional series in the future. The Trust has a multi-class distribution system
that allows each series to offer investors the option of purchasing shares
either subject to a front-end sales charge (which may be reduced or waived under
certain circumstances as described in the Trust's Prospectus) coupled with a
Rule 12b-1 Plan distribution fee (the "Class A Shares"), subject to a declining
contingent deferred sales charge (if sold within six years after purchase), a
Rule 12b-1 Plan distribution fee and a service fee (the "Class B Shares") or
subject to a contingent deferred sales charge (if sold within one year after
purchase), a Rule 12b-1 Plan distribution fee and a service fee (the "Class C
Shares"). Euclid Market Neutral Fund offers investors the option of purchasing a
fourth class of shares (the "Class I Shares") which does not have a Rule 12b-1
Plan. This Plan, however, governs only the Class B Shares of each series of the
Trust. The Trust may, from time to time, distribute shares of any class of any
series through a contractual arrangement (the "Distribution Agreement") with a
principal distributor (the "Principal Distributor") for such class of shares of
such series duly qualified to act on behalf of the Trust in such capacity, it
being understood that the Trust may change the Principal Distributor for any
class of shares of any series from time to time. The Board of Trustees,
including a majority of the Qualified Trustees (as defined in paragraph 5
herein), has determined to adopt this Plan. In voting to approve this Plan, the
Trustees have determined, in the exercise of their reasonable business judgment
and in light of their fiduciary duty, that there is a reasonable likelihood that
this Plan will benefit the Class B Shares of Euclid Market Neutral Fund.
NOW, THEREFORE, in consideration of the foregoing, the Trust hereby
adopts this Plan in accordance with Rule 12b-1 under the Act on the following
terms and conditions:
<PAGE>
1. The Trust shall pay to each Principal Distributor of Class B
Shares of any series (includingEuclid Market Neutral Fund) its "Allocable
Portion," as hereinafter defined, of the distribution fee allowable under the
Rules of Conduct of NASD Regulation, Inc. (the "Rules of Conduct") in respect of
such Class of Shares of such series, consisting of a distribution fee at the
rate of three quarters of one percent (0.75%) per annum of the average daily net
assets of such Class of Shares (the "Distribution Fee") and a service fee at the
rate of one quarter of one percent (0.25%) of the average daily net assets of
such Class of Shares of such series of the Trust (as described in the
Prospectus). For purposes of applying the limitation set forth in the Rules of
Conduct on the maximum amount of the Distribution Fee payable in respect of the
Class B Shares of any series, the Trust hereby elects to add to six and one
quarter percent (6.25%) of the issue price of the Class B Shares interest
thereon at the rate of prime plus one percent per annum. A contingent deferred
sales charge ("CDSC") also shall be payable by the holders of Class B Shares in
the case of early redemption of such Class B Shares (as described in the
Prospectus).
2. The amounts set forth in paragraph 1 of this Plan shall be paid
for the Principal Distributor's services and expenses as distributor of the
Class B Shares of the Trust and may be spent by the Principal Distributor, in
its discretion, on, among other things, compensation to and expenses (including
overhead and telephone expenses) of account executives or other employees of the
Principal Distributor or of other broker-dealers who engage in or support
distribution of shares; printing of prospectuses and reports for other than
existing shareholders; advertising; preparation, printing and distribution of
sales literature; and allowances to other broker-dealers. In addition, whether
or not required to be provided for in this Rule 12b-1 Distribution Plan, to the
extent approved by the shareholders of a particular series and the Board of
Trustees of the Trust, the Class B Shares or a series may pay or reimburse the
Principal Distributor and others for all of its organizational and initial
offering expenses. Such amounts are in addition to and not limited by the
amounts as set forth in paragraph 1 herein.
3. Any Distribution Agreement in respect of Class B Shares of any
series may provide that: (I) the Principal Distributor in respect of such
Distribution Agreement will be deemed to have fully earned its Allocable Portion
of the Distribution Fee payable in respect of Class B Shares of such series upon
the sale of each "Initial Issue Commission Share" (as hereinafter defined) of
such series taken into account in determining such Principal Distributor's
Allocable Portion of such Distribution Fee; (II) except as provided in (III)
below, the Trust's obligation to pay such Principal Distributor its Allocable
Portion of the Distribution Fee payable in respect of the Class B Shares of such
series shall be absolute and unconditional and shall not be subject to dispute,
offset, counterclaim or any defense whatsoever (it being understood that such
provision is not a waiver of the Trust's right to pursue such Principal
Distributor and enforce such claims against the assets of such Principal
Distributor other than its right to the Distribution Fees and CDSCs in respect
of the Class B Shares of such series); (III) the Trust's obligation to pay such
Principal Distributor its Allocable Portion of the Distribution Fee payable in
respect of the Class B Shares of such series shall not be terminated or modified
except to the extent required by a change in the Act or the Rules of Conduct
enacted or promulgated after September 15, 1995 (a "Change-in-
<PAGE>
Applicable-Law"), or in connection with a "Complete Termination" (as hereinafter
defined) of this Plan in respect of the Class B Shares of such series; (IV) the
Trust will not waive or change any CDSC in respect of the Class B Shares of such
series, except as provided in the Trust's Prospectus or statement of additional
information without the consent of the Principal Distributor (or its assigns);
(V) except to the extent required by a Change-in-Applicable-Law, neither the
termination of such Principal Distributor's role as principal distributor of the
Class B Shares of such series, nor the termination of such Distribution
Agreement nor the termination of this Plan will terminate such Principal
Distributor's right to its Allocable Portion of the CDSCs in respect of Class B
Shares of such series sold prior to such termination; (VI) except as provided in
the Trust's Prospectus and statement of additional information, until such
Principal Distributor has been paid its Allocable Portion of the Distribution
Fees in respect of the Class B Shares of such series, the Trust will not adopt a
plan of liquidation in respect of such series without the consent of such
Principal Distributor (or its assigns); and (VII) such Principal Distributor may
sell and assign its rights to its Allocable Portion of the Distribution Fees and
CDSCs (but not such Principal Distributor's obligations to the Trust under the
Distribution Agreement) to raise funds to make the expenditures related to the
distribution of Class B Shares of such series and in connection therewith, upon
receipt of notice of such sale and assignment, the Trust shall pay to the
purchaser or assignee such portion of the Principal Distributor's Allocable
Portion of the Distribution Fees in respect of the Class B Shares of such series
so sold or assigned. For purposes of this Plan, the term "Allocable Portion"
means, in respect of Distribution Fees payable in respect of the Class B Shares
of any series as applied to any Principal Distributor, the portion of such
Distribution Fees and CDSCs allocated to such Principal Distributor in
accordance with the Allocation Schedule (as hereinafter defined). For purposes
of this Plan, the term "Complete Termination" of this Plan means, in respect of
any series, a termination of this Plan involving the cessation of payments of
Distribution Fees hereunder in respect of Class B Shares of such series and the
cessation of payments of distribution fees pursuant to every other rule 12b-1
plan of the Trust in respect of such series for every future class of shares
which, in the good faith determination of the Board of Trustees of the Trust,
has substantially similar economic characteristics to the Class B Shares taking
into account the total sales charge, contingent deferred sales charge and other
similar charges, it being understood that the existing Class A Shares and the
existing Class C Shares do not have substantially similar economic
characteristics to the Class B Shares. For purposes of this Plan, the term
"Allocation Schedule" means, in respect of the Class B Shares of any series, a
schedule which shall be approved in the same manner as this Plan as contemplated
by Section 5 hereof for assigning to each Principal Distributor of Class B
Shares of such series the portion of the total Distribution Fees payable by the
Trust in respect of the Class B Shares of such series which has been earned by
such Principal Distributor, which shall be attached to and become a part of any
Distribution Agreement in respect of Class B Shares. For purposes of clause (I)
of the first sentence of this Section 3, the term "Initial Issue Commission
Share" shall mean, in respect of any series, a Class B Share which is a
Commission Share issued by such series under circumstances other than in
connection with a permitted free exchange with another fund. For purposes of the
foregoing definition a "Commission Share" shall mean, in respect of any series,
each Class B Share of such series which is issued under circumstances which
would normally give rise to an obligation of the holder of such Class B Share to
pay a CDSC upon
<PAGE>
redemption of such Share, including, without limitation, any Class B Share of
such Fund issued in connection with a permitted free exchange, and any such
Class B Share shall not cease to be a Commission Share prior to the redemption
(including a redemption in connection with a permitted free exchange) or
conversion even though the obligation to pay the CDSC shall have expired or
conditions for thereof still exist.
4. This Plan shall not take effect until it has been approved by a
vote of at least a majority (as defined in the Act) of the outstanding voting
securities of Class B Shares of the Series. With respect to the submission of
this Plan for such a vote, it shall have been effectively approved with respect
to Class B Shares of any series if a majority of the outstanding voting
securities of Class B Shares of that series votes for the approval of this Plan,
notwithstanding that: (1) this Plan has not been approved by a majority of the
outstanding voting securities of Class B Shares of any other series, or (2) the
matter has not been approved by a majority of the outstanding voting securities
of Class B Shares of the Trust.
5. This Plan shall become effective with respect to the Class B
Shares of a series upon approval, together with any related agreements, by a
majority vote of both (i) the Board of Trustees and (ii) those Trustees who are
not "interested persons" of the Trust (as defined in the Act) and have no direct
or indirect financial interest in the operation of this Plan or any agreements
related to it (the "Qualified Trustees"), cast in person at a meeting called for
the purpose of voting on this Plan and such related agreements.
6. This Plan shall continue in effect for so long as such
continuance is specifically approved at least annually in the manner provided
for approval of this Plan in paragraph 5 herein.
7. In each year that this Plan remains in effect, any person
authorized to direct the disposition of monies paid or payable by the Trust
pursuant to this Plan or any related agreement shall prepare and furnish to the
Board and the Board shall review, at least quarterly, written reports, complying
with the requirements of Rule 12b-1 under the Act, of the amounts expended under
this Plan and purposes for which such expenditures were made.
8. This Plan may be terminated at any time with respect to the Class
B Shares of any series by a majority vote of the Qualified Trustees or by vote
of a majority of the outstanding voting securities of Class B Shares of that
series. This Plan may remain in effect with respect to the Class B Shares of a
series even if it has been terminated in accordance with this paragraph with
respect to one or more other series of the Trust.
9. This Plan may not be amended in order to increase materially the
amount of distribution expenses provided for in paragraph 1 herein unless such
amendment is approved by a majority (as defined in the Act) of the outstanding
voting securities of Class B Shares and no material amendment to this Plan shall
be made unless approved in the manner provided in paragraph 5 herein.
<PAGE>
10. While this Plan shall be in effect, the selection and nomination
of Trustees who are not interested persons of the Trust (as defined in the Act)
shall be committed to the discretion of the Trustees then in office who are not
interested persons of the Trust.
The Trust shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 7 herein, for a period of
not less than six years from the date of this Plan, or the agreements or such
report, as the case may be, the first two years in an easily accessible place.
The Agreement and Declaration of Trust of the Trust is on file with
the Secretary of the State of Delaware and notice is hereby given that this Plan
is adopted on behalf of the Trust, and not by the Trustees or officers of the
Trust individually, and the obligations of or arising out of this Plan are not
binding upon the Trustees, officers or shareholders of the Trust individually
but are binding only upon the assets and property of the Trust. Notice is hereby
given that the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular series of the Trust shall
be enforceable against the assets of such series only, and not against the
assets of the Trust generally.
Date: April 22, 1998
<PAGE>
EUCLID MUTUAL FUNDS
Class A Shares and Class C Shares
RULE 12b-1 DISTRIBUTION PLAN
This distribution plan (the "Rule 12b-1 Distribution Plan" or the
"Plan"), has been adopted by the sole shareholder of the Class A Shares and
Class C Shares of Euclid Market Neutral Fund, a series of Euclid Mutual Funds
(the "Trust"), a Delaware business trust, on April 22, 1998, pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended (the "Act").
W H E R E A S:
The Trust is an open-end management investment company and is
registered as such under the Act. The Trust has the above listed series which is
currently being offered, and the Board of Trustees may establish and offer
additional series in the future. The Trust has a multi-class distribution system
that allows each series to offer investors the option of purchasing shares
either subject to a front-end sales charge (which may be reduced or waived under
certain circumstances as described in the Trust's Prospectus) coupled with a
Rule 12b-1 Plan distribution fee (the "Class A Shares"), subject to a declining
contingent deferred sales charge (if sold within six years after purchase), a
Rule 12b-1 Plan distribution fee and a service fee (the "Class B Shares") or
subject to a contingent deferred sales charge (if sold within one year after
purchase), a Rule 12b-1 Plan distribution fee and a service fee (the "Class C
Shares"). Euclid Market Neutral Fund (the "Fund") offers investors the option of
purchasing a fourth class of shares (the "Class I Shares"), which does not have
a Rule 12b-1 Plan. This Plan, however, governs only the Class A Shares and Class
C Shares of each series of the Trust. The Trust may, from time to time,
distribute shares of any class of any series through a contractual arrangement
(the "Distribution Agreement") with a principal distributor (the "Principal
Distributor") for such class of shares of such series duly qualified to act on
behalf of the Trust in such capacity, it being understood that the Trust may
change the Principal Distributor for any class of shares of any series from time
to time. The Board of Trustees, including a majority of the Qualified Trustees
(as defined in paragraph 6 herein), has determined to adopt this Plan. In voting
to approve this Plan, the Trustees have determined, in the exercise of their
reasonable business judgment and in light of their fiduciary duty, that there is
a reasonable likelihood that this Plan will benefit the Class A Shares and Class
C Shares of the Fund.
NOW, THEREFORE, in consideration of the foregoing, the Trust hereby
adopts this Plan in accordance with Rule 12b-1 under the Act on the following
terms and conditions:
<PAGE>
1. The Trust shall pay to the Principal Distributor of Class A
Shares of any series of the Trust a fee at the rate of .30 of 1% per annum of
the average daily net assets of the Class A Shares of each series of the Trust.
If at any time this Plan shall not be in effect with respect to the Class A
Shares of all series, the above fee shall be calculated on the basis of the net
assets of Class A Shares of those series for which the Plan is in effect. The
fee shall be calculated and accrued daily and paid monthly or at such other
intervals as the Board of Trustees shall determine.
2. The Trust shall pay to the Principal Distributor of Class C
Shares of any series of the Trust a distribution fee at the rate of 1% per annum
of the average daily net assets of the Class C Shares of each series of the
Trust. The fee for all such payments made to the Distributor under this
paragraph includes a service fee of .25 of 1% per annum of the average daily net
assets of the Class C Shares of each series. The fee is paid to financial
services firms including National Association of Securities Dealers, Inc.
("NASD") member firms (commencing one year after purchase with respect to Class
C Shares) for continuous personal service by such firms to investors in such
Class C Shares. If at any time this Plan shall not be in effect with respect to
the Class C Shares of all series, the above fees shall be calculated on the
basis of the net assets of Class C Shares of those series for which the Plan is
in effect. The fees shall be calculated and accrued daily and paid monthly or at
such other intervals as the Board of Trustees shall determine. For purposes of
applying the limitation set forth in the Rules of Conduct of NASD Regulation,
Inc. on the maximun amount of the Distribution Fee payable in respect of the
Class C Shares of any series, the Trust hereby elects to add to six and one
quarter percent (6.25%) of the issue price of the Class C Shares interest
thereon at the rate of prime plus one percent per annum.
3. The amounts set forth in paragraphs 1 and 2 of this Plan shall be
paid for the Principal Distributor's services and expenses as distributor of the
Class A Shares and Class C Shares of the Trust and may be spent by the Principal
Distributor, in its discretion, on, among other things, compensation to and
expenses (including overhead and telephone expenses) of account executives or
other employees of the Principal Distributor or of other broker-dealers who
engage in or support distribution of shares; printing of prospectuses and
reports for other than existing shareholders; advertising; preparation, printing
and distribution of sales literature; and allowances to other broker-dealers. In
addition, whether or not required to be provided for in this Rule 12b-1 plan, to
the extent approved by the shareholders of a particular class or series and the
Board of Trustees of the Trust, a class or series may pay or reimburse the
Principal Distributor and others for all of its organizational and initial
offering expenses. Such amounts are in addition to and not limited by the
amounts as set forth in paragraphs 1 and 2 herein.
4. This Plan shall not take effect with respect to the Class A
Shares of a series until it has been approved by a vote of at least a majority
(as defined in the Act) of the outstanding voting securities of Class A Shares
of the series. With respect to the submission of this Plan for such a vote, it
shall have been effectively approved with respect to Class A Shares of any
series if a majority of the outstanding voting securities of Class A Shares of
that series votes for the approval of this Plan, notwithstanding that: (1) this
Plan has not been approved
<PAGE>
by a majority of the outstanding voting securities of Class A Shares of any
other series, or (2) the matter has not been approved by a majority of the
outstanding voting securities of Class A Shares of the Trust.
5. This Plan shall not take effect with respect to the Class C
Shares of a series until it has been approved by a vote of at least a majority
(as defined in the Act) of the outstanding voting securities of Class C Shares
of the series. With respect to the submission of this Plan for such a vote, it
shall have been effectively approved with respect to Class C Shares of any
series if a majority of the outstanding voting securities of Class C Shares of
that series votes for the approval of this Plan, notwithstanding that: (1) this
Plan has not been approved by a majority of the outstanding voting securities of
Class C Shares of any other series, or (2) the matter has not been approved by a
majority of the outstanding voting securities of Class C Shares of the Trust.
6. This Plan shall not become effective with respect to the Class A
Shares or Class C Shares of a series without the approval, together with the
approval of any related agreements, of a majority vote of both (i) the Board of
Trustees and (ii) those Trustees who are not "interested persons" of the Trust
(as defined in the Act) and have no direct or indirect financial interest in the
operation of this Plan or any agreements related to it (the "Qualified
Trustees"), cast in person at a meeting called for the purpose of voting on this
Plan and such related agreements.
7. This Plan shall continue in effect for so long as such
continuance is specifically approved at least annually in the manner provided
for approval of this Plan in paragraph 6 herein.
8. In each year that this Plan remains in effect, any person
authorized to direct the disposition of monies paid or payable by the Trust
pursuant to this Plan or any related agreement shall prepare and furnish to the
Board and the Board shall review, at least quarterly, written reports, complying
with the requirements of Rule 12b-1 under the Act, of the amounts expended under
this Plan and purposes for which such expenditures were made.
9. This Plan may be terminated at any time with respect to the Class
A Shares of any series by a majority vote of the Qualified Trustees or by vote
of a majority of the outstanding voting securities of Class A Shares of that
series. This Plan may remain in effect with respect to the Class A Shares of a
series even if it has been terminated in accordance with this paragraph with
respect to one or more other series of the Trust.
10. This Plan may be terminated at any time with respect to the
Class C Shares of any series by a majority vote of the Qualified Trustees or by
vote of a majority of the outstanding voting securities of Class C Shares of
that series. This Plan may remain in effect with respect to the Class C Shares
of a series even if it has been terminated in accordance with this paragraph
with respect to one or more other series of the Trust.
<PAGE>
11. This Plan may not be amended in order to increase materially the
amount of distribution expenses provided for in paragraphs 1 and 2 herein unless
such amendment is approved in the manner provided in paragraphs 4 and 5 herein,
and no material amendment to this Plan shall be made unless approved in the
manner provided in paragraph 6 herein.
12. While this Plan shall be in effect, the selection and nomination
of Trustees who are not interested persons of the Trust (as defined in the Act)
shall be committed to the discretion of the Trustees then in office who are not
interested persons of the Trust.
The Trust shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 8 herein, for a period of
not less than six years from the date of this Plan, or the agreements or such
report, as the case may be, the first two years in an easily accessible place.
The Declaration of Trust of the Trust is on file with the Secretary
of the State of Delaware and notice is hereby given that this Plan is adopted on
behalf of the Trust, and not by the Trustees or officers of the Trust
individually, and the obligations of or arising out of this Plan are not binding
upon the Trustees, officers or shareholders of the Trust individually but are
binding only upon the assets and property of the Trust.
Date: April 22, 1998
Exhibit 18
EUCLID MUTUAL FUNDS
RULE 18f-3 MULTI-CLASS PLAN
I. Introduction.
In accordance with Rule 18f-3 under the Investment Company Act of
1940 (the "1940 Act"), the following Multiple Class Plan (the "Plan") specifies
the differences among each individual class of shares of the series of
investment funds of Euclid Mutual Funds (the "Trust") and sets forth the
separate arrangements for allocating expenses among each class of shares that
may be issued under the Trust's multiple class distribution system.
The Trust is an open-end series investment company registered under
the 1940 Act and its shares are registered under the Securities Act of 1933. The
Trust currently offers one series, Euclid Market Neutral Fund, and intends to
offer additional series in the future (each, a "Series").
As of the date hereof, the Trust hereby elects to offer multiple
classes of shares in each of its Series pursuant to the provisions of Rule 18f-3
and this Plan. Each share in a Series will represent an equal pro rata interest
in the underlying assets of the respective Series.
II. General.
The Trust reserves the right to increase, decrease or waive the
contingent deferred sales charge ("CDSC") imposed on any existing or future
classes of shares within the ranges permissible under applicable rules and
regulations of the Securities and Exchange Commission (the "SEC"), and the rules
of the National Association of Securities Dealers, Inc. (the "NASD"), as such
rules and regulations may be amended, modified or adopted from time to time. As
described more fully herein, the Trust currently intends to issue Class A
Shares, Class B Shares, Class C Shares and Class I Shares of each of its Series.
The Trust may in the future alter the terms of existing classes or create new
classes in compliance with applicable rules and regulations of the SEC and the
NASD.
III. Allocation of Expenses.
Pursuant to Rule 18f-3 under the 1940 Act, the Trust shall allocate
to each class of shares in a Series (i) any fees and expenses incurred by the
Trust in connection with the distribution of such class of shares under a
distribution plan adopted for such class of shares pursuant to Rule 12b-1 under
the 1940 Act, and (ii) any fees and expenses incurred by the Trust under a
shareholder servicing plan in connection with the provision of shareholder
services to the holders of such class of shares. In addition, pursuant to Rule
18f-3, the Trust may allocate the following fees and expenses to a particular
class of shares (to the extent such expenses actually vary among each class of
shares or vary by types of services provided to each class of shares) in any
Series:
(i) transfer agent fees identified by the transfer agent as being
attributable to such class of shares;
(ii) printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses, reports,
and proxies to current shareholders of such class of shares or to
regulatory agencies with respect to such class of shares;
(iii) blue sky and SEC registration or qualification fees incurred
by such class of shares;
(iv) the expenses of administrative personnel and services as
required to support the shareholders of such class of shares;
(v) litigation or other legal expenses relating solely to such class
of shares;
(vi) Trustees' fees incurred as a result of issues relating to such
class of shares; and
(vii) other expenses that are subsequently identified and determined
to be properly allocated to such class of shares.
<PAGE>
IV. Class Arrangements.
The following is a summary of the features applicable to each class
of shares for each Series. Additional details regarding such fees and services
are set forth in the Trust's current Prospectus.
A. Class A Shares
For Each Series:
a. Maximum Sales Charge: 5.50%, subject to quantity
discounts at certain dollar amounts, or breakpoints, as
described in the Prospectus.
b. Contingent Deferred Sales Charge: None.
c. Rule 12b-1 Fees: 0.30%, which includes a 0.25% service
fee.
d. Conversion Features: None.
e. Exchange Privileges: Subject to the restrictions and
conditions set forth in the Prospectus, Class A Shares
may be exchanged for Class A Shares of any fund
distributed by Zweig Securities Corp. (except that Class
A Shares of Zweig Cash Fund purchased without a sales
charge are exchangeable at net asset value plus the
applicable sales charge).
B. Class B Shares
For each Series:
a. Maximum Sales Charge: None.
b. Contingent Deferred Sales Charge: 5%, declines over time
for shares held less than six years.
c. Rule 12b-1 Fees: 1.00%, which includes a 0.25% service
fee.
d. Conversion Features: Convert to Class A Shares 84 months
after purchase, based on relative net asset value of the
two classes. Shares acquired by the reinvestment of
dividends and distributions are included in the
conversion.
e. Exchange Privileges: Subject to certain restrictions and
conditions, Class B Shares may be exchanged for Class B
Shares of any fund distributed by Zweig Securities Corp.
C. Class C Shares
For each Series:
a. Maximum Sales Charge: None.
b. Contingent Deferred Sales Charge: 1.25% for shares
redeemed within one year of purchase.
c. Rule 12b-1 Fees: 1.00%, which includes a 0.25% service
fee.
d. Conversion Features: None.
e. Exchange Privileges: Subject to the restrictions and
conditions set forth in the Prospectus, Class C Shares
of a Series are only exchangeable at net asset value for
Class C Shares of any fund distributed by Zweig
Securities Corp.
D. Class I Shares
For each Series:
a. Maximum Sales Charge: None
b. Contingent Deferred Sales Charge: None.
c. Rule 12b-1 Fees: None.
d. Conversion Features: None.
e. Exchange Privileges: Subject to the restrictions and
conditions set forth in the Prospectus, Class I Shares
of a Series are only exchangeable at net asset value for
Class I Shares of any fund distributed by Zweig
Securities Corp.
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V. Contingent Deferred Sales Charge Waiver.
No CDSC will be imposed when a shareholder redeems Class B Shares or
Class C Shares under certain circumstances described in the Trust's Prospectus.
VI. Conversion Feature.
A Series may issue one or more than one class of shares (each a
"Purchase Class") that may convert to another class ("Target Class") after a
specified period of time on the basis of the relative net asset value per share
of the two classes without the imposition of an additional sales load, fee, or
other charge. Shares of a Target Class will be subject to a lower distribution
expense and/or service expense, in the aggregate, than the shares of the
Purchase Class that converts to such Target Class.
The actual terms of a conversion feature would be determined on a
class by class basis. Any class of shares with a conversion feature will convert
into another class of shares on the basis of the relative net asset values of
the two classes, without the imposition of any sales load, fee, or other charge.
After a conversion, the converted shares will be subject to an asset-based sales
charge and/or service fee (as those terms are defined in Rule 2830 of the NASD
Conduct Rules), if any, that in the aggregate are lower than the asset-based
sales charge and service fee to which they were subject prior to the conversion.
Any conversion feature will be subject to a determination that the conversion of
shares does not constitute a taxable event under federal tax law. Any conversion
feature adopted by a Series will be fully disclosed in the Trust's then-current
prospectus.
VII. Net Asset Value.
Under the Plan, all expenses incurred by the Trust will continue to
be allocated among the various classes of shares based upon the net assets of
the Trust attributable to each class, except that shares of a particular class
will continue to bear the class expenses incurred by such class. Consequently,
the net income of, and the dividends payable with respect to, each particular
class would generally differ from the net income of, and the dividends payable
with respect to, the other classes of shares of a particular Series. Therefore,
the net asset value per share of the classes will differ at times. Expenses of a
Series allocated to a class of shares will continue to be borne on a pro rata
basis by each outstanding share of that class.
VIII. Compensation for Broker-Dealers and Financial Planners.
As described more fully in the Trust's Prospectus, broker-dealers
and financial planners that sell shares of any Series will continue to be
compensated differently depending on the class of shares an investor chooses.
IX. Conflicts of Interest.
The Trust does not believe that the implementation of the Plan will
give rise to any conflicts of interest. The Board of Trustees will continue to
monitor, on an ongoing basis, the Trust for the existence of any material
conflicts among the interests of the holders of the various classes of shares
and will take any action reasonably necessary to eliminate any such conflicts
that may develop. The Trust also believes that the interests of the various
classes of shares as to the investment advisory fees of the Trust are the same
and not in conflict. These fees are used to compensate the Trust's investment
adviser for providing investment advisory services that are common to all
investors, regardless of the class of shares.
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X. Board Review.
The Board of Trustees of the Trust shall review this Plan as
frequently as it deems necessary. Prior to any material amendment(s) to this
Plan, the Trust's Board of Trustees, including a majority of the Trustees that
are not interested persons of the Trust, shall find that the Plan, as proposed
to be amended (including any proposed amendments to the method of allocating
class and/or Trust expenses), is in the best interest of each class of shares of
any Series individually and the Trust as a whole. In considering whether to
approve any proposed amendment(s) to the Plan, the Trustees shall request and
evaluate such information as they consider reasonably necessary to evaluate the
proposed amendment(s) to the Plan. Such information shall address, among other
issues, the issue of whether any waivers or reimbursements of advisory or
administrative fees could be considered a cross-subsidization of one class by
another.
In making its initial determination to approve this Plan, the Board
has focused on, among other things, the relationship between or among the
classes and has examined potential conflicts of interest among classes
(including those potentially involving a cross-subsidization between classes)
regarding the allocation of fees, services, waivers and reimbursements of
expenses, and voting rights. The Board has evaluated the level of services
provided to each class and the cost of those services to ensure that the
services are appropriate and the allocation of expenses is reasonable. In
approving any subsequent amendments to this Plan, the Board shall focus on and
evaluate such factors as well as any others deemed necessary by the Board.
* * *
This Plan is hereby approved by a majority of the Trustees of the
Trust, including a majority of the Trustees who are not interested persons of
the Trust (collectively, the "Trustees"). The Trustees have found that this
Plan, including the expense allocation, is in the best interests of each class
individually and the Trust as a whole. The Trustees have made this determination
after requesting and evaluating such information as may be reasonably necessary
to evaluate this Plan.
This Plan is intended to conform to Rule 18f-3 and Rule 6c-10 under
the 1940 Act and any inconsistencies shall be read to conform with such Rules.
Dated: April 16 , 1998
