As filed with the Securities and Exchange Commission on
March 30, 1995
Registration No. 2-58869
811-2742
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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Pre-Effective Amendment No. / /
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Post-Effective Amendment No. 27 / X /
and ----
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940 ----
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Amendment No. 22 / X /
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(Check appropriate box or boxes)
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PUTNAM EQUITY INCOME FUND
(Exact name of registrant as specified in charter)
One Post Office Square, Boston, Massachusetts 02109
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code
(617) 292-1000
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It is proposed that this filing will become effective
(check appropriate box)
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/ / immediately upon filing pursuant to paragraph (b)
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/ X / on April 1, 1995 pursuant to paragraph
(b)
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/ / 60 days after filing pursuant to paragraph
(a) (1)
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<PAGE>
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/ / on (date) pursuant to paragraph (a)
(1)
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/ / 75 days after filing pursuant to paragraph (a)(2)
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/ / on (date) pursuant to paragraph (a)(2) of rule 485.
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If appropriate, check the following box:
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/ / this post-effective amendment designates a new
---- effective date for a previously filed post-effective
amendment.
JOHN R. VERANI, Vice President
PUTNAM EQUITY INCOME FUND
One Post Office Square
Boston, Massachusetts 02109
(Name and address of agent for service)
---------------
Copy to:
JOHN W. GERSTMAYR, Esquire
ROPES & GRAY
One International Place
Boston, Massachusetts 02110
The Registrant has registered an indefinite number or amount
of securities under the Securities Act of 1933 pursuant to Rule
24f-2. A Rule 24f-2 notice for the fiscal year ended
November 30, 1994 is not required because the Registrant
sold no shares pursuant to Rule 24f-2 in such fiscal year. <PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Proposed Proposed
maximum maximum
Amount offering aggregate Amount of
Title of securities being price per offering registration
being registeredregistered unit* price** fee
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<C> <C> <C> <C> <C>
Shares of Beneficial
Interest 7,261,167 shs. $9.59 $290,000 $100.00
-----------------------------------------------------------------------------------------
* Based on offering price per share on March 20, 1995 .
** Calculated pursuant to Rule 24e-2 under the Investment Company Act of 1940. The
total amount of securities redeemed or repurchased during the Registrant's
previous fiscal year was 7,230,928 shares, none of which have been used for
reductions pursuant to Rule 24e-2(a) or Rule 24f-2(c) under said Act in the
current fiscal year, and all of which are being used for such reduction in this
Amendment.
/TABLE
<PAGE>
PUTNAM EQUITY INCOME FUND
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(A))
PART A
N-1A ITEM NO. LOCATION
1. Cover Page....................... Cover Page
2. Synopsis......................... Expenses summary
3. Condensed Financial Information.. Financial highlights;
How performance is shown
4. General Description of
Registrant....................... Objectives; How
objectives are pursued;
Organization and history
5. Management of the Fund........... Expenses summary; How
the Fund is managed;
About Putnam
Investments, Inc.
5A. Management's Discussion
of Fund Performance.............. (Contained in the Annual
Report of the
Registrant)
6. Capital Stock and Other
Securities....................... Cover Page; Organization
and history; How
distributions are made;
tax information
7. Purchase of Securities Being
Offered.......................... How to buy shares;
Distribution Plans; How
to sell shares; How to
exchange shares; How the
Fund values its shares
8. Redemption or Repurchase......... How to buy shares; How
to sell shares; How to
exchange shares;
Organization and history
9. Pending Legal Proceedings........ Not Applicable <PAGE>
PART B
N-1A ITEM NO.
LOCATION
10. Cover Page....................... Cover Page
11. Table of Contents................ Cover Page
12. General Information and History.. Organization and history
(Part A)
13. Investment Objectives and
Policies......................... How objectives are
pursued (Part A);
Investment Restrictions
of the Fund;
Miscellaneous Investment
Practices
14. Management of the Registrant..... Management of the Fund
(Trustees; Officers);
Additional Officers of
the Fund
15. Control Persons and Principal
Holders of Securities............ Management of the Fund
(Trustees; Officers);
Fund Charges and
Expenses (Ownership of
Fund Shares)
16. Investment Advisory and Other
Services......................... Management of the Fund
(Trustees; Officers; The
Management Contract;
Principal
Underwriter ; Investor
Servicing Agent and
Custodian) ; Fund
Charges and Expenses;
Distribution Plan;
Independent Accountants
and Financial Statements
17. Brokerage Allocation............. Management of the Fund
(Portfolio
Transactions); Fund
Charges and Expenses
<PAGE>
18. Capital Stock and Other
Securities....................... Organization and history
(Part A); How
distributions are made;
tax information (Part
A); Suspension of
Redemptions
19. Purchase, Redemption and Pricing
of Securities Being Offered...... How to buy shares (Part
A); How to sell shares
(Part A); How to
exchange shares (Part
A); How to Buy Shares;
Determination of Net
Asset Value; Suspension
of Redemptions
20. Tax Status....................... How distributions are
made; tax information
(Part A); Taxes
21. Underwriters..................... Management of the Fund
(Principal Underwriter);
Fund Charges and
Expenses
22. Calculation of Performance Data.. How performance is shown
(Part A); Investment
Performance of the Fund;
Standard Performance
Measures
23. Financial Statements............. Independent Accountants
and Financial Statements
PART C
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C of the
Registration Statement.
<PAGE>
PROSPECTUS
APRIL 1, 1995
PUTNAM EQUITY INCOME FUND
CLASS A, B AND M SHARES
INVESTMENT STRATEGY: GROWTH AND INCOME
This Prospectus explains concisely what you should know before
investing in Class A, B or M shares of Putnam Equity Income Fund
(the "Fund"). Please read it carefully and keep it for future
reference. You can find more detailed information about the Fund
in the April 1, 1995 Statement of Additional Information,
as amended from time to time. For a free copy of the Statement
or other information, call Putnam Investor Services at
1-800-225-1581. The Statement has been filed with the Securities
and Exchange Commission and is incorporated into this Prospectus
by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.
BOSTON*LONDON*TOKYO
<PAGE>
ABOUT THE FUND
Expenses summary
.........................................................
Financial highlights
.........................................................
Objectives
.........................................................
How objectives are pursued
.........................................................
How performance is shown
........................................................<
/R>
How the Fund is managed
.........................................................
Organization and history
ABOUT YOUR INVESTMENT
Alternative sales arrangements
........................................................
How to buy shares
........................................................<
/R>
Distribution Plans
.....................
........................
...........
How to sell shares
........................................................<
/R>
How to exchange shares
........................................................<
/R>
How the Fund values its shares
...............................................
........... How distributions are
made; tax information
ABOUT PUTNAM INVESTMENTS, INC.
<PAGE>
ABOUT THE FUND
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing in
the Fund. The following table summarizes your maximum
transaction costs from investing in the Fund and expenses
incurred by the Fund based on its most recent fiscal year.
The Examples show the cumulative expenses attributable to a
hypothetical $1,000 investment over specified periods.
CLASS A CLASS B CLASS M
SHARES SHARES SHARES
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Charge
Imposed on Purchases
(as a percentage of
offering price) 5.75% NONE* 3.50%*
Deferred Sales Charge 5.0% in the first
(as a percentage year, declining
of the lower of to 1.0% in the
original purchase sixth year, and
price or redemption eliminated
proceeds) NONE** thereafter NONE
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees 0.64% 0.64% 0.64%
12b-1 Fees 0.25% 1.00% 0.75%
Other Expenses 0.15% 0.14% 0.15%
Total Fund Operating
Expenses 1.04% 1.78% 1.54%
The table is provided to help you understand the expenses of
investing in the Fund and your share of the operating expenses
which the Fund incurs. The 12b-1 fees for Class B
shares and Class M shares reflect the maximum amount permitted
under the Class B Distribution Plan and the amount to which the
Trustees currently limit payments under the Class M Distribution
Plan. For Class M shares, management fees and "Other
Expenses" are based on the operating expenses for the Fund's
Class A shares.
<PAGE>
EXAMPLES
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of each
period:
1 3 5 10
year years years years
CLASS A $67 $89 $112 $177
CLASS B $68 $86 $116
$190***
CLASS M $50 $82 $116 $212
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return but no redemption:
1 3 5 10
year years years years
CLASS A $67 $89 $112 $177
CLASS B $18 $56 $96 $190***
CLASS M $50 $82 $116 $212
The Examples do not represent past or future expense levels.
Actual expenses may be greater or less than those shown. Federal
regulations require the Examples to assume a 5% annual return,
but actual annual return has varied.
* The higher 12b-1 fees borne by Class B and Class M shares may
cause long-term shareholders to pay more than the economic
equivalent of the maximum permitted front-end sales charge on
Class A shares.
** A deferred sales charge of up to 1.00% is assessed on certain
redemptions of Class A shares that were purchased without an
initial sales charge as part of an investment of $1 million or
more. See "How to buy shares -- Class A shares."
*** Reflects conversion of Class B shares to Class A shares
(which pay lower ongoing expenses) approximately eight years
after purchase. See "How to buy shares -- Class B shares --
Conversion of Class B shares."
FINANCIAL HIGHLIGHTS
The table on the following page presents per share financial
information for Class A and Class B shares. No Class M
shares were outstanding during these periods. This information
has been audited and reported on by the Fund's independent
accountants. The Report of Independent Accountants and financial
statements included in the Fund's Annual Report to shareholders
for the 1994 fiscal year are incorporated by reference
into this Prospectus. The Fund's Annual Report, which contains
additional unaudited performance information, is available
without charge upon request.
On March 7, 1991, the shareholders of the Fund approved a change
in the investment objective of the Fund to its current investment
objectives and a change in the Fund's distribution policies.
Prior to March 7, 1991, the investment objective of the Fund was
to seek as high a level of current return as Putnam Investment
Management, Inc., the Fund's investment manager ("Putnam
Management"), believed not to involve undue risk, primarily by
investing in dividend-paying common stocks and securities
convertible into common stocks and by writing covered call
options to increase its current return. Under the Fund's former
distribution policies, at certain times the Fund paid quarterly
distributions at a level rate even though the Fund did not
achieve projected investment results for a given period. As a
result, the Fund's distributions at times included a return of
capital. Consequently, the information in the table relating to
the periods before March 7, 1991 does not reflect the Fund's
performance under its current investment objectives or
distribution policies.
FINANCIAL HIGHLIGHTS*
(For a share outstanding throughout the period)
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
SEPTEMBER 13, 1993
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
NOVEMBER 30 NOVEMBER 30 YEAR ENDED NOVEMBER 30
1994 1993+ 1994 1993 1992
CLASS B CLASS A
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $8.65 $8.66 $8.67 $7.72 $7.29
INVESTMENT OPERATIONS
NET INVESTMENT INCOME .26 .06 .32 .28 .42
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (.18) (.07) (.18) 1.01 .41
TOTAL FROM INVESTMENT OPERATIONS .08 (.01) .14 1.29 .83
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.27) -- (.32) (.31) (.40)
IN EXCESS OF NET INVESTMENT INCOME -- -- -- (.03) --
FROM NET REALIZED GAIN ON INVESTMENTS -- -- -- -- --
PAID-IN CAPITAL -- -- -- -- --
TOTAL DISTRIBUTIONS (.27) -- (.32) (.34) (.40)
NET ASSET VALUE, END OF PERIOD $8.46 $8.65 $8.49 $8.67 $7.72
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%) (A) 0.86(.12)(B) 1.59 17.06 11.66
NET ASSET, END OF PERIOD
(IN THOUSANDS) $32,114 $14,800$304,124 $328,251 $334,127
RATIO OF EXPENSES TO AVERAGE
NET ASSETS (%) 1.78 .44(B) 1.04 1.16 1.23
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS (%) 3.02 .55(B) 3.67 3.40 5.57
PORTFOLIO TURNOVER (%) 82.49 125.85(C) 82.49125.85(C) 340.99
<FN>
+ PER SHARE NET INVESTMENT INCOME HAS BEEN DETERMINED ON THE BASIS OF THE WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD.
++ EFFECTIVE MARCH 7, 1991 THE FUND'S INVESTMENT OBJECTIVE WAS CHANGED FROM SEEKING
HIGH CURRENT RETURN TO SEEKING CURRENT INCOME. INFORMATION IN THE TABLE FOR PERIODS PRIOR TO MARCH 7, 1991
DOES NOT REFLECT THE FUND'S CURRENT INVESTMENT OBJECTIVE.
(A) TOTAL INVESTMENT RETURN ASSUMES DIVIDEND REINVESTMENT AND DOES NOT REFLECT THE EFFECT
OF SALES CHARGES.
(B) NOT ANNUALIZED.
(C) PORTFOLIO TURNOVER EXCLUDES THE IMPACT OF ASSETS RECEIVED FROM THE ACQUISITION BY THE FUND, THEN KNOWN AS PUTNAM
STRATEGIC INCOME TRUST, OF
PUTNAM EQUITY INCOME FUND.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
YEAR ENDED NOVEMBER 30
1991++ 1990 1989 1988 1987 1986 1985
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $6.60 $8.62 $8.47 $7.87 $10.81 $10.76 $10.65
INVESTMENT OPERATIONS
NET INVESTMENT INCOME .30 .25 .29 .24 .21 .29 .39
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS .93 (1.08) 1.14 1.87 (1.44) 1.47 1.53
TOTAL FROM INVESTMENT OPERATIONS 1.23 (.83) 1.43 2.11 (1.23) 1.76 1.92
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.30) (.25) (.32) (.32) (.21) (.20) (.39)
IN EXCESS OF NET INVESTMENT INCOME -- -- -- -- -- -- --
FROM NET REALIZED GAIN ON INVESTMENTS (.24) -- (.06) (1.19) (1.50) (1.51) (1.42)
PAID-IN CAPITAL -- (.94) (.90) -- -- -- --
TOTAL DISTRIBUTIONS (.54) (1.19) (1.28) (1.51) (1.71) (1.71) (1.81)
NET ASSET VALUE, END OF PERIOD $7.29 $6.60 $8.62 $8.47 $7.87 $10.81 $10.76
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%) (A) 19.13 (10.56) 17.75 28.23 (15.33) 17.73 19.80
NET ASSET, END OF PERIOD
(IN THOUSANDS) $397,237 $585,011$934,823 $1,005,981 $902,370$1,158,887$1,162,753
RATIO OF EXPENSES TO AVERAGE
NET ASSETS (%) 1.20 1.09 .84 .87 .83 .73 .77
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS (%) 4.13 3.30 3.28 2.75 1.92 2.72 3.44
PORTFOLIO TURNOVER (%) 198.18 222.84 153.35 38.32 225.30 205.30 183.25
</TABLE>
<PAGE>
OBJECTIVES
THE INVESTMENT OBJECTIVE OF PUTNAM EQUITY INCOME FUND IS TO SEEK
CURRENT INCOME. CAPITAL GROWTH IS A SECONDARY OBJECTIVE WHEN
CONSISTENT WITH SEEKING CURRENT INCOME. The Fund is not intended
to be a complete investment program, and there is no assurance
that it will achieve its objectives.
HOW OBJECTIVES ARE PURSUED
BASIC INVESTMENT STRATEGY
THE FUND SEEKS CURRENT INCOME BY INVESTING PRIMARILY IN A
DIVERSIFIED PORTFOLIO OF INCOME-PRODUCING EQUITY SECURITIES. The
Fund will normally invest at least 65% of its assets in
income-producing equity securities, which may include common
stocks, preferred stocks, and securities convertible into common
or preferred stocks. The income-producing equity securities the
Fund purchases will normally have current dividend yields higher
than the currently available dividend yield quoted on the
Standard & Poor's 500 Composite Stock Price Index, although there
is no assurance that such yields will be achieved. The Fund may
also invest in debt securities rated at the time of
investment at least Caa by Moody's Investors Service, Inc. or CCC
by Standard & Poor's Corporation or, if unrated, of comparable
quality as determined by Putnam Management. Securities in the
rating categories Caa and CCC are considered to be of poor
standing and predominantly speculative. The Fund will not
necessarily dispose of a security when its rating is reduced
below its rating at the time of purchase, although Putnam
Management will monitor the investment to determine whether
continued investment in the security will assist in meeting the
Fund's investment objective. The Fund may hold a portion of its
assets in cash or money market instruments.
The Fund seeks its secondary objective of capital growth, when
consistent with its primary objective of current income, by
investing in securities which Putnam Management believes have the
potential to appreciate in value over time.
THE FUND WILL NOT LIMIT ITS INVESTMENTS TO ANY PARTICULAR TYPE OF
COMPANY. The Fund may invest in companies, large or small, whose
securities Putnam Management believes have the potential to
provide above-average current income and, secondarily, capital
growth. It may invest in small and relatively less well-known
companies. Such companies may have limited product lines,
markets or financial resources, or may depend on a limited
management group. Their securities may trade less frequently and
in limited volume, and only in the over-the-counter market or on
a regional securities exchange. As a result, these securities may
fluctuate in value more than those of larger, more established
companies.
At times Putnam Management may judge that conditions in the
securities markets make pursuing the Fund's basic investment
strategy inconsistent with the best interests of its
shareholders. At such times Putnam Management may temporarily
use alternative strategies, primarily designed to reduce
fluctuations in the value of the Fund's assets. In implementing
these "defensive" strategies, the Fund may invest without limit
in debt securities, money market instruments, or other securities
Putnam Management considers consistent with such defensive
strategies. It is impossible to predict when, or for how long,
the Fund will use these alternative strategies.
FOREIGN INVESTMENTS
THE FUND MAY INVEST UP TO 20% OF ITS ASSETS IN SECURITIES
PRINCIPALLY TRADED IN FOREIGN MARKETS. The Fund may also
purchase Eurodollar certificates of deposit without regard to the
20% limit. Since foreign securities are normally denominated and
traded in foreign currencies, the values of the Fund's assets may
be affected favorably or unfavorably by currency exchange rates
and exchange control regulations. There may be less information
publicly available about a foreign company than about a U.S.
company, and foreign companies are not generally subject to
accounting, auditing and financial reporting standards and
practices comparable to those in the United States. The
securities of some foreign companies are less liquid and at times
more volatile than securities of comparable U.S. companies.
Foreign brokerage commissions and other fees are also generally
higher than in the United States. Foreign settlement procedures
and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the
Fund's assets held abroad) and expenses not present in the
settlement of domestic investments.
In addition, there may be a possibility of nationalization or
expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial
instability and diplomatic developments which could affect the
value of the Fund's investments in certain foreign countries.
Legal remedies available to investors in certain foreign
countries may be more limited than those available with respect
to investments in the United States or in other foreign
countries. The laws of some foreign countries may limit the
Fund's ability to invest in securities of certain issuers located
in those foreign countries. Special tax considerations apply to
foreign securities.
The risks described above are typically increased to the extent
that the Fund invests in securities traded in under-developed and
developing nations, which are sometimes referred to as "emerging
markets."
The Fund may buy or sell foreign currencies, foreign currency
forward contracts and call and put options on foreign currencies
for hedging purposes in connection with its foreign investments.
A MORE DETAILED EXPLANATION OF FOREIGN INVESTMENTS, AND THE RISKS
AND SPECIAL TAX CONSIDERATIONS ASSOCIATED WITH THEM, IS INCLUDED
IN THE STATEMENT OF ADDITIONAL INFORMATION.
PORTFOLIO TURNOVER
The length of time the Fund has held a particular security is
not generally a consideration in investment decisions. Putnam
Management will change the Fund's investments whenever it
believes doing so will further the Fund's investment objectives.
A change in the securities owned by the Fund is known as
"portfolio turnover." As a result of the Fund's investment
policies, under certain market conditions the Fund's portfolio
turnover rate may be higher than that of other mutual funds.
Portfolio turnover generally involves some expense to the Fund,
including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and reinvestment in
other securities. Such transactions may result in realization of
taxable capital gains. Portfolio turnover rates for the ten most
recent fiscal years are shown in the section "Financial
highlights."
INDEX FUTURES AND OPTIONS
THE FUND MAY BUY AND SELL INDEX FUTURES CONTRACTS FOR HEDGING
PURPOSES. An "index future" is a contract to buy or sell units
of a particular securities index at an agreed price on a
specified future date. Depending on the change in value of the
index between the time when the Fund enters into and terminates
an index future transaction, the Fund realizes a gain or loss.
The Fund may buy and sell call and put options on index futures
or on the indices themselves in addition to or as an
alternative to purchasing and selling index futures or, to the
extent permitted by applicable law, to earn additional income.
The Fund may also purchase warrants, issued by banks and other
financial institutions, whose values are based on the values from
time to time of one or more securities indices.
THE USE OF INDEX FUTURES AND OPTIONS INVOLVES CERTAIN SPECIAL
RISKS. FUTURES AND OPTIONS TRANSACTIONS INVOLVE COSTS AND MAY
RESULT IN LOSSES. Certain risks arise because of the possibility
of imperfect correlations between movements in the prices of
index futures and options and movements in the prices of the
underlying stock index or of the common stocks in the Fund's
portfolio that are the subject of a hedge. The successful use of
the strategies described above further depends on Putnam
Management's ability to forecast market movements correctly.
Other risks arise from the Fund's potential inability to close
out its index futures or options positions, and there can be no
assurance that a liquid secondary market will exist for any index
future or option at any particular time. Certain provisions of
the Internal Revenue Code and certain regulatory requirements may
limit the Fund's ability to engage in index futures and options
transactions.
A MORE DETAILED EXPLANATION OF THE FUTURES OR OPTIONS PORTFOLIO
TRANSACTIONS DESCRIBED ABOVE, INCLUDING THE RISKS ASSOCIATED WITH
THEM, IS INCLUDED IN THE STATEMENT OF ADDITIONAL INFORMATION.
OTHER INVESTMENT PRACTICES
THE FUND MAY ALSO ENGAGE TO A LIMITED EXTENT IN THE FOLLOWING
INVESTMENT PRACTICES, EACH OF WHICH INVOLVES CERTAIN SPECIAL
RISKS. THE STATEMENT OF ADDITIONAL INFORMATION CONTAINS MORE
DETAILED INFORMATION ABOUT THESE PRACTICES, INCLUDING LIMITATIONS
DESIGNED TO REDUCE THESE RISKS.
OPTIONS. The Fund may seek to increase its current return by
writing covered call and put options on securities it owns or in
which it may invest. The Fund receives a premium from writing a
call or put option, which increases the Fund's return if the
option expires unexercised or is closed out at a net profit.
When the Fund writes a call option, it gives up the opportunity
to profit from any increase in the price of the security above
the exercise price of the option; when it writes a put option,
the Fund takes the risk that it will be required to purchase a
security from the option holder at a price above the current
market price of the security. The Fund may terminate an option
that it has written prior to its expiration by entering into a
closing purchase transaction in which it purchases an option
having the same terms as the option written. The Fund may also
buy and sell put and call options for hedging purposes. The Fund
may also from time to time buy and sell combinations of put and
call options on the same underlying security to earn additional
income. The aggregate value of the securities underlying the
options may not exceed 25% of the Fund's assets. The Fund's use
of these strategies may be limited by applicable law.
SECURITIES LOANS, REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS.
The Fund may lend portfolio securities amounting to not more than
25% of its assets to broker-dealers and may enter into repurchase
agreements on up to 25% of its total assets. These transactions
must be fully collateralized at all times. The Fund may also
purchase securities for future delivery, which may increase its
overall investment exposure and involves a risk of loss if the
value of the securities declines prior to the settlement date.
These transactions involve some risk to the Fund if the other
party should default on its obligation and the Fund is delayed or
prevented from recovering the collateral or completing the
transaction.
LIMITING INVESTMENT RISK
SPECIFIC INVESTMENT RESTRICTIONS HELP THE FUND LIMIT INVESTMENT
RISKS FOR ITS SHAREHOLDERS. THESE RESTRICTIONS PROHIBIT THE FUND
FROM: acquiring more than 10% of the voting securities of any
one issuer*, or more than 10% of any class of securities of any
one issuer* and investing more than: (a) 5% of its total assets
in securities of any one issuer (other than obligations issued or
guaranteed by the U.S. government or its agencies or
instrumentalities);* (b) 5% of its net assets in companies that,
together with any predecessors, have been in operation less than
three years and in equity securities (other than securities
restricted as to resale) that do not have readily available
market quotations; (c) 15% of its net assets in securities
restricted as to resale, excluding securities determined by the
Fund's Trustees (or the person designated by the Fund's Trustees
to make such determinations) to be readily marketable;* (d) 25%
of its total assets in any one industry;* (e) 15% of its net
assets in any combination of securities that are not readily
marketable, in securities restricted as to resale (excluding
securities determined by the Fund's Trustees (or the person
designated by the Fund's Trustees to make such determinations) to
be readily marketable), and in repurchase agreements maturing in
more than seven days; or (f) 5% of its net assets in warrants.
Restrictions marked with an asterisk (*) above are summaries of
fundamental investment policies. See the Statement of Additional
Information for the full text of these policies and the Fund's
other fundamental investment policies. Except for investment
policies designated as fundamental in this Prospectus or the
Statement, the investment policies described in this Prospectus
and in the Statement are not fundamental investment policies.
The Trustees may change any non-fundamental investment policies
without shareholder approval. As a matter of policy, the
Trustees would not materially change the Fund's investment
objectives without shareholder approval.
HOW PERFORMANCE IS SHOWN
THE FUND'S INVESTMENT PERFORMANCE MAY FROM TIME TO TIME BE
INCLUDED IN ADVERTISEMENTS ABOUT THE FUND. "Yield" for each
class of shares is calculated by dividing the annualized net
investment income per share of such class during a recent 30-day
period by the maximum public offering price per share of such
class on the last day of that period. Yield reflects the
deduction of the maximum initial sales charge in the case of
Class A and Class M shares, but does not reflect the deduction of
any contingent deferred sales charge in the case of Class B
shares.
"Total return" for the one-, five- and ten-year periods (or for
the life of a class, if shorter) through the most recent calendar
quarter represents the average annual compounded rate of return
on an investment of $1,000 in the Fund at the maximum public
offering price (in the case of Class A and Class M shares) or
reflecting the deduction of any applicable contingent deferred
sales charge (in the case of Class B shares). Total return may
also be presented for other periods or based on investment at
reduced sales charge levels or net asset value. Any quotation of
investment performance not reflecting the maximum initial sales
charge or contingent deferred sales charge would be reduced if
such sales charges were used.
ALL DATA IS BASED ON THE FUND'S PAST INVESTMENT RESULTS AND DOES
NOT PREDICT FUTURE PERFORMANCE. Investment performance, which
will vary, is based on many factors, including market conditions,
the composition of the Fund's portfolio, the Fund's operating
expenses and which class of shares you purchase. Investment
performance also often reflects the risks associated with the
Fund's investment objectives and policies. These factors should
be considered when comparing the Fund's investment results to
those of other mutual funds and other investment vehicles.
Quotations of investment performance for any period when an
expense limitation was in effect will be greater than if the
limitation had not been in effect. The Fund's performance may be
compared to various indices. See the Statement of Additional
Information.
HOW THE FUND IS MANAGED
THE TRUSTEES OF THE FUND ARE RESPONSIBLE FOR GENERALLY OVERSEEING
THE CONDUCT OF THE FUND'S BUSINESS. Subject to such policies as
the Trustees may determine, Putnam Management furnishes a
continuing investment program for the Fund and makes investment
decisions on its behalf. Subject to the control of the Trustees,
Putnam Management also manages the Fund's other affairs and
business. Edward P. Bousa, Kenneth J. Taubes and Rosemary H.
Thomsen, each a Senior Vice President of Putnam Management
and Vice President of the Fund, have had primary
responsibility for the day-to-day management of the Fund's
portfolio since December, 1992, February, 1994 and March,
1995, respectively. Mr. Bousa has been employed by Putnam
Management since 1992. Prior to 1992, Mr. Bousa was a
Vice President and Portfolio Manager at Fidelity Investments.
Mr. Taubes has been employed by Putnam Management since
1991. Prior to 1991, Mr. Taubes was Senior Vice
President of the Finance Division of U.S. Trust Company. Ms.
Thomsen has been employed by Putnam Management since 1986.
The Fund pays all expenses not assumed by Putnam Management,
including Trustees' fees, auditing, legal, custodial, investor
servicing and shareholder reporting expenses, and payments under
its Distribution Plans (which are in turn allocated to the
relevant class of shares). The Fund also reimburses Putnam
Management for the compensation and related expenses of certain
officers of the Fund and their staff who provide administrative
services to the Fund. The total reimbursement is determined
annually by the Trustees.
Putnam Management places all orders for purchases and sales of
the Fund's securities. In selecting broker-dealers, Putnam
Management may consider research and brokerage services furnished
to it and its affiliates. Subject to seeking the most favorable
price and execution available, Putnam Management may consider
sales of shares of the Fund (and, if permitted by law, of the
other Putnam funds) as a factor in the selection of
broker-dealers.
ORGANIZATION AND HISTORY
Putnam Equity Income Fund is a Massachusetts business trust
organized on April 27, 1977. A copy of the Agreement and
Declaration of Trust, which is governed by Massachusetts law, is
on file with the Secretary of State of The Commonwealth of
Massachusetts. Prior to March 11, 1991, the Fund was known as
Putnam Option Income Trust. Prior to September 13, 1993, the
Fund was known as Putnam Strategic Income Trust.
The Fund is an open-end, diversified management investment
company with an unlimited number of authorized shares of
beneficial interest. Shares of the Fund may, without shareholder
approval, be divided into two or more classes of shares having
such preferences and special or relative rights and privileges as
the Trustees determine. The Fund's shares are currently divided
into three classes.
Each share has one vote, with fractional shares voting
proportionally. Shares of each class will vote together as a
single class except when otherwise required by law or as
determined by the Trustees. Shares are freely transferable, are
entitled to dividends as declared by the Trustees, and, if the
Fund were liquidated, would receive the net assets of the Fund.
The Fund may suspend the sale of shares at any time and may
refuse any order to purchase shares. Although the Fund is not
required to hold annual meetings of its shareholders,
shareholders holding at least 10% of the outstanding shares
entitled to vote have the right to call a meeting to elect or
remove Trustees or to take other actions as provided in the
Agreement and Declaration of Trust.
If you own fewer shares than a minimum amount set by the Trustees
(presently 20 shares), the Fund may choose to redeem your shares
and pay you for them. You will receive at least 30 days' written
notice before the Fund redeems your shares, and you may purchase
additional shares at any time to avoid a redemption. The Fund
may also redeem shares if you own shares above a maximum amount
set by the Trustees. There is presently no maximum, but the
Trustees may establish one at any time, which could apply to both
present and future shareholders.
THE FUND'S TRUSTEES: GEORGE PUTNAM,* CHAIRMAN. President of the
Putnam funds. Chairman and Director of Putnam Management and
Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director,
Marsh & McLennan Companies, Inc.; WILLIAM F. POUNDS, VICE
CHAIRMAN. Professor of Management, Alfred P. Sloan School of
Management, M.I.T.; JAMESON ADKINS BAXTER, President, Baxter
Associates, Inc.; HANS H. ESTIN, Vice Chairman, North American
Management Corp.; JOHN A. HILL, Principal and Managing Director,
First Reserve Corporation; ELIZABETH T. KENNAN, President, Mount
Holyoke College; LAWRENCE J. LASSER,* Vice President of the
Putnam funds. President, Chief Executive Officer and Director of
Putnam Investments, Inc. and Putnam Management. Director, Marsh
& McLennan Companies, Inc.; ROBERT E. PATTERSON, Executive Vice
President, Cabot Partners Limited Partnership; DONALD S.
PERKINS *, Chairman of the Board and Director of Kmart
Corporation and Director of various corporations, including
AT&T and Time Warner Inc.; GEORGE PUTNAM, III,* President,
New Generation Research, Inc.; A.J.C. SMITH,* Chairman, Chief
Executive Officer and Director, Marsh & McLennan Companies, Inc.;
and W. NICHOLAS THORNDIKE, Director of various corporations and
charitable organizations, including Data General Corporation,
Bradley Real Estate, Inc. and Providence Journal Co. Also,
Trustee of Massachusetts General Hospital and Eastern
Utilities Associates. The Fund's Trustees are also Trustees of
the other Putnam funds. Those marked with an asterisk (*) are
or may be deemed to be "interested persons" of the Fund,
Putnam Management or Putnam Mutual Funds.
ABOUT YOUR INVESTMENT
ALTERNATIVE SALES ARRANGEMENTS
This Prospectus offers investors three classes of shares which
bear sales charges in different forms and amounts and which bear
different levels of expenses:
CLASS A SHARES. An investor who purchases Class A shares pays a
sales charge at the time of purchase. As a result, Class A
shares are not subject to any charges when they are redeemed
(except for sales at net asset value in excess of $1 million
which are subject to a contingent deferred sales charge).
Certain purchases of Class A shares qualify for reduced sales
charges. Class A shares currently bear a 12b-1 fee at the annual
rate of 0.25% of the Fund's average net assets attributable to
Class A shares. See "How to buy shares -- Class A shares."
CLASS B SHARES. Class B shares are sold without an initial sales
charge, but are subject to a contingent deferred sales charge of
up to 5% if redeemed within six years. Class B shares also bear
a higher 12b-1 fee than Class A shares, currently at the annual
rate of 1.00% of the Fund's average net assets attributable to
Class B shares. Class B shares will automatically convert into
Class A shares, based on relative net asset value, approximately
eight years after purchase. Class B shares provide an investor
the benefit of putting all of the investor's dollars to work from
the time the investment is made, but (until conversion) will have
a higher expense ratio and pay lower dividends than Class A
shares due to the higher 12b-1 fee. See "How to buy shares --
Class B shares."
CLASS M SHARES. An investor who purchases Class M shares pays a
sales charge at the time of purchase which is lower than the
sales charge applicable to Class A shares. Class M shares are
not subject to any contingent deferred sales charge when they are
redeemed. Certain purchases of Class M shares qualify for
reduced sales charges. Class M shares currently bear a 12b-1 fee
at the annual rate of 0.75% of the Fund's average net
assets attributable to Class M shares. See "How to buy shares -
Class M shares."
WHICH ARRANGEMENT IS BEST FOR YOU? The decision as to which
class of shares provides a more suitable investment for an
investor depends on a number of factors, including the amount and
intended length of the investment. Investors making investments
that qualify for reduced sales charges might consider Class A or
Class M shares. Investors who prefer not to pay an initial sales
charge might consider Class B shares. Orders for Class B shares
for $250,000 or more will be treated as orders for Class
A shares or declined. For more information about these sales
arrangements, consult your investment dealer or Putnam Investor
Services. Sales personnel may receive different compensation
depending on which class of shares they sell. Shares may only be
exchanged for shares of the same class of another Putnam fund.
See "How to exchange shares."
HOW TO BUY SHARES
You can open a Fund account with as little as $500 and make
additional investments at any time with as little as $50. You
can buy Fund shares three ways - through most investment dealers,
through Putnam Mutual Funds (at 1-800-225-1581), or through a
systematic investment plan. If you do not have a dealer, Putnam
Mutual Funds can refer you to one.
BUYING SHARES THROUGH PUTNAM MUTUAL FUNDS. Complete an order
form and return it with a check payable to the Fund to Putnam
Mutual Funds, which will act as your agent in purchasing shares
through your designated investment dealer.
BUYING SHARES THROUGH SYSTEMATIC INVESTING. You can make regular
investments of $25 or more per month through automatic deductions
from your bank checking account. Application forms are available
from your investment dealer or through Putnam Investor Services.
Shares are sold at the public offering price based on the net
asset value next determined after Putnam Investor Services
receives your order. In most cases, in order to receive that
day's public offering price, Putnam Investor Services must
receive your order before the close of regular trading on the New
York Stock Exchange. If you buy shares through your investment
dealer, the dealer must receive your order before the close of
regular trading on the New York Stock Exchange to receive that
day's public offering price.
<PAGE>
CLASS A SHARES
The public offering price of Class A shares is the net asset
value plus a sales charge. The Fund receives the net asset
value. The sales charge varies depending on the size of your
purchase and is allocated between your investment dealer and
Putnam Mutual Funds. The current sales charges are:
<PAGE>
<TABLE>
<CAPTION>
SALES CHARGE AMOUNT OF
AS A PERCENTAGE OF: SALES CHARGE
---------------------- REALLOWED
NET TO DEALERS
AMOUNT OF TRANSACTION AMOUNT OFFERING AS A PERCENTAGE
AT OFFERING PRICE INVESTED PRICE OF OFFERING PRICE*
------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
Less than $50,000 6.10%5.75%5.00%
$50,000 but less than $100,000 4.71 4.50 3.75
100,000 but less than 250,000 3.63 3.50 2.75
250,000 but less than 500,000 2.56 2.50 2.00
500,000 but less than 1,000,000 2.04 2.00 1.75
------------------------------------------------------------------------------------------
/TABLE
<PAGE>
* At the discretion of Putnam Mutual Funds, however, the
entire sales charge may at times be reallowed to dealers.
The Staff of the Securities and Exchange Commission has
indicated that dealers who receive more than 90% of the
sales charge may be considered underwriters.
There is no initial sales charge on purchases of Class A shares
of $1 million or more. However, a contingent deferred sales
charge ("CDSC") of 1.00% or 0.50%, respectively, is imposed on
redemptions of such shares within the first or second year after
purchase, based on the lower of the shares' cost and current net
asset value. Any shares acquired by reinvestment of
distributions will be redeemed without a CDSC. In addition,
shares purchased by certain investors investing $1 million or
more that have made arrangements with Putnam Mutual Funds and
whose dealer of record waived the commission as described below
are not subject to the CDSC. In determining whether a CDSC is
payable, the Fund will first redeem shares not subject to any
charge. Putnam Mutual Funds receives the entire amount of any
CDSC you pay. See the Statement of Additional Information for
more information about the CDSC.
Except as stated below, Putnam Mutual Funds pays investment
dealers of record commissions on sales of Class A shares of $1
million or more based on an investor's cumulative purchases
during the one-year period beginning with the date of the initial
purchase at net asset value . Each subsequent one-year
measuring period for these purposes will begin with
the first net asset value purchase following the end of the prior
period. Such commissions are paid at the rate of 1.00% of the
amount under $3 million, 0.50% of the next $47 million and 0.25%
thereafter. On sales at net asset value to a participant-
directed qualified retirement plan initially investing less than
$20 million in Putnam funds and other investments managed by
Putnam Management or its affiliates (including a plan sponsored
by an employer with more than 750 employees), Putnam Mutual Funds
pays commissions on cumulative purchases during the life of the
account at the rate of 1.00% of the amount under $3 million and
0.50% thereafter. On sales at net asset value to all other
participant-directed qualified retirement plans, Putnam Mutual
Funds pays commissions on the initial investment and on
subsequent net quarterly sales at the rate of 0.15%.
CLASS B SHARES
Class B shares are sold without an initial sales charge, although
a CDSC will be imposed if you redeem shares within six years of
purchase. The following types of shares may be redeemed without
charge at any time: (i) shares acquired by reinvestment of
distributions and (ii) shares otherwise exempt from the CDSC, as
described in "How to buy shares - General" below. For other
shares, the amount of the charge is determined as a percentage of
the lesser of the current market value or the cost of the shares
being redeemed. The amount of the CDSC will depend on the number
of years since you invested and the dollar amount being redeemed,
according to the following table:
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
YEARS SINCE PURCHASE DOLLAR AMOUNT
PAYMENT MADE SUBJECT TO CHARGE
------------------- -------------------
0-1. . . . . . . . . . . . . . . . . .5.0%
1-2. . . . . . . . . . . . . . . . . .4.0%
2-3. . . . . . . . . . . . . . . . . .3.0%
3-4. . . . . . . . . . . . . . . . . .3.0%
4-5. . . . . . . . . . . . . . . . . .2.0%
5-6. . . . . . . . . . . . . . . . . .1.0%
6 and thereafter. . . . . . . . . . . . . . .NONE
In determining whether a CDSC is payable on any redemption, the
Fund will first redeem shares not subject to any charge, and then
shares held longest during the six-year period. For this purpose,
the amount of any increase in a share's value above its initial
purchase price is not regarded as a share exempt from the CDSC.
Thus, when a share that has appreciated in value is redeemed
during the six-year period, a CDSC is assessed on its initial
purchase price. For information on how sales charges are
calculated if you exchange your shares, see "How to exchange
shares." Putnam Mutual Funds receives the entire amount of any
CDSC you pay.
CONVERSION OF CLASS B SHARES. Class B shares will automatically
convert into Class A shares at the end of the month eight years
after the purchase date, except as noted below. Class B shares
acquired by exchanging Class B shares of another Putnam fund will
convert into Class A shares based on the time of the initial
purchase. Class B shares acquired through reinvestment of
distributions will convert into Class A shares based on the date
of the initial purchase to which such shares relate. For this
purpose, Class B shares acquired through reinvestment of
distributions will be attributed to particular purchases of Class
B shares in accordance with such procedures as the Trustees may
determine from time to time. The conversion of Class B shares to
Class A shares is subject to the continuing availability of a
ruling from the Internal Revenue Service or an opinion of counsel
that such conversions will not constitute taxable events for
Federal tax purposes. There can be no assurance that such ruling
or opinion will be available, and the conversion of Class B
shares to Class A shares will not occur if such ruling or opinion
is not available. In such event, Class B shares would continue
to be subject to higher expenses than Class A shares for an
indefinite period.
<PAGE>
CLASS M SHARES
The public offering price of Class M shares is the net asset
value plus a sales charge. The Fund receives the net asset
value. The sales charge varies depending on the size of your
purchase and is allocated between your investment dealer and
Putnam Mutual Funds. The current sales charges are:
<PAGE>
<TABLE>
<CAPTION>
SALES CHARGE
AS A PERCENTAGE OF: AMOUNT OF SALES
------------------- CHARGE REALLOWED
NET TO DEALERS
AMOUNT OF TRANSACTION AMOUNT OFFERING AS A PERCENTAGE OF
AT OFFERING PRICE INVESTED PRICE OFFERING PRICE*
-----------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Less than $50,000 3.63% 3.50% 3.00%
50,000 but less than 100,000 2.56 2.50 2.00
$ 100,000 but less than 250,000 1.52 1.50 1.00
250,000 but less than 500,000 1.01 1.00 1.00
500,000 and above 1,000,000 NONE NONE NONE
-----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
* At the discretion of Putnam Mutual Funds, however, the
entire sales charge may at times be reallowed to dealers.
The Staff of the Securities and Exchange Commission has
indicated that dealers who receive more than 90% of the
sales charge may be considered underwriters.
Class M shares do not convert into any other class of shares.
GENERAL
You may be eligible to buy Class A shares and Class M shares at
reduced sales charges. Consult your investment dealer or Putnam
Mutual Funds for details about Putnam's Combined Purchase
Privilege, Cumulative Quantity Discount, Statement of Intention,
Group Sales Plan, Employee Benefit Plans and other plans.
Descriptions are also included in the order form and in the
Statement of Additional Information. In addition, sales charges
will not apply to Class M shares purchased with redemption
proceeds received within the prior ninety days from non-Putnam
mutual funds on which the investor paid a front-end or contingent
deferred sales charge.
The Fund may sell Class A, Class B and Class M shares at net
asset value without an initial sales charge or a CDSC to the
Fund's current and retired Trustees (and their families), current
and retired employees (and their families) of Putnam Management
and affiliates, registered representatives and other employees
(and their families) of broker-dealers having sales agreements
with Putnam Mutual Funds, employees (and their families) of
financial institutions having sales agreements with Putnam Mutual
Funds (or otherwise having an arrangement with a broker-dealer or
financial institution with respect to sales of Fund shares),
financial institution trust departments investing an aggregate of
$1 million or more in Putnam funds, clients of certain
administrators of tax-qualified plans, employee benefit plans of
companies with more than 750 employees, tax-qualified plans when
proceeds from repayments of loans to participants are invested
(or reinvested) in Putnam funds, "wrap accounts" for the benefit
of clients of broker-dealers, financial institutions or financial
planners adhering to certain standards established by Putnam
Mutual Funds, and investors meeting certain requirements who sold
shares of certain Putnam closed-end funds pursuant to a tender
offer by the closed-end fund. In addition, the Fund may sell
shares at net asset value without an initial sales charge or a
CDSC in connection with the acquisition by the Fund of assets of
an investment company or personal holding company, and the CDSC
will be waived on redemptions of shares arising out of death or
disability or in connection with certain withdrawals from IRA or
other retirement plans. Up to 12% of the value of Class B shares
subject to a Systematic Withdrawal Plan may also be redeemed each
year without a CDSC. See the Statement of Additional
Information.
<PAGE>
Shareholders of other Putnam funds may be entitled to exchange
their shares for, or reinvest distributions from their funds in,
shares of the Fund at net asset value.
If you are considering redeeming or exchanging shares or
transferring shares to another person shortly after purchase, you
should pay for those shares with a certified check to avoid any
delay in redemption, exchange or transfer. Otherwise the Fund
may delay payment until the purchase price of those shares has
been collected or, if you redeem by telephone, until 15 calendar
days after the purchase date.
To eliminate the need for safekeeping, the Fund will not issue
certificates for your shares unless you request them. Putnam
Mutual Funds may, at its expense, provide additional promotional
incentives or payments to dealers that sell shares of the Putnam
funds. In some instances, these incentives or payments may be
offered only to certain dealers who have sold or may sell
significant amounts of shares. Certain dealers may not sell all
classes of shares. Banks and other financial service firms may
be subject to various state laws regarding the services described
above, and may be required to register as dealers pursuant to
state law.
DISTRIBUTION PLANS
CLASS A DISTRIBUTION PLAN. The Class A Plan provides for
payments by the Fund to Putnam Mutual Funds at the annual rate of
up to 0.35% of the Fund's average net assets attributable to
Class A shares. The Trustees currently limit payments under the
Class A Plan to the annual rate of 0.25% of such assets. Should
the Trustees decide in the future to approve payments in excess
of this amount, shareholders will be notified and this Prospectus
will be revised.
In order to compensate investment dealers (including, for this
purpose, certain financial institutions) for services provided in
connection with sales of Class A shares and the maintenance of
shareholder accounts, Putnam Mutual Funds makes quarterly
payments to qualifying dealers based on the average net asset
value of Class A shares of the Fund which are attributable to
shareholders for whom the dealers are designated as the dealer of
record. This calculation excludes until one year after purchase
shares purchased at net asset value by shareholders investing $1
million or more and by participant-directed qualified retirement
plans sponsored by employers with more than 750 employees ("NAV
Shares"), except for shares owned by certain investors investing
$1 million or more that have made arrangements with Putnam Mutual
Funds and whose dealer of record waived the sales commission.
Except as stated below, Putnam Mutual Funds makes such payments
at the annual rate of 0.20% of such average net asset value for
Class A shares outstanding as of December 31, 1989 and 0.25% of
such average net asset value of shares acquired after that date
(including shares acquired through reinvestment of
distributions). For participant-directed qualified retirement
plans initially investing less than $20 million in Putnam funds
and other investments managed by Putnam Management or its
affiliates, Putnam Mutual Funds' payments to qualifying dealers
on NAV Shares are 100% of the rate stated above if average plan
assets in Putnam funds (excluding money market funds) during the
quarter are less than $20 million, 60% of the stated rate if
average plan assets are at least $20 million but less than $30
million, and 40% of the stated rate if average plan assets are
$30 million or more. For all other participant-directed
qualified retirement plans purchasing NAV Shares, Putnam Mutual
Funds makes quarterly payments to qualifying dealers at the
annual rate of 0.10% of the average net asset value of such
shares.
CLASS B AND CLASS M DISTRIBUTION PLANS. The Class B Plan and the
Class M Plan provide for payments by the Fund to Putnam Mutual
Funds at the annual rate of up to 1.00% of the Fund's average net
assets attributable to Class B shares and Class M shares, as the
case may be. The Trustees currently limit payments under the
Class M Plan to the annual rate of 0.75%.
Although Class B shares are sold without an initial sales charge,
Putnam Mutual Funds pays a sales commission equal to 4.00% of the
amount invested to dealers who sell Class B shares. These
commissions are not paid on exchanges from other Putnam funds and
sales to investors exempt from the CDSC. The amount paid to
dealers at the time of the sale of Class M shares is set forth
above under "How to buy shares -- Class M shares." In addition,
in order to further compensate dealers (including, for this
purpose, certain financial institutions) for services provided in
connection with sales of Class B shares and Class M shares and
the maintenance of shareholder accounts, Putnam Mutual Funds
makes quarterly payments to qualifying dealers based on the
average net asset value of Class B shares and Class M shares
which are attributable to shareholders for whom the dealers are
designated as the dealer of record. Putnam Mutual Funds makes
such payments at an annual rate of 0.25% of such average net
asset value of Class B shares and Class M shares, as the case may
be. In addition, Putnam Mutual Funds also pays to dealers, as
additional compensation with respect to the sale of Class M
shares, 0.40% of such average net asset value of Class M shares.
For Class M shares, the total annual payment to dealers equals
0.65% of such average net asset value.
GENERAL. Payments under the Plans are intended to compensate
Putnam Mutual Funds for services provided and expenses incurred
by it as principal underwriter of the Fund's shares, including
the payments to dealers mentioned above. Putnam Mutual Funds may
suspend or modify such payments to dealers. Such payments are
also subject to the continuation of the relevant Distribution
Plan, the terms of Service Agreements between dealers and Putnam
Mutual Funds, and any applicable limits imposed by the National
Association of Securities Dealers, Inc.
<PAGE>
HOW TO SELL SHARES
You can sell your shares to the Fund any day the New York Stock
Exchange is open, either directly to the Fund or through your
investment dealer. The Fund will only redeem shares for which it
has received payment.
SELLING SHARES DIRECTLY TO THE FUND. Send a signed letter of
instruction or stock power form to Putnam Investor Services,
along with any certificates that represent shares you want to
sell. The price you will receive is the next net asset value
calculated after the Fund receives your request in proper form
less any applicable CDSC. In order to receive that day's net
asset value, Putnam Investor Services must receive your request
before the close of regular trading on the New York Stock
Exchange. If you sell shares having a net asset value of
$100,000 or more, the signatures of registered owners or their
legal representatives must be guaranteed by a bank, broker-dealer
or certain other financial institutions. See the Statement of
Additional Information for more information about where to obtain
a signature guarantee. Stock power forms are available from your
investment dealer, Putnam Investor Services and many commercial
banks. If you want your redemption proceeds sent to an address
other than your address as it appears on Putnam's records, a
signature guarantee is required. Putnam Investor Services
usually requires additional documentation for the sale of shares
by a corporation, partnership, agent or fiduciary, or a surviving
joint owner. Contact Putnam Investor Services for details.
THE FUND GENERALLY SENDS YOU PAYMENT FOR YOUR SHARES THE BUSINESS
DAY AFTER YOUR REQUEST IS RECEIVED. Under unusual circumstances,
the Fund may suspend redemptions, or postpone payment for more
than seven days, as permitted by federal securities law.
You may use Putnam's Telephone Redemption Privilege to redeem
shares valued up to $100,000 from your account unless you have
notified Putnam Investor Services of an address change within the
preceding 15 days. Unless an investor indicates otherwise on the
Account Application, Putnam Investor Services will be authorized
to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide Putnam Investor
Services with his or her account registration and address as it
appears on Putnam Investor Services' records. Putnam Investor
Services will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine;
if it fails to employ reasonable procedures, Putnam Investor
Services may be liable for any losses due to unauthorized or
fraudulent instructions. For information, consult Putnam
Investor Services. During periods of unusual market changes and
shareholder activity, you may experience delays in contacting
Putnam Investor Services by telephone in which case you may wish
to submit a written redemption request, as described above, or
contact your investment dealer, as described below. The
Telephone Redemption Privilege is not available if you were
issued certificates for your shares which remain outstanding. <PAGE>
The Telephone Redemption Privilege may be modified or terminated
without notice.
SELLING SHARES THROUGH YOUR INVESTMENT DEALER. Your dealer must
receive your request before the close of regular trading on the
New York Stock Exchange to receive that day's net asset value.
Your dealer will be responsible for furnishing all necessary
documentation to Putnam Investor Services, and may charge you for
its services.
HOW TO EXCHANGE SHARES
You can exchange your shares for shares of the same class of
certain other Putnam funds at net asset value beginning 15 days
after purchase. Not all Putnam funds offer all classes of
shares. If you exchange shares subject to a CDSC, the
transaction will not be subject to the CDSC. However, when you
redeem the shares acquired through the exchange, the redemption
may be subject to the CDSC, depending upon when you originally
purchased the shares and using the schedule of any fund into or
from which you have exchanged your shares that would result in
your paying the highest CDSC applicable to your class of shares.
For purposes of computing the CDSC, the length of time you have
owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.
To exchange your shares, simply complete an Exchange
Authorization Form and send it to Putnam Investor Services.
Exchange Authorization Forms are available by calling or writing
Putnam Investor Services. For federal income tax purposes, an
exchange is treated as a sale of shares and generally results in
a capital gain or loss. A Telephone Exchange Privilege is
currently available for amounts up to $500,000. Putnam Investor
Services' procedures for telephonic transactions are described
above under "How to sell shares." The Telephone Exchange
Privilege is not available if you were issued certificates for
shares which remain outstanding. Ask your investment dealer or
Putnam Investor Services for prospectuses of other Putnam funds.
Shares of certain Putnam funds are not available to residents of
all states.
The exchange privilege is not intended as a vehicle for short-
term trading. Excessive exchange activity may interfere with
portfolio management and have an adverse effect on all
shareholders. In order to limit excessive exchange activity and
in other circumstances where Putnam Management or the Trustees
believe doing so would be in the best interests of the Fund, the
Fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges or reject any
exchange. Shareholders would be notified of any such action to
the extent required by law. Consult Putnam Investor Services
before requesting an exchange. See the Statement of Additional
Information to find out more about the exchange privilege.
<PAGE>
HOW THE FUND VALUES ITS SHARES
THE FUND CALCULATES THE NET ASSET VALUE OF A SHARE OF EACH CLASS
BY DIVIDING THE TOTAL VALUE OF ITS ASSETS, LESS LIABILITIES, BY
THE NUMBER OF ITS SHARES OUTSTANDING. SHARES ARE VALUED AS OF
THE CLOSE OF REGULAR TRADING ON THE NEW YORK STOCK EXCHANGE EACH
DAY THE EXCHANGE IS OPEN. Portfolio securities for which market
quotations are readily available are valued at market
value. Short-term investments that will mature in 60 days or
less are valued at amortized cost, which approximates
market value. All other securities and assets are valued at
their fair value following procedures approved by the Trustees.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income quarterly and any
net realized capital gains at least annually. Distributions from
capital gains are made after applying any available capital loss
carryovers. A capital loss carryover is currently available.
Distributions paid by the Fund with respect to Class A shares
will generally be greater than those paid with respect to Class B
shares and Class M shares because expenses attributable to Class
B shares and Class M shares will generally be higher.
YOU CAN CHOOSE FROM THREE DISTRIBUTION OPTIONS: (1) reinvest all
distributions in additional Fund shares without a sales charge;
(2) receive distributions from net investment income in cash
while reinvesting capital gains distributions in additional
shares without a sales charge; or (3) receive all distributions
in cash. You can change your distribution option by notifying
Putnam Investor Services in writing. If you do not select an
option when you open your account, all distributions will be
reinvested. All distributions not paid in cash will be
reinvested in the shares of the class on which the distributions
are paid. You will receive a statement confirming reinvestment
of distributions in additional Fund shares (or in shares of other
Putnam funds for Dividends Plus accounts) promptly following the
quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within
a specified period, Putnam Investor Services will notify you that
you have the option of requesting another check or reinvesting
the distribution in the Fund or in another Putnam fund. If
Putnam Investor Services does not receive your election, the
distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or Putnam Investor Services is
returned as "undeliverable," Fund distributions will
automatically be reinvested in the Fund or in another Putnam
fund.
The Fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements that are necessary for it to be relieved of federal
taxes on income and gains it distributes to shareholders. The
Fund will distribute substantially all of its ordinary income and
capital gain net income on a current basis.
All Fund distributions will be taxable to you as ordinary income,
except that any distributions of net long-term capital gains will
be taxable as such, regardless of how long you have held the
shares. Distributions will be taxable as described above whether
received in cash or in shares through the reinvestment of
distributions.
Early in each year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding
year.
The foregoing is a summary of certain federal income tax
consequences of investing in the Fund. You should consult your
tax adviser to determine the precise effect of an investment in
the Fund on your particular tax situation (including possible
liability for state and local taxes).
ABOUT PUTNAM INVESTMENTS, INC.
PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS SINCE 1937.
Putnam Mutual Funds is the principal underwriter of the Fund and
of other Putnam funds. Putnam Fiduciary Trust Company is the
Fund's custodian. Putnam Investor Services, a division of Putnam
Fiduciary Trust Company, is the Fund's investor servicing and
transfer agent.
Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are subsidiaries of Putnam Investments, Inc., which is
wholly owned by Marsh & McLennan Companies, Inc., a publicly-
owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment management.
<PAGE>
MAKE THE MOST OF YOUR PUTNAM PRIVILEGES
As a Putnam mutual fund shareholder, you have access to a number
of services that can help you build a more effective and flexible
financial program. Here are some of the ways you can use these
privileges to make the most of your Putnam mutual fund
investment.
SYSTEMATIC INVESTMENT PLAN
Invest as much as you wish ($25 or more) on any day of the month
except for the 29th, 30th, or 31st. The amount will be
automatically transferred from your checking or savings account.
SYSTEMATIC WITHDRAWAL
Make regular withdrawals of $50 or more monthly, quarterly, or
semiannually from an account valued at $10,000 or more. You may
establish your withdrawal on any day of the month except for the
29th, 30th, or 31st.
SYSTEMATIC EXCHANGE
Transfer assets automatically from one Putnam account to another
on a regular, prearranged basis. There is no additional charge
for this service.
FREE EXCHANGE PRIVILEGE
Exchange money between Putnam funds in the same class of shares
without charge. The exchange privilege allows you to adjust your
investments as your objectives change. A signature guarantee is
required for exchanges of more than $500,000.
<PAGE>
DIVIDENDS PLUS
Diversify your portfolio by investing dividends and other
distributions from one Putnam fund automatically into another at
net asset value.
STATEMENT OF INTENTION
To reduce a front-end sales charge, you agree to invest a minimum
dollar amount over 13 months. Depending on your fund, the
minimum is $25,000, $50,000, or $100,000. Whenever you make an
investment under this arrangement, you or your investment advisor
should notify Putnam that a Statement of Intention is in effect.
Investors may not maintain, within the same fund, simultaneous
plans for systematic investment or exchange and systematic
withdrawal or exchange. These privileges are subject to change
or termination.
For more information about any of these services and privileges,
call your investment advisor or a Putnam customer service
representative toll free at 1-800-225-1581.
<PAGE>
PUTNAM EQUITY INCOME FUND
One Post Office Square
Boston, MA 02109
FUND INFORMATION:
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
INVESTOR SERVICING AGENT
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
CUSTODIAN
Putnam Fiduciary Trust Company
One Post Office Square
Boston, MA 02109
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
PUTNAMINVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581
<PAGE>
PUTNAM EQUITY INCOME FUND
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION
APRIL 1,
1995
This Statement of Additional Information is not a Prospectus and
is only authorized for distribution when accompanied or preceded
by a Prospectus of the Fund dated April 1, 1995 , as
revised from time to time. This Statement contains information
which may be useful to investors but which is not included in the
Prospectus. If the Fund has more than one form of current
Prospectus, each reference to the Prospectus in this Statement
shall include all the Fund's Prospectuses, unless otherwise
noted. The Statement should be read together with the
Prospectus. Investors may obtain a free copy of the applicable
Prospectus from Putnam Investor Services, Mailing address: P.O.
Box 41203, Providence, RI 02940-1203.
Part I of this Statement of Additional Information contains
specific information about the Fund. Part II includes
information about the Fund and the other Putnam funds.
<PAGE>
TABLE OF CONTENTS
PART I PAGE
INVESTMENT RESTRICTIONS OF THE FUND. . . . . . . . . . . . . . . .I-3
FUND CHARGES AND EXPENSES. . . . . . . . . . . . . . . . . . . . .I-6
INVESTMENT PERFORMANCE OF THE FUND . . . . . . . . . . . . . . . .I-9
ADDITIONAL OFFICERS OF THE FUND. . . . . . . . . . . . . . . . . I-15
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . . . I-16
PART II
MISCELLANEOUS INVESTMENT PRACTICES . . . . . . . . . . . . . . . II-1
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-22
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . .II-27
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . .II-36
HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . .II-38
DISTRIBUTION PLAN. . . . . . . . . . . . . . . . . . . . . . . .II-49
INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . .II-50
SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . . .II-56
SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . . .II-56
SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . .II-56
STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . . .II-57
COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . .II-58
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .II-63
<PAGE>
PUTNAM EQUITY INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
PART I
INVESTMENT RESTRICTIONS OF THE FUND
AS FUNDAMENTAL INVESTMENT RESTRICTIONS, WHICH MAY NOT BE CHANGED
WITHOUT A VOTE OF A MAJORITY OF THE OUTSTANDING VOTING
SECURITIES, THE FUND MAY NOT AND WILL NOT:
(1) Borrow money in excess of 10% of the value (taken at the
lower of cost or current value) of its total assets (not
including the amount borrowed) at the time the borrowing is made,
and then only from banks as a temporary measure to facilitate the
meeting of redemption requests (not for leverage) which might
otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes. Such
borrowings will be repaid before any additional investments are
purchased.
(2) Pledge, hypothecate, mortgage or otherwise encumber its
assets in excess of 15% of its total assets (taken at cost) and
then only to secure borrowings permitted by restriction 1 above.
(For the purposes of this restriction, collateral arrangements
with respect to margin for financial futures contracts or related
options and the deposit of underlying securities and other assets
in escrow in connection with the writing of call or put options
are not deemed to be a pledge or other encumbrance of assets.)
(3) Purchase securities on margin, except such short-term
credits as may be necessary for the clearance of purchases and
sales of securities, and except that it may make margin payments
in connection with financial futures contracts or related
options.
(4) Make short sales of securities or maintain a short position
for the account of the Fund unless at all times when a short
position is open it either owns an equal amount of such
securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the
securities sold short. (It is presently anticipated that such
sales would be made only for federal income tax purposes; such
sales would not be made of securities subject to outstanding
options.)
(5) Underwrite securities issued by other persons except to the
extent that, in connection with the disposition of its portfolio
investments, it may deemed to be an underwriter under federal
securities laws.
(6) Purchase or sell real estate, although it may purchase
securities of issuers which deal in real estate, securities which
are secured by interests in real estate and securities
representing interests in real estate.<PAGE>
(7) Purchase or sell commodities or commodity contracts, except
that the Fund may buy or sell financial futures contracts and
related options.
(8) Make loans, except by purchase of debt obligations in which
the Fund may invest consistent with its investment policies, by
entry into repurchase agreements with respect to not more than
25% of its total assets, or through the lending of its portfolio
securities with respect to not more than 25% of its total assets.
(9) Invest in securities of any issuer, if, to the knowledge of
the Fund, officers and Trustees of the Fund and officers and
directors of Putnam Management who beneficially own more than
0.5% of the securities of that issuer together beneficially own
more than 5%.
(10) Invest in securities of any issuer if, immediately after
such investment, more than 5% of the total assets of the Fund
taken at current value would be invested in the securities of
such issuer; provided that this limitation does not apply to
obligations issued or guaranteed as to interest and principal by
the U.S. government or its agencies or instrumentalities.
(11) Purchase securities restricted as to resale, if, as a
result, such investments would exceed 15% of the value of the
Fund's net assets, excluding restricted securities that have been
determined by the Trustees of the Fund (or the person designated
by them to make such determinations) to be readily marketable.
(12) Purchase securities (other than securities of the U.S.
government, its agencies or instrumentalities), if as a result of
such purchase more than 25% of total Fund assets would be
invested in any one industry.
(13) Acquire more than 10% of the voting securities of any issuer
or more than 10% of any class of securities of any issuer. (For
these purposes all preferred stocks of an issuer are regarded as
a single class, and all debt securities of an issuer are regarded
as a single class. This restriction does not limit the extent to
which the Fund may write or purchase options.)
IT IS CONTRARY TO THE FUND'S PRESENT POLICY, WHICH MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL, TO:
(1) Invest in securities of registered open-end investment
companies, except as they may be acquired as part of a merger or
consolidation or acquisition of assets or by purchases in the
open market involving only customary brokers' commissions.
(2) Invest in securities of an issuer, which, together with any
predecessor, has been in operation for less than three years, and
in equity securities for which market quotations are not readily
available (but excluding securities restricted as to resale) if,
as a result, the aggregate of such investments would exceed 5% of
the value of the Fund's net assets; provided, however, that this
restriction shall not apply to any obligation of the U.S.
government or its instrumentalities or agencies.
<PAGE>
(3) Buy or sell oil, gas or other mineral leases, rights or
royalty contracts.
(4) Make investments for the purpose of gaining control of a
company's management.
(5) Invest in (a) securities which at the time of such
investment are not readily marketable, (b) securities restricted
as to resale (excluding securities determined by the Trustees of
the Fund (or the person designated by the Trustees of the Fund to
make such determinations) to be readily marketable), and (c)
repurchase agreements maturing in more than seven days, if, as a
result, more than 15% of the Fund's net assets (taken at current
value) would be invested in securities described in (a), (b) and
(c) above.
(6) Invest in warrants if, as a result, such investments (valued
at the lower cost or market) would exceed 5% of the value of the
Fund's net assets; provided that not more than 2% of the Fund's
net assets may be invested in warrants not listed on the New York
or American Stock Exchanges.
(7) Purchase or sell real property (including limited
partnership interests), except that the Fund may (a) purchase or
sell readily marketable interests in real estate investment
trusts or readily marketable securities of companies which invest
in real estate (b) purchase or sell securities that are secured
by interests in real estate or interests therein, or (c) acquire
real estate through exercise of its rights as a holder of
obligations secured by real estate or interests therein or sell
real estate so acquired.
Changes in the above policies will be reflected in the Fund's
Prospectus or in this Statement. The Fund has undertaken to
certain state securities authorities that certain of these
policies will not be changed without approval of such authorities
so long as shares of the Fund are registered for sale in such
states. Changes in these policies could result in increased
investment risk.
Although certain of the Fund's fundamental investment
restrictions permit the Fund to borrow money to a limited extent,
the Fund does not currently intend to do so and did not do so
last year.
------------------------
All percentage limitations on investments will apply at the time
of the making of an investment and shall not be considered
violated unless an excess or deficiency occurs or exists
immediately after and as a result of such investment.
The Investment Company Act of 1940 provides that a "vote of a
majority of the outstanding voting securities" of the Fund means
the affirmative vote of the lesser of (l) more than 50% of the
outstanding shares of the Fund, or (2) 67% or more of the shares
present at a meeting if more than 50% of the outstanding shares
are represented at the meeting in person or by proxy.
FUND CHARGES AND EXPENSES
MANAGEMENT FEES
Under a Management Contract dated May 2, 1986, the Fund pays a
quarterly fee to Putnam Management based on the average net
assets of the Fund, as determined at the close of each business
day during the quarter, at an annual rate of 0.75% of the first
$100 million of average net assets, 0.65% of the next $100
million, 0.55% of the next $300 million, 0.50% of the next $1
billion, 0.45% of the next $1 billion and 0.40% of any amount
over $2.5 billion. For its 1992 , 1993 and
1994 fiscal years, pursuant to the Management Contract, the
Fund incurred fees of $2,337,958 , $2,099,538
and $2,186,967 , respectively.
BROKERAGE COMMISSIONS
During fiscal 1992 , 1993 and 1994 , the
Fund incurred brokerage commissions aggregating
$2,517,766 , $756,374 and $670,423 , respectively,
on agency transactions. In fiscal 1992 , 1993
and 1994 , the Fund incurred underwriting commissions
aggregating $1,114,525 , $691,961 and
$422,516 , respectively, on underwritten transactions. In
fiscal 1994 , Putnam Management, on behalf of the Fund,
placed agency and underwritten transactions having an approximate
aggregate dollar value of $291,247,309 (46.01% of the
Fund's agency and underwritten transactions, on which
approximately $502,950 of commissions were paid) with
brokers and dealers to recognize research, statistical and
quotation services Putnam Management considered to be
particularly useful to it and its affiliates.
ADMINISTRATIVE EXPENSE REIMBURSEMENT
The Fund reimbursed Putnam Management $10,032 for
administrative services in fiscal 1994, including
$9,098 for the compensation of certain officers of the
Fund and their staff and contributions to the Putnam Investments,
Inc. Profit Sharing Retirement Plan for their benefit.
<TABLE>
<CAPTION>
TRUSTEE FEES
The Fund pays each Trustee a fee for his or her services. Each Trustee also receives
fees for serving as Trustee of other Putnam funds. The Trustees periodically review their
fees to assure that such fees continue to be appropriate in light of their
responsibilities as well as in relation to fees paid to trustees of other mutual fund
complexes. The Trustees meet monthly over a two-day period, except in August. The
Compensation Committee, which consists solely of Trustees not affiliated with Putnam
Management and is responsible for recommending Trustee compensation, estimates that the
Committee and Trustee meeting time together with the appropriate preparation requires the
equivalent of at least three business days per Trustee meeting. The fees paid to each
Trustee by the Fund and by all of the Putnam funds are shown below:
RETIREMENT
YEAR FIRST BENEFITS TOTAL
ELECTED AS A AGGREGATE ACCRUED AS COMPENSATION
TRUSTEE OF THE COMPENSATION PART OF FUND'S FROM ALL
TRUSTEES PUTNAM FUNDS FROM THE FUND* EXPENSES PUTNAM FUNDS**
---------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
Jameson A. Baxter 1994 $1,063 $0 $135,850
Hans H. Estin 1972 1,184 0 141,850
John A. Hill 1985 1,190 0 143,850
Elizabeth T. Kennan 1992 1,173 0 141,850
Lawrence J. Lasser 1992 1,184 0 141,850
Robert E. Patterson 1984 1,203 0 144,850
Donald S. Perkins 1982 1,167 0 139,850
William F. Pounds 1971 1,190 0 143,850
George Putnam 1957 1,184 0 141,850
George Putnam, III 1984 1,184 0 141,850
A.J.C. Smith 1986 1,151 0 137,850
W. Nicholas Thorndike 1992 1,203 0 144,850
----------------------------------------------------------------------------------
* Reflects amounts paid by the Fund for its fiscal year ended November 30, 1994.
Includes an annual retainer and an attendance fee for each meeting attended.
** Reflects total payments received from all Putnam funds in the most recent calendar
year. As of December 31, 1994, there were 86 funds in the Putnam family.
</TABLE>
The Fund's Trustees have approved Retirement Guidelines for
Trustees of the Putnam funds. These guidelines provide generally
that a Trustee who retires after reaching age 72 and who has at
least 10 years of continuous service will be eligible to receive
a retirement benefit from each Putnam fund for which he or she
served as a Trustee. The amount and form of such benefit is
subject to determination annually by the Trustees and, unless
otherwise determined by the Trustees, will be an annual cash
benefit payable for life equal to one-half of the Trustee
retainer fees paid by the Fund at the time of retirement.
Several retired Trustees are currently receiving benefits
pursuant to the Guidelines and it is anticipated that the current
Trustees of the Fund will receive similar benefits upon their
retirement. A Trustee who retired in the most recent calendar
year and was eligible to receive benefits under these Guidelines
would have received an annual benefit of $60,425, based upon the
aggregate retainer fees paid by the Putnam funds for such year.
The Trustees of the Fund reserve the right to amend or terminate
such Guidelines and the related payments at any time, and may
modify or waive the foregoing eligibility requirements when
deemed appropriate.
For additional information concerning the Fund's Trustees, see
"Management of the Fund" in Part II of this Statement of
Additional Information.<PAGE>
OWNERSHIP OF FUND SHARES
At February 28, 1995 the officers and Trustees of the Fund
as a group owned less than 1% of the outstanding shares of
any class of the Fund, and to the knowledge of the Fund no
person owned of record or beneficially 5% or more of the shares
of any class of the Fund, except that Raymond James &
Associates, Inc., P.O. Box 12749, 880 Carillon Parkway, St.
Petersburg, FLA, 33733-2749, owned of record 6.10% of the Class
M shares of the Fund.
CLASS A SALES CHARGES, CONTINGENT DEFERRED SALES CHARGES AND
12B-1 FEES
During fiscal 1992 , 1993 and 1994 , Putnam
Mutual Funds received $125,530 , $574,362 and
$439,254 , respectively, in sales charges on sales of Class A
shares of the Fund, of which it retained $20,425
, $36,613 and $63,412 , respectively, after
allowance of dealer concessions. During fiscal 1992
, 1993 and 1994 , Putnam Mutual Funds did not
receive any contingent deferred sales charges upon redemptions of
Class A shares of the Fund. During fiscal 1994 , the Fund
incurred $797,114 in 12b-1 fees to Putnam Mutual Funds
pursuant to the Fund's Class A Distribution Plan.
CLASS B CONTINGENT DEFERRED SALES CHARGES AND 12B-1 FEES
During fiscal 1993 and 1994 , Putnam Mutual Funds received
$8,079 and $50,066, respectively, in contingent deferred
sales charges upon redemptions of Class B shares of the Fund.
During fiscal 1994 , the Fund incurred $233,518 in
12b-1 fees to Putnam Mutual Funds pursuant to the Fund's Class B
Distribution Plan.
INVESTOR SERVICING AND CUSTODY FEES AND EXPENSES
During the 1994 fiscal year, the Fund incurred
$264,730 in fees and out-of-pocket expenses for investor
servicing and custody services provided by Putnam Fiduciary Trust
Company.
INVESTMENT PERFORMANCE OF THE FUND
On March 7, 1991, the shareholders of the Fund approved a change
in the investment objective of the Fund to its current investment
objectives and a change in the Fund's distribution policies. The
investment objective of the Fund before March 7, 1991 was to seek
as high a level of current return as Putnam Management believed
not to involve undue risk, primarily by investing in
dividend-paying common stocks and securities convertible into
common stocks and writing covered call options to increase its
current return. Under the Fund's former distribution policies,
at certain times the Fund paid quarterly distributions at a level
rate even though the Fund did not achieve projected investment
results for a given period. As a result, the Fund's
distributions at times included a return of capital.
Consequently, the performance information shown below relating to
the periods before March 7, 1991 does not reflect the Fund's
performance under its current investment objectives or
distribution policies.
STANDARD PERFORMANCE MEASURES
The yield for Class A shares for the thirty-day period ended
November 30, 1994 was 3.57%. The average
annual total return (compounded annually) for Class A shares for
the one-, five- and ten-year periods ended November 30, 1994
was -4.26%, +5.92% and 9.17%, respectively. Investment
performance is adjusted to reflect the deduction of the maximum
sales charge of 5.75%. The yield for Class B shares for the
thirty-day period ended November 30, 1994 was 3.05%. The average
annual total return (compounded annually) for Class B shares for
the one-year period ended November 30, 1994 and for the life of
the class through November 30, 1994 was -4.03% and -3.17%,
respectively, adjusted to reflect deduction of the
applicable contingent deferred sales charge. The maximum
contingent deferred sales charge is 5.00%. See "Other Performance
Information" below for the inception date of each class. No Class
M shares were outstanding at November 30, 1994 . See
"Standard Performance Measures" in Part II of this Statement for
information on how the Fund's total return and yield are
calculated.
PERFORMANCE RATINGS
For the 1994 fiscal year, the Class A shares of the Fund
were ranked 16 of 98 equity income funds by Lipper
Analytical Services, Inc. and 18 of 96 equity
income funds by CDA/Wiesenberger's Management Results. As of the
end of the fiscal year, the Class A shares of the Fund were given
a 3-star rating (out of 5 stars) by Morningstar, Inc. For the
1994 fiscal year, the Class B shares of the Fund were ranked 21
of 98 equity income funds by Lipper Analytical Services, Inc. and
27 of 96 equity income funds by CDA/Wiesenberger's Management
Results. Class B shares were not rated by Morningstar, Inc .
No Class M shares were outstanding during fiscal 1994 .
See "Comparison of Portfolio Performance" in Part II of this
Statement for information about how these rankings and
ratings are determined. Past performance is no guarantee of
future results.
OTHER PERFORMANCE INFORMATION
The tables below show total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment
in one share of the Fund during the life of the Fund. This was a
period of fluctuating security prices. No Class M shares were
outstanding during these periods. The Class A tables have been
restated to reflect the current 5.75% maximum sales charge and do
not project the future performance of the Fund.<PAGE>
<TABLE>
<CAPTION>
CLASS A SHARES
DISTRIBUTIONS
---------------------------------------------------
CUMULATIVE
MAXIMUM NET ASSET FROM NET ASSET VALUE
OFFERING VALUE IN EXCESS SHORT-TERM FROM AT YEAR-END
FISCAL PRICE AT ------------------ FROM OF NET GAINS AND LONG-TERM FROM WITH ALL
YEAR BEGINNING BEGINNING END OF INVESTMENT INVESTMENT OPTION CAPITAL PAID-IN DISTRIBUTIONS
ENDED OF YEAR OF YEAR YEAR INCOME INCOME PREMIUMS GAINS CAPITAL REINVESTED
-------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
2/28/78(1)$14.57 $13.73 $12.99 $ .27 --- $ .19 --- --- $13.45
11/30/78 13.78 12.99 12.98 .45 --- .65 --- --- 14.60
11/30/79 13.77 12.98 13.08 .57 --- 1.01 $ .015 --- 16.58
11/30/80 13.88 13.08 14.00 .60 --- 1.13 .065 --- 20.31
11/30/81 14.85 14.00 12.91 .60 --- 1.40 --- --- 21.72
11/30/82 13.70 12.91 12.64 .48 --- 1.04 .471 --- 25.24
11/30/83 13.41 12.64 12.19 .33 --- 1.73 --- --- 28.55
11/30/84 12.93 12.19 10.65 .55(2) --- 1.42 .037 --- 29.91
11/30/85 11.30 10.65 10.76 .39(3) --- 1.41 .005 --- 35.83
11/30/86 11.42 10.76 10.81 .20 --- 1.40 .110 --- 42.18
11/30/87 11.47 10.81 7.87 .21 --- 1.38 .120 --- 35.71
11/30/88 8.35 7.87 8.47 .32 --- 1.19 --- --- 45.79
11/30/89 8.99 8.47 8.62 .32 --- .06 --- $0.90 53.92
11/30/90 9.15 8.62 6.60 .25 --- --- --- 0.94 48.23
11/30/91 7.00 6.60 7.29 .30 --- .24 --- --- 57.45
11/30/92 7.73 7.29 7.72 .40 --- --- --- --- 64.15
11/30/93 8.19 7.72 8.67 .31 .03 --- --- --- 75.09
11/30/94 9.20 8.67 8.49 .32 --- --- --- --- 76.29
----- ------ ------ ------- -------
Total distributions $6.87 $0.03 $14.25 $0.823 $ 1.84
(1) Investment operations began June 15, 1977.
(2) Includes $0.079 from distributed net equalization credits, which constitutes a return of capital for federal income
tax purposes.
(3) Includes $0.009 from distributed net equalization credits, which constitutes a return of capital for federal income
tax purposes.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
PER CENTAGE CHANGES DURING LIFE OF CLASS A SHARES
PUTNAM EQUITY INCOME FUND
-------------------------------
NET
MAXIMUM ASSET STANDARD &
OFFERING VALUE POOR'S 500 DOW JONES CONSUMER
PRICE TO NET TO NET COMPOSITE STOCK INDUSTRIAL PRICE
FISCAL ASSET VALUE ASSET VALUE PRICE INDEX AVERAGE INDEX
YEAR CUMULA- CUMULA- CUMULA- CUMULA- CUMULA-
ENDED ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE
----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/28/78(1) -- -7.7% -- -2.1% -- -6.0% -- -14.0% -- +4.3%
11/30/78 +2.3% +0.2 +8.5% +6.3 +13.1% +6.3 +12.3% -3.4 +7.2% +11.8
11/30/79 +7.1 +13.8 +13.6 +20.8 +18.3 +25.7 +9.3 +5.6 +12.6 +25.9
11/30/80 +15.4 +39.4 +22.5 +47.9 +39.7 +75.5 +28.6 +35.8 +12.7 +41.8
11/30/81 +0.9 +49.1 +7.0 +58.2 -5.5 +66.0 -5.1 +28.9 +9.6 +55.4
11/30/82 +9.5 +73.2 +16.2 +83.8 +16.3 +93.0 +24.7 +60.8 +4.6 +62.5
11/30/83 +6.6 +95.9 +13.1 +107.9 +25.6 +142.3 +28.7 +106.9 +3.3 +67.8
11/30/84 -1.2 +105.3 +4.8 +117.8 +2.9 +149.4 -2.2 +102.5 +4.1 +74.6
11/30/85 +12.9 +145.9 +19.8 +160.9 +29.1 +221.8 +29.9 +163.0 +3.5 +80.8
11/30/86 +10.9 +189.5 +17.7 +207.2 +27.7 +311.0 +35.1 +255.4 +1.3 +83.1
11/30/87 -20.2 +145.1 -15.3 +160.1 -4.8 +291.5 -1.2 +251.0 +4.5 +91.4
11/30/88 +20.9 +214.3 +28.2 +233.5 +23.2 +382.2 +19.7 +320.1 +4.3 +99.5
11/30/89 +10.9 +270.1 +17.8 +292.7 +30.8 +530.8 +33.4 +460.4 +4.7 +108.8
11/30/90 -15.7 +231.0 -10.6 +251.2 -3.6 +508.3 -1.8 +450.4 +6.3 +121.9
11/30/91 +12.3 +294.3 +19.1 +318.4 +20.4 +632.6 +17.0 +543.9 +3.0 +128.5
11/30/92 +5.3 +340.3 +11.7 +367.2 +18.5 +767.8 +17.7 +657.6 +3.1 +135.5
11/30/93 +10.3 +415.4 +17.1 +446.9 +10.1 +855.0 +14.8 +769.0 +2.7 +141.8
11/30/94 -4.3 +423.6 +1.6 +455.6 +1.1 +865.2 +4.4 +807.2 +2.7 +148.3
(1) Investment operations began June 15, 1977.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES
CUMULATIVE
DISTRIBUTIONS NET ASSET VALUE
NET ASSET VALUE ------------------- AT YEAR-END
FISCAL ------------------ FROM FROM WITH ALL
PERIOD BEGINNING END OF INVESTMENT CAPITAL DISTRIBUTIONS
ENDED OF YEAR YEAR INCOME GAINS REINVESTED
------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
11/30/93 (1) $8.66 $8.65 - -- $8.65
11/30/94 $8.65 $8.46 $0.27 --
$8.72
(1) Class B shares were offered beginning September 13, 1993.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGES DURING LIFE OF CLASS B SHARES
PUTNAM EQUITY INCOME FUND
---------------------------
NET
ASSET STANDARD &
VALUE POOR'S 500 DOW JONES CONSUMER
TO NET COMPOSITE STOCK INDUSTRIAL PRICE
FISCAL ASSET VALUE PRICE INDEX AVERAGE INDEX
PERIOD CUMULA- CUMULA- CUMULA- CUMULA-
ENDED ANNUAL TIVE ANNUALTIVE ANNUAL TIVE ANNUAL TIVE
----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/93(1) -- -0.12% -- +0.31% -- +1.60% --
0.69%
11/30/94 0.86% 0.74% 1.07% 1.39% 4.36% 6.03% 2.67% 3.38%
(1) Class B shares were offered beginning September 13, 1993.
/TABLE
<PAGE>
The tables are not adjusted for any payments under the Fund's
Class A Distribution Plan prior to its implementation in fiscal
1990 or taxes payable on reinvested distributions or for any
contingent deferred sales charges which would be applied upon
redemption of Class B shares . The total values for the Fund
as of the end of each period reflect reinvestment of all
distributions and all changes in net asset value.
Standard & Poor's 500 Composite Stock Price Index is an unmanaged
list of common stocks frequently used as a general measure of
stock market performance. Its performance figures reflect
changes of market prices and reinvestment of all regular cash
dividends but are not adjusted for commissions or other costs.
The Dow Jones Industrial Average is an unmanaged list of 30
common stocks also frequently used as a general measure of stock
market performance. Its performance figures reflect changes of
market prices and reinvestment of all distributions but are not
adjusted for commissions or other costs. Because the Fund is a
managed portfolio investing in a wide variety of dividend-paying
common stocks, securities convertible into common stocks, and
other securities, the securities it owns will not match those in
the indices.
The Consumer Price Index, prepared by the U.S. Bureau of Labor
Statistics, is a commonly used measure of the rate of inflation.
The index shows the average change in the cost of selected
consumer goods and services and does not represent a return on an
investment vehicle.
ADDITIONAL OFFICERS OF THE FUND
In addition to the persons listed as officers of the Fund in Part
II of this Statement, the following persons are also officers of
the Fund. Officers of Putnam Management hold the same offices in
Putnam Management's parent company, Putnam Investments, Inc.
PETER CARMAN, Vice President. Senior Managing Director of Putnam
Management. Prior to August 1, 1993, Mr. Carman was Chief
Investment Officer, Chairman of the U.S. Equity Investment Policy
Committee and a Director of Sanford C. Bernstein & Company,Inc.
THOMAS V. REILLY, Vice President. Managing Director of Putnam
Management. Vice President of certain of the Putnam funds.
EDWARD P. BOUSA, Vice President. Senior Vice President of Putnam
Management. Vice President of certain of the Putnam funds.
Prior to October, 1992, Mr. Bousa was Vice President and
Portfolio Manager at Fidelity Investments.
KENNETH J. TAUBES, Vice President. Senior Vice President of
Putnam Management. Vice President of certain of the Putnam
funds. Prior to June, 1991, Mr. Taubes was Senior Vice
President of the Finance Division of U.S. Trust Company.
ROSEMARY H. THOMSEN, Vice President. Senior Vice President of
Putnam Management. Vice President of certain of the Putnam
funds.
<PAGE>
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Coopers & Lybrand L.L.P. , One Post Office Square, Boston,
MA, 02109, are the Fund's independent accountants, providing
audit services, tax return review and other tax consulting
services and assistance and consultation in connection with the
review of various Securities and Exchange Commission filings. The
Report of Independent Accountants and financial statements
included in the Fund's Annual Report for the fiscal year ended
November 30, 1994 , filed electronically on February 8,
1995 (811-2742), are incorporated by reference into this
Statement of Additional Information. The financial highlights in
the Prospectus and the financial statements incorporated by
reference into the Prospectus and the Statement of Additional
Information have been so included and incorporated by reference
in reliance upon the report of Coopers & Lybrand L.L.P. ,
independent accountants, given on the authority of that firm as
experts in auditing and accounting.
<PAGE>
<PAGE>
TABLE OF CONTENTS
MISCELLANEOUS INVESTMENT PRACTICES . . . . . . . . . . . . . . . . . . II-1
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-22
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . .II-27
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . .II-36
HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-38
DISTRIBUTION PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . .II-49
INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-50
SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . .II-56
SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . .II-56
SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . .II-56
STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . . . . . .II-57
COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . . . . .II-58
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-63
<PAGE>
THE PUTNAM FUNDS
STATEMENT OF ADDITIONAL INFORMATION
PART II
The following information applies generally to your Fund and to
the other Putnam funds. In certain cases the discussion applies
to some but not all of the funds or their shareholders, and you
should refer to your Prospectus to determine whether the matter
is applicable to you or your Fund. You will also be referred to
Part I for certain information applicable to your particular
Fund. Shareholders who purchase shares at net asset value
through employer-sponsored defined contribution plans should also
consult their employer for information about the extent to which
the matters described below apply to them.
MISCELLANEOUS INVESTMENT PRACTICES
YOUR FUND'S PROSPECTUS STATES WHICH OF THE FOLLOWING INVESTMENT
PRACTICES ARE AVAILABLE TO YOUR FUND. THE FACT THAT YOUR FUND IS
AUTHORIZED TO ENGAGE IN A PARTICULAR PRACTICE DOES NOT
NECESSARILY MEAN THAT IT WILL ACTUALLY DO SO. YOU SHOULD
DISREGARD ANY PRACTICE DESCRIBED BELOW WHICH IS NOT MENTIONED IN
THE PROSPECTUS.
SHORT-TERM TRADING
In seeking the Fund's objective, Putnam Management will buy or
sell portfolio securities whenever Putnam Management believes it
appropriate to do so. In deciding whether to sell a portfolio
security, Putnam Management does not consider how long the Fund
has owned the security. From time to time the Fund will buy
securities intending to seek short-term trading profits. A
change in the securities held by the Fund is known as "portfolio
turnover" and generally involves some expense to the Fund. These
expenses may include brokerage commissions or dealer mark-ups and
other transaction costs on both the sale of securities and the
reinvestment of the proceeds in other securities. If sales of
portfolio securities cause the Fund to realize net short-term
capital gains, such gains will be taxable as ordinary income. As
a result of the Fund's investment policies, under certain market
conditions the Fund's portfolio turnover rate may be higher than
that of other mutual funds. Portfolio turnover rate for a fiscal
year is the ratio of the lesser of purchases or sales of
portfolio securities to the monthly average of the value of
portfolio securities -- excluding securities whose maturities at
acquisition were one year or less. The Fund's portfolio turnover
rate is not a limiting factor when Putnam Management considers a
change in the Fund's portfolio.
<PAGE>
LOWER-RATED SECURITIES
The Fund may invest in lower-rated fixed-income securities
(commonly known as "junk bonds"), to the extent described in the
Prospectus. The lower ratings of certain securities held by the
Fund reflect a greater possibility that adverse changes in the
financial condition of the issuer or in general economic
conditions, or both, or an unanticipated rise in interest rates,
may impair the ability of the issuer to make payments of interest
and principal. The inability (or perceived inability) of issuers
to make timely payment of interest and principal would likely
make the values of securities held by the Fund more volatile and
could limit the Fund's ability to sell its securities at prices
approximating the values the Fund had placed on such securities.
In the absence of a liquid trading market for securities held by
it, the Fund may be unable at times to establish the fair value
of such securities. The rating assigned to a security by Moody's
Investors Service, Inc. or Standard & Poor's Corporation (or by
any other nationally recognized securities rating organization)
does not reflect an assessment of the volatility of the
security's market value or the liquidity of an investment in the
security. See the Prospectus or Part I of this Statement for a
description of security ratings.
Like those of other fixed-income securities, the values of
lower-rated securities fluctuate in response to changes in
interest rates. Thus, a decrease in interest rates will
generally result in an increase in the value of the Fund's
assets. Conversely, during periods of rising interest rates, the
value of the Fund's assets will generally decline. In addition,
the values of such securities are also affected by changes in
general economic conditions and business conditions affecting the
specific industries of their issuers. Changes by recognized
rating services in their ratings of any fixed-income security and
in the ability of an issuer to make payments of interest and
principal may also affect the value of these investments.
Changes in the value of portfolio securities generally will not
affect cash income derived from such securities, but will affect
the Fund's net asset value. The Fund will not necessarily
dispose of a security when its rating is reduced below its rating
at the time of purchase, although Putnam Management will monitor
the investment to determine whether its retention will assist in
meeting the Fund's investment objective.
At times, a substantial portion of the Fund's assets may be
invested in securities as to which the Fund, by itself or
together with other funds and accounts managed by Putnam
Management and its affiliates, holds a major portion or all of
such securities. Although Putnam Management generally considers
such securities to be liquid because of the availability of an
institutional market for such securities, it is possible that,
under adverse market or economic conditions or in the event of
adverse changes in the financial condition of the issuer, the
Fund could find it more difficult to sell such securities when
Putnam Management believes it advisable to do so or may be able
to sell such securities only at prices lower than if such
securities were more widely held. Under such circumstances, it
may also be more difficult to determine the fair value of such
securities for purposes of computing the Fund's net asset value.
In order to enforce its rights in the event of a default under
such securities, the Fund may be required to take possession of
and manage assets securing the issuer's obligations on such
securities, which may increase the Fund's operating expenses and
adversely affect the Fund's net asset value. In the case of
tax-exempt funds, any income derived from the Fund's ownership or
operation of such assets would not be tax-exempt. In addition,
the Fund's intention to qualify as a "regulated investment
company" under the Internal Revenue Code may limit the extent to
which the Fund may exercise its rights by taking possession of
such assets.
Certain securities held by the Fund may permit the issuer at its
option to "call", or redeem, its securities. If an issuer were
to redeem securities held by the Fund during a time of declining
interest rates, the Fund may not be able to reinvest the proceeds
in securities providing the same investment return as the
securities redeemed.
If the Fund's Prospectus describes so-called "zero-coupon" bonds
and "payment-in-kind" bonds as possible investments, the Fund may
invest without limit in such bonds unless otherwise specified in
the Prospectus. Zero-coupon bonds are issued at a significant
discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer, at its
option, to make current interest payments on the bonds either in
cash or in additional bonds. Because zero-coupon bonds do not
pay current interest, their value is subject to greater
fluctuation in response to changes in market interest rates than
bonds which pay interest currently. Both zero-coupon and
payment-in-kind bonds allow an issuer to avoid the need to
generate cash to meet current interest payments. Accordingly,
such bonds may involve greater credit risks than bonds paying
interest currently. Even though such bonds do not pay current
interest in cash, the Fund is nonetheless required to accrue
interest income on such investments and to distribute such
amounts at least annually to shareholders. Thus, the Fund could
be required at times to liquidate investments in order to satisfy
its dividend requirements.
The amount of information about the financial condition of an
issuer of tax exempt securities may not be as extensive as that
which is made available by corporations whose securities are
publicly traded. Therefore, to the extent the Fund invests in
tax exempt securities in the lower rating categories, the
achievement of the Fund's goals is more dependent on Putnam
Management's investment analysis than would be the case if the
Fund were investing in securities in the higher rating
categories.
INVESTMENTS IN MISCELLANEOUS FIXED INCOME SECURITIES
Unless otherwise specified in the Prospectus or elsewhere in this
Statement of Additional Information, if the Fund may invest in
inverse floating obligations and premium securities, it may do so
without limit. The Fund, however, currently does not intend to
invest more than 15% of its assets in inverse floating
obligations under normal market conditions.
SECURITIES LOANS
The Fund may make secured loans of its portfolio securities, on
either a short-term or long-term basis, amounting to not more
than 25% of its total assets, thereby realizing additional
income. The risks in lending portfolio securities, as with other
extensions of credit, consist of possible delay in recovery of
the securities or possible loss of rights in the collateral
should the borrower fail financially. As a matter of policy,
securities loans are made to broker-dealers pursuant to
agreements requiring that loans be continuously secured by
collateral consisting of cash or short-term debt obligations at
least equal at all times to the value of the securities on loan,
"marked-to-market" daily. The borrower pays to the Fund an
amount equal to any dividends or interest received on securities
lent. The Fund retains all or a portion of the interest received
on investment of the cash collateral or receives a fee from the
borrower. Although voting rights, or rights to consent, with
respect to the loaned securities pass to the borrower, the Fund
retains the right to call the loans at any time on reasonable
notice, and it will do so to enable the Fund to exercise voting
rights on any matters materially affecting the investment. The
Fund may also call such loans in order to sell the securities.
FORWARD COMMITMENTS
The Fund may enter into contracts to purchase securities for a
fixed price at a future date beyond customary settlement time
("forward commitments") if the Fund holds, and maintains until
the settlement date in a segregated account, cash or high-grade
debt obligations in an amount sufficient to meet the purchase
price, or if the Fund enters into offsetting contracts for the
forward sale of other securities it owns. In the case of to-be-
announced ("TBA") purchase commitments, the unit price and the
estimated principal amount are established when the Fund enters
into a contract, with the actual principal amount being within a
specified range of the estimate. Forward commitments may be
considered securities in themselves, and involve a risk of loss
if the value of the security to be purchased declines prior to
the settlement date, which risk is in addition to the risk of
decline in the value of the Fund's other assets. Where such
purchases are made through dealers, the Fund relies on the dealer
to consummate the sale. The dealer's failure to do so may result
in the loss to the Fund of an advantageous yield or price.
Although the Fund will generally enter into forward commitments
with the intention of acquiring securities for its portfolio or
for delivery pursuant to options contracts it has entered into,
the Fund may dispose of a commitment prior to settlement if
Putnam Management deems it appropriate to do so. The Fund may
realize short-term profits or losses upon the sale of forward
commitments.
The Fund may enter into TBA sale commitments to hedge its
portfolio positions or to sell mortgage-backed securities it owns
under delayed delivery arrangements. Proceeds of TBA sale
commitments are not received until the contractual settlement
date. During the time a TBA sale commitment is outstanding,
equivalent deliverable securities, or an offsetting TBA purchase
commitment deliverable on or before the sale commitment date, are
held as "cover" for the transaction. Unsettled TBA sale
commitments are valued at current market value of the underlying
securities. If the TBA sale commitment is closed through the
acquisition of an offsetting purchase commitment, the Fund
realizes a gain or loss on the commitment without regard to any
unrealized gain or loss on the underlying security. If the Fund
delivers securities under the commitment, the Fund realizes a
gain or loss from the sale of the securities based upon the unit
price established at the date the commitment was entered into.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements up to the limit
specified in the Prospectus. A repurchase agreement is a
contract under which the Fund acquires a security for a
relatively short period (usually not more than one week) subject
to the obligation of the seller to repurchase and the Fund to
resell such security at a fixed time and price (representing the
Fund's cost plus interest). It is the Fund's present intention
to enter into repurchase agreements only with commercial banks
and registered broker-dealers and only with respect to
obligations of the U.S. government or its agencies or
instrumentalities. Repurchase agreements may also be viewed as
loans made by the Fund which are collateralized by the securities
subject to repurchase. Putnam Management will monitor such
transactions to ensure that the value of the underlying
securities will be at least equal at all times to the total
amount of the repurchase obligation, including the interest
factor. If the seller defaults, the Fund could realize a loss on
the sale of the underlying security to the extent that the
proceeds of sale including accrued interest are less than the
resale price provided in the agreement including interest. In
addition, if the seller should be involved in bankruptcy or
insolvency proceedings, the Fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal
and interest if the Fund is treated as an unsecured creditor and
required to return the underlying collateral to the seller's
estate.
Pursuant to an exemptive order issued by the Securities and
Exchange Commission, the Fund may transfer uninvested cash
balances into a joint account, along with cash of other Putnam
funds and certain other accounts. These balances may be invested
in one or more repurchase agreements and/or short-term money
market instruments.
OPTIONS ON SECURITIES
WRITING COVERED OPTIONS. The Fund may write covered call options
and covered put options on optionable securities held in its
portfolio, when in the opinion of Putnam Management such
transactions are consistent with the Fund's investment objectives
and policies. Call options written by the Fund give the
purchaser the right to buy the underlying securities from the
Fund at a stated exercise price; put options give the purchaser
the right to sell the underlying securities to the Fund at a
stated price.
The Fund may write only covered options, which means that, so
long as the Fund is obligated as the writer of a call option, it
will own the underlying securities subject to the option (or
comparable securities satisfying the cover requirements of
securities exchanges). In the case of put options, the Fund will
hold cash and/or high-grade short-term debt obligations equal to
the price to be paid if the option is exercised. In addition,
the Fund will be considered to have covered a put or call option
if and to the extent that it holds an option that offsets some or
all of the risk of the option it has written. The Fund may write
combinations of covered puts and calls on the same underlying
security.
The Fund will receive a premium from writing a put or call
option, which increases the Fund's return on the underlying
security in the event the option expires unexercised or is closed
out at a profit. The amount of the premium reflects, among other
things, the relationship between the exercise price and the
current market value of the underlying security, the volatility
of the underlying security, the amount of time remaining until
expiration, current interest rates, and the effect of supply and
demand in the options market and in the market for the underlying
security. By writing a call option, the Fund limits its
opportunity to profit from any increase in the market value of
the underlying security above the exercise price of the option
but continues to bear the risk of a decline in the value of the
underlying security. By writing a put option, the Fund assumes
the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current
market value, resulting in a potential capital loss unless the
security subsequently appreciates in value.
The Fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction, in
which it purchases an offsetting option. The Fund realizes a
profit or loss from a closing transaction if the cost of the
transaction (option premium plus transaction costs) is less or
more than the premium received from writing the option. Because
increases in the market price of a call option generally reflect
increases in the market price of the security underlying the
option, any loss resulting from a closing purchase transaction
may be offset in whole or in part by unrealized appreciation of
the underlying security owned by the Fund.
If the Fund writes a call option but does not own the underlying
security, and when it writes a put option, the Fund may be
required to deposit cash or securities with its broker as
"margin", or collateral, for its obligation to buy or sell the
underlying security. As the value of the underlying security
varies, the Fund may have to deposit additional margin with the
broker. Margin requirements are complex and are fixed by
individual brokers, subject to minimum requirements currently
imposed by the Federal Reserve Board and by stock exchanges and
other self-regulatory organizations.
PURCHASING PUT OPTIONS. The Fund may purchase put options to
protect its portfolio holdings in an underlying security against
a decline in market value. Such protection is provided during
the life of the put option since the Fund, as holder of the
option, is able to sell the underlying security at the put
exercise price regardless of any decline in the underlying
security's market price. In order for a put option to be
profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the
premium and transaction costs. By using put options in this
manner, the Fund will reduce any profit it might otherwise have
realized from appreciation of the underlying security by the
premium paid for the put option and by transaction costs.
PURCHASING CALL OPTIONS. The Fund may purchase call options to
hedge against an increase in the price of securities that the
Fund wants ultimately to buy. Such hedge protection is provided
during the life of the call option since the Fund, as holder of
the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying
security's market price. In order for a call option to be
profitable, the market price of the underlying security must rise
sufficiently above the exercise price to cover the premium and
transaction costs.
RISK FACTORS IN OPTIONS TRANSACTIONS
The successful use of the Fund's options strategies depends on
the ability of Putnam Management to forecast correctly interest
rate and market movements. For example, if the Fund were to
write a call option based on Putnam Management's expectation that
the price of the underlying security would fall, but the price
were to rise instead, the Fund could be required to sell the
security upon exercise at a price below the current market price.
Similarly, if the Fund were to write a put option based on Putnam
Management's expectation that the price of the underlying
security would rise, but the price were to fall instead, the Fund
could be required to purchase the security upon exercise at a
price higher than the current market price.
When the Fund purchases an option, it runs the risk that it will
lose its entire investment in the option in a relatively short
period of time, unless the Fund exercises the option or enters
into a closing sale transaction before the option's expiration.
If the price of the underlying security does not rise (in the
case of a call) or fall (in the case of a put) to an extent
sufficient to cover the option premium and transaction costs, the
Fund will lose part or all of its investment in the option. This
contrasts with an investment by the Fund in the underlying
security, since the Fund will not realize a loss if the
security's price does not change.
The effective use of options also depends on the Fund's ability
to terminate option positions at times when Putnam Management
deems it desirable to do so. There is no assurance that the Fund
will be able to effect closing transactions at any particular
time or at an acceptable price.
If a secondary market in options were to become unavailable, the
Fund could no longer engage in closing transactions. Lack of
investor interest might adversely affect the liquidity of the
market for particular options or series of options. A market may
discontinue trading of a particular option or options generally.
In addition, a market could become temporarily unavailable if
unusual events -- such as volume in excess of trading or clearing
capability -- were to interrupt its normal operations.
A market may at times find it necessary to impose restrictions on
particular types of options transactions, such as opening
transactions. For example, if an underlying security ceases to
meet qualifications imposed by the market or the Options Clearing
Corporation, new series of options on that security will no
longer be opened to replace expiring series, and opening
transactions in existing series may be prohibited. If an options
market were to become unavailable, the Fund as a holder of an
option would be able to realize profits or limit losses only by
exercising the option, and the Fund, as option writer, would
remain obligated under the option until expiration or exercise.
Disruptions in the markets for the securities underlying options
purchased or sold by the Fund could result in losses on the
options. If trading is interrupted in an underlying security,
the trading of options on that security is normally halted as
well. As a result, the Fund as purchaser or writer of an option
will be unable to close out its positions until options trading
resumes, and it may be faced with considerable losses if trading
in the security reopens at a substantially different price. In
addition, the Options Clearing Corporation or other options
markets may impose exercise restrictions. If a prohibition on
exercise is imposed at the time when trading in the option has
also been halted, the Fund as purchaser or writer of an option
will be locked into its position until one of the two
restrictions has been lifted. If the Options Clearing
Corporation were to determine that the available supply of an
underlying security appears insufficient to permit delivery by
the writers of all outstanding calls in the event of exercise, it
may prohibit indefinitely the exercise of put options. The Fund,
as holder of such a put option, could lose its entire investment
if the prohibition remained in effect until the put option's
expiration.
Special risks are presented by internationally-traded options.
Because of time differences between the United States and various
foreign countries, and because different holidays are observed in
different countries, foreign options markets may be open for
trading during hours or on days when U.S. markets are closed. As
a result, option premiums may not reflect the current prices of
the underlying interest in the United States.
Over-the-counter ("OTC") options purchased by the Fund and assets
held to cover OTC options written by the Fund may, under certain
circumstances, be considered illiquid securities for purposes of
any limitation on the Fund's ability to invest in illiquid
securities.
FUTURES CONTRACTS AND RELATED OPTIONS
Subject to applicable law, and unless otherwise specified in the
Prospectus, the Fund may invest without limit in the types of
futures contracts and related options identified in the
Prospectus. A financial futures contract sale creates an
obligation by the seller to deliver the type of financial
instrument called for in the contract in a specified delivery
month for a stated price. A financial futures contract purchase
creates an obligation by the purchaser to take delivery of the
type of financial instrument called for in the contract in a
specified delivery month at a stated price. The specific
instruments delivered or taken, respectively, at settlement date
are not determined until on or near that date. The determination
is made in accordance with the rules of the exchange on which the
futures contract sale or purchase was made. Futures contracts
are traded in the United States only on commodity exchanges or
boards of trade -- known as "contract markets" -- approved for
such trading by the Commodity Futures Trading Commission (the
"CFTC"), and must be executed through a futures commission
merchant or brokerage firm which is a member of the relevant
contract market.
Although futures contracts (other than index futures) by their
terms call for actual delivery or acceptance of commodities or
securities, in most cases the contracts are closed out before the
settlement date without the making or taking of delivery.
Closing out a futures contract sale is effected by purchasing a
futures contract for the same aggregate amount of the specific
type of financial instrument or commodity with the same delivery
date. If the price of the initial sale of the futures contract
exceeds the price of the offsetting purchase, the seller is paid
the difference and realizes a gain. Conversely, if the price of
the offsetting purchase exceeds the price of the initial sale,
the seller realizes a loss. Similarly, the closing out of a
futures contract purchase is effected by the purchaser's entering
into a futures contract sale. If the offsetting sale price
exceeds the purchase price, the purchaser realizes a gain, and if
the purchase price exceeds the offsetting sale price, he realizes
a loss. In general 40% of the gain or loss arising from the
closing out of a futures contract traded on an exchange approved
by the CFTC is treated as short-term gain or loss, and 60% is
treated as long-term gain or loss.
Unlike when the Fund purchases or sells a security, no price is
paid or received by the Fund upon the purchase or sale of a
futures contract. Upon entering into a contract, the Fund is
required to deposit with its custodian in a segregated account in
the name of the futures broker an amount of cash and/or U.S.
Government Securities. This amount is known as "initial margin."
The nature of initial margin in futures transactions is different
from that of margin in security transactions in that futures
contract margin does not involve the borrowing of funds to
finance the transactions. Rather, initial margin is similar to a
performance bond or good faith deposit which is returned to the
Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Futures contracts
also involve brokerage costs.
Subsequent payments, called "variation margin" or "maintenance
margin", to and from the broker (or the custodian) are made on a
daily basis as the price of the underlying security or commodity
fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking to
the market." For example, when the Fund has purchased a futures
contract on a security and the price of the underlying security
has risen, that position will have increased in value and the
Fund will receive from the broker a variation margin payment
based on that increase in value. Conversely, when the Fund has
purchased a security futures contract and the price of the
underlying security has declined, the position would be less
valuable and the Fund would be required to make a variation
margin payment to the broker.
The Fund may elect to close some or all of its futures positions
at any time prior to their expiration in order to reduce or
eliminate a hedge position then currently held by the Fund. The
Fund may close its positions by taking opposite positions which
will operate to terminate the Fund's position in the futures
contracts. Final determinations of variation margin are then
made, additional cash is required to be paid by or released to
the Fund, and the Fund realizes a loss or a gain. Such closing
transactions involve additional commission costs.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write
call and put options on futures contracts it may buy or sell and
enter into closing transactions with respect to such options to
terminate existing positions. Options on future contracts give
the purchaser the right in return for the premium paid to assume
a position in a futures contract at the specified option exercise
price at any time during the period of the option. The Fund may
use options on futures contracts in lieu of writing or buying
options directly on the underlying securities or purchasing and
selling the underlying futures contracts. For example, to hedge
against a possible decrease in the value of its portfolio
securities, the Fund may purchase put options or write call
options on futures contracts rather than selling futures
contracts. Similarly, the Fund may purchase call options or
write put options on futures contracts as a substitute for the
purchase of futures contracts to hedge against a possible
increase in the price of securities which the Fund expects to
purchase. Such options generally operate in the same manner as
options purchased or written directly on the underlying
investments.
As with options on securities, the holder or writer of an option
may terminate his position by selling or purchasing an offsetting
option. There is no guarantee that such closing transactions can
be effected.
The Fund will be required to deposit initial margin and
maintenance margin with respect to put and call options on
futures contracts written by it pursuant to brokers' requirements
similar to those described above in connection with the
discussion of futures contracts.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS.
Successful use of futures contracts by the Fund is subject to
Putnam Management's ability to predict movements in the direction
of interest rates and other factors affecting securities markets.
For example, if the Fund has hedged against the possibility of
decline in the values of its investments and the values of its
investments increase instead, the Fund will lose part or all of
the benefit of the increase through payments of daily maintenance
margin. The Fund may have to sell investments at a time when it
may be disadvantageous to do so in order to meet margin
requirements.
Compared to the purchase or sale of futures contracts, the
purchase of call or put options on futures contracts involves
less potential risk to the Fund because the maximum amount at
risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the purchase of
a call or put option on a futures contract would result in a loss
to the Fund when the purchase or sale of a futures contract would
not, such as when there is no movement in the prices of the
hedged investments. The writing of an option on a futures
contract involves risks similar to those risks relating to the
sale of futures contracts.
There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render
certain market clearing facilities inadequate, and thereby result
in the institution by exchanges of special procedures which may
interfere with the timely execution of customer orders.
To reduce or eliminate a hedge position held by the Fund, the
Fund may seek to close out a position. The ability to establish
and close out positions will be subject to the development and
maintenance of a liquid secondary market. It is not certain that
this market will develop or continue to exist for a particular
futures contract or option. Reasons for the absence of a liquid
secondary market on an exchange include the following: (i) there
may be insufficient trading interest in certain contracts or
options; (ii) restrictions may be imposed by an exchange on
opening transactions or closing transactions or both; (iii)
trading halts, suspensions or other restrictions may be imposed
with respect to particular classes or series of contracts or
options, or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or a clearing corporation may not
at all times be adequate to handle current trading volume; or
(vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the
trading of contracts or options (or a particular class or series
of contracts or options), in which event the secondary market on
that exchange for such contracts or options (or in the class or
series of contracts or options) would cease to exist, although
outstanding contracts or options on the exchange that had been
issued by a clearing corporation as a result of trades on that
exchange would continue to be exercisable in accordance with
their terms.
U.S. TREASURY SECURITY FUTURES CONTRACTS AND OPTIONS. If the
Fund invests in tax-exempt securities issued by a governmental
entity, the Fund may purchase and sell futures contracts and
related options on U.S. Treasury securities when, in the opinion
of Putnam Management, price movements in Treasury security
futures and related options will correlate closely with price
movements in the tax-exempt securities which are the subject of
the hedge. U.S. Treasury security futures contracts require the
seller to deliver, or the purchaser to take delivery of, the type
of U.S. Treasury security called for in the contract at a
specified date and price. Options on U.S. Treasury security
futures contracts give the purchaser the right in return for the
premium paid to assume a position in a U.S. Treasury security
futures contract at the specified option exercise price at any
time during the period of the option.
Successful use of U.S. Treasury security futures contracts by the
Fund is subject to Putnam Management's ability to predict
movements in the direction of interest rates and other factors
affecting markets for debt securities. For example, if the Fund
has sold U.S. Treasury security futures contracts in order to
hedge against the possibility of an increase in interest rates
which would adversely affect tax-exempt securities held in its
portfolio, and the prices of the Fund's tax-exempt securities
increase instead as a result of a decline in interest rates, the
Fund will lose part or all of the benefit of the increased value
of its securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such
situations, if the Fund has insufficient cash, it may have to
sell securities to meet daily maintenance margin requirements at
a time when it may be disadvantageous to do so.
There is also a risk that price movements in U.S. Treasury
security futures contracts and related options will not correlate
closely with price movements in markets for tax-exempt
securities. For example, if the Fund has hedged against a
decline in the values of tax-exempt securities held by it by
selling Treasury security futures and the values of Treasury
securities subsequently increase while the values of its
tax-exempt securities decrease, the Fund would incur losses on
both the Treasury security futures contracts written by it and
the tax-exempt securities held in its portfolio. Putnam
Management will seek to reduce this risk by monitoring movements
in markets for U.S. Treasury security futures and options and for
tax-exempt securities closely. The Fund will only purchase or
sell Treasury security futures or related options when, in the
opinion of Putnam Management, price movements in Treasury
security futures and related options will correlate closely with
price movements in tax-exempt securities in which the Fund
invests.
INDEX FUTURES CONTRACTS. An index futures contract is a contract
to buy or sell units of an index at a specified future date at a
price agreed upon when the contract is made. Entering into a
contract to buy units of an index is commonly referred to as
buying or purchasing a contract or holding a long position in
the index. Entering into a contract to sell units of an index is
commonly referred to as selling a contract or holding a short
position. A unit is the current value of the index. The Fund
may enter into stock index futures contracts, debt index futures
contracts, or other index futures contracts appropriate to its
objective. The Fund may also purchase and sell options on index
futures contracts.
For example, the Standard & Poor's Composite 500 Stock Price
Index ("S&P 500") is composed of 500 selected common stocks, most
of which are listed on the New York Stock Exchange. The S&P 500
assigns relative weightings to the common stocks included in the
Index, and the value fluctuates with changes in the market values
of those common stocks. In the case of the S&P 500, contracts
are to buy or sell 500 units. Thus, if the value of the S&P 500
were $150, one contract would be worth $75,000 (500 units x
$150). The stock index futures contract specifies that no
delivery of the actual stocks making up the index will take
place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the
difference between the contract price and the actual level of the
stock index at the expiration of the contract. For example, if
the Fund enters into a futures contract to buy 500 units of the
S&P 500 at a specified future date at a contract price of $150
and the S&P 500 is at $154 on that future date, the Fund will
gain $2,000 (500 units x gain of $4). If the Fund enters into a
futures contract to sell 500 units of the stock index at a
specified future date at a contract price of $150 and the S&P 500
is at $152 on that future date, the Fund will lose $1,000 (500
units x loss of $2).
There are several risks in connection with the use by the Fund of
index futures as a hedging device. One risk arises because of
the imperfect correlation between movements in the prices of the
index futures and movements in the prices of securities which are
the subject of the hedge. Putnam Management will, however,
attempt to reduce this risk by buying or selling, to the extent
possible, futures on indices the movements of which will, in its
judgment, have a significant correlation with movements in the
prices of the securities sought to be hedged.
Successful use of index futures by the Fund for hedging purposes
is also subject to Putnam Management's ability to predict
movements in the direction of the market. It is possible that,
where the Fund has sold futures to hedge its portfolio against a
decline in the market, the index on which the futures are written
may advance and the value of securities held in the Fund's
portfolio may decline. If this occurred, the Fund would lose
money on the futures and also experience a decline in value in
its portfolio securities. It is also possible that, if the Fund
has hedged against the possibility of a decline in the market
adversely affecting securities held in its portfolio and
securities prices increase instead, the Fund will lose part or
all of the benefit of the increased value of those securities it
has hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Fund has
insufficient cash, it may have to sell securities to meet daily
variation margin requirements at a time when it is
disadvantageous to do so.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the
index futures and the portion of the portfolio being hedged, the
prices of index futures may not correlate perfectly with
movements 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. Second, margin 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 the securities market does. Increased
participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price
distortions in the futures market and also because of the
imperfect correlation between movements in the index and
movements in the prices of index futures, even a correct forecast
of general market trends by Putnam Management may still not
result in a successful hedging transaction over a short time
period.
OPTIONS ON STOCK INDEX FUTURES. Options on index futures are
similar to options on securities except that options on index
futures give the purchaser the right, in return for the premium
paid, to assume a position in an index futures contract (a long
position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during
the period of the option. Upon exercise of the option, the
delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account which
represents the amount by which the market price of the index
futures contract, at exercise, exceeds (in the case of a call) or
is less than (in the case of a put) the exercise price of the
option on the index future. If an option is exercised on the
last trading day prior to its expiration date, the settlement
will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the index
on which the future is based on the expiration date. Purchasers
of options who fail to exercise their options prior to the
exercise date suffer a loss of the premium paid.
OPTIONS ON INDICES
As an alternative to purchasing call and put options on index
futures, the Fund may purchase and sell call and put options on
the underlying indices themselves. Such options would be used in
a manner identical to the use of options on index futures.
INDEX WARRANTS
The Fund may purchase put warrants and call warrants whose values
vary depending on the change in the value of one or more
specified securities indices ("index warrants"). Index warrants
are generally issued by banks or other financial institutions and
give the holder the right, at any time during the term of the
warrant, to receive upon exercise of the warrant a cash payment
from the issuer based on the value of the underlying index at the
time of exercise. In general, if the value of the underlying
index rises above the exercise price of the index warrant, the
holder of a call warrant will be entitled to receive a cash
payment from the issuer upon exercise based on the difference
between the value of the index and the exercise price of the
warrant; if the value of the underlying index falls, the holder
of a put warrant will be entitled to receive a cash payment from
the issuer upon exercise based on the difference between the
exercise price of the warrant and the value of the index. The
holder of a warrant would not be entitled to any payments from
the issuer at any time when, in the case of a call warrant, the
exercise price is greater than the value of the underlying index,
or, in the case of a put warrant, the exercise price is less than
the value of the underlying index. If the Fund were not to
exercise an index warrant prior to its expiration, then the Fund
would lose the amount of the purchase price paid by it for the
warrant.
The Fund will normally use index warrants in a manner similar to
its use of options on securities indices. The risks of the
Fund's use of index warrants are generally similar to those
relating to its use of index options. Unlike most index options,
however, index warrants are issued in limited amounts and are not
obligations of a regulated clearing agency, but are backed only
by the credit of the bank or other institution which issues the
warrant. Also, index warrants generally have longer terms than
index options. Although the Fund will normally invest only in
exchange-listed warrants, index warrants are not likely to be as
liquid as certain index options backed by a recognized clearing
agency. In addition, the terms of index warrants may limit the
Fund's ability to exercise the warrants at such time, or in such
quantities, as the Fund would otherwise wish to do.
FOREIGN SECURITIES
Under its current policy, which may be changed without
shareholder approval, the Fund may invest up to the limit of its
total assets specified in its Prospectus in securities
principally traded in markets outside the United States.
Eurodollar certificates of deposit are excluded for purposes of
this limitation. Foreign investments can be affected favorably
or unfavorably by changes in currency exchange rates and in
exchange control regulations. There may be less publicly
available information about a foreign company than about a U.S.
company, and foreign companies may not be subject to accounting,
auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies. Securities of
some foreign companies are less liquid or more volatile than
securities of U.S. companies, and foreign brokerage commissions
and custodian fees are generally higher than in the United
States. Investments in foreign securities can involve other
risks different from those affecting U.S. investments, including
local political or economic developments, expropriation or
nationalization of assets and imposition of withholding taxes on
dividend or interest payments. To hedge against possible
variations in foreign exchange rates, the Fund may purchase and
sell forward foreign currency contracts. These represent
agreements to purchase or sell specified currencies at specified
dates and prices. The Fund will only purchase and sell forward
foreign currency contracts in amounts Putnam Management deems
appropriate to hedge existing or anticipated portfolio positions
and will not use such forward contracts for speculative purposes.
Foreign securities, like other assets of the Fund, will be held
by the Fund's custodian or by a subcustodian.
FOREIGN CURRENCY TRANSACTIONS
Unless otherwise specified in the Prospectus, the Fund may engage
without limit in currency exchange transactions, as well as
foreign currency forward and futures contracts, to protect
against uncertainty in the level of future currency exchange
rates. In addition, the Fund may write covered call and put
options on foreign currencies for the purpose of increasing its
current return.
Generally, the Fund may engage in both "transaction hedging" and
"position hedging". When it engages in transaction hedging, the
Fund enters into foreign currency transactions with respect to
specific receivables or payables, generally arising in connection
with the purchase or sale of portfolio securities. The Fund will
engage in transaction hedging when it desires to "lock in" the
U.S. dollar price of a security it has agreed to purchase or
sell, or the U.S. dollar equivalent of a dividend or interest
payment in a foreign currency. By transaction hedging the Fund
will attempt to protect itself against a possible loss resulting
from an adverse change in the relationship between the U.S.
dollar and the applicable foreign currency during the period
between the date on which the security is purchased or sold, or
on which the dividend or interest payment is earned, and the date
on which such payments are made or received.
The Fund may purchase or sell a foreign currency on a spot (or
cash) basis at the prevailing spot rate in connection with the
settlement of transactions in portfolio securities denominated in
that foreign currency. The Fund may also enter into contracts to
purchase or sell foreign currencies at a future date ("forward
contracts") and purchase and sell foreign currency futures
contracts.
For transaction hedging purposes the Fund may also purchase
exchange-listed and over-the-counter call and put options on
foreign currency futures contracts and on foreign currencies. A
put option on a futures contract gives the Fund the right to
assume a short position in the futures contract until the
expiration of the option. A put option on a currency gives the
Fund the right to sell the currency at an exercise price until
the expiration of the option. A call option on a futures
contract gives the Fund the right to assume a long position in
the futures contract until the expiration of the option. A call
option on a currency gives the Fund the right to purchase the
currency at the exercise price until the expiration of the
option.
When it engages in position hedging, the Fund enters into foreign
currency exchange transactions to protect against a decline in
the values of the foreign currencies in which its portfolio
securities are denominated (or an increase in the value of
currency for securities which the Fund expects to purchase, when
the Fund holds cash or short-term investments). In connection
with position hedging, the Fund may purchase put or call options
on foreign currency and on foreign currency futures contracts and
buy or sell forward contracts and foreign currency futures
contracts. The Fund may also purchase or sell foreign currency
on a spot basis.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved
will not generally be possible since the future value of such
securities in foreign currencies will change as a consequence of
market movements in the value of those securities between the
dates the currency exchange transactions are entered into and the
dates they mature.
It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward
or futures contract. Accordingly, it may be necessary for the
Fund to purchase additional foreign currency on the spot market
(and bear the expense of such purchase) if the market value of
the security or securities being hedged is less than the amount
of foreign currency the Fund is obligated to deliver and a
decision is made to sell the security or securities and make
delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency
received upon the sale of the portfolio security or securities if
the market value of such security or securities exceeds the
amount of foreign currency the Fund is obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in
the underlying prices of the securities which the Fund owns or
intends to purchase or sell. They simply establish a rate of
exchange which one can achieve at some future point in time.
Additionally, although these techniques tend to minimize the risk
of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the
increase in value of such currency.
The Fund may seek to increase its current return or to offset
some of the costs of hedging against fluctuations in current
exchange rates by writing covered call options and covered put
options on foreign currencies. The Fund receives a premium from
writing a call or put option, which increases the Fund's current
return if the option expires unexercised or is closed out at a
net profit. The Fund may terminate an option that it has written
prior to its expiration by entering into a closing purchase
transaction in which it purchases an option having the same terms
as the option written.
The Fund's currency hedging transactions may call for the
delivery of one foreign currency in exchange for another foreign
currency and may at times not involve currencies in which its
portfolio securities are then denominated. Putnam Management
will engage in such "cross hedging" activities when it believes
that such transactions provide significant hedging opportunities
for the Fund. Cross hedging transactions by the Fund involve the
risk of imperfect correlation between changes in the values of
the currencies to which such transactions relate and changes in
the value of the currency or other asset or liability which is
the subject of the hedge.
CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign
currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number
of days from the date of the contract as agreed by the parties,
at a price set at the time of the contract. In the case of a
cancelable forward contract, the holder has the unilateral right
to cancel the contract at maturity by paying a specified fee.
The contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial
banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage
for trades. A foreign currency futures contract is a
standardized contract for the future delivery of a specified
amount of a foreign currency at a future date at a price set at
the time of the contract. Foreign currency futures contracts
traded in the United States are designed by and traded on
exchanges regulated by the CFTC, such as the New York Mercantile
Exchange.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the
maturity date of a forward contract may be any fixed number of
days from the date of the contract agreed upon by the parties,
rather than a predetermined date in a given month. Forward
contracts may be in any amounts agreed upon by the parties rather
than predetermined amounts. Also, forward foreign exchange
contracts are traded directly between currency traders so that no
intermediary is required. A forward contract generally requires
no margin or other deposit.
At the maturity of a forward or futures contract, the Fund either
may accept or make delivery of the currency specified in the
contract, or at or prior to maturity enter into a closing
transaction involving the purchase or sale of an offsetting
contract. Closing transactions with respect to forward contracts
are usually effected with the currency trader who is a party to
the original forward contract. Closing transactions with respect
to futures contracts are effected on a commodities exchange; a
clearing corporation associated with the exchange assumes
responsibility for closing out such contracts.
Positions in the foreign currency futures contracts may be closed
out only on an exchange or board of trade which provides a
secondary market in such contracts. Although the Fund intends to
purchase or sell foreign currency futures contracts only on
exchanges or boards of trade where there appears to be an active
secondary market, there is no assurance that a secondary market
on an exchange or board of trade 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 variation margin.
FOREIGN CURRENCY OPTIONS. In general, options on foreign
currencies operate similarly to options on securities and are
subject to many similar risks. Foreign currency options are
traded primarily in the over-the-counter market, although options
on foreign currencies have recently been listed on several
exchanges. Options are traded not only on the currencies of
individual nations, but also on the European Currency Unit
("ECU"). The ECU is composed of amounts of a number of
currencies, and is the official medium of exchange of the
European Community's European Monetary System.
The Fund will only purchase or write foreign currency options
when Putnam Management believes that a liquid secondary market
exists for such options. There can be no assurance that a liquid
secondary market will exist for a particular option at any
specific time. Options on foreign currencies are affected by all
of those factors which influence foreign exchange rates and
investments generally.
The value of any currency, including U.S. dollars and foreign
currencies, may be affected by complex political and economic
factors applicable to the issuing country. In addition, the
exchange rates of foreign currencies (and therefore the values
of foreign currency options) may be affected significantly,
fixed, or supported directly or indirectly by U.S. and foreign
government actions. Government intervention may increase risks
involved in purchasing or selling foreign currency options, since
exchange rates may not be free to fluctuate in response to other
market forces.
The value of a foreign currency option reflects the value of an
exchange rate, which in turn reflects relative values of two
currencies, the U.S. dollar and the foreign currency in question.
Because foreign currency transactions occurring in the interbank
market involve substantially larger amounts than those that may
be involved in the exercise of foreign currency options,
investors may be disadvantaged by having to deal in an odd lot
market for the underlying foreign currencies in connection with
options at prices that are less favorable than for round lots.
Foreign governmental restrictions or taxes could result in
adverse changes in the cost of acquiring or disposing of foreign
currencies.
There is no systematic reporting of last sale information for
foreign currencies and there is no regulatory requirement that
quotations available through dealers or other market sources be
firm or revised on a timely basis. Available quotation
information is generally representative of very large round-lot
transactions in the interbank market and thus may not reflect
exchange rates for smaller odd-lot transactions (less than $1
million) where rates may be less favorable. The interbank market
in foreign currencies is a global, around-the-clock market. To
the extent that options markets are closed while the markets for
the underlying currencies remain open, significant price and rate
movements may take place in the underlying markets that cannot be
reflected in the options markets.
SETTLEMENT PROCEDURES. Settlement procedures relating to the
Fund's investments in foreign securities and to the Fund's
foreign currency exchange transactions may be more complex than
settlements with respect to investments in debt or equity
securities of U.S. issuers, and may involve certain risks not
present in the Fund's domestic investments. For example,
settlement of transactions involving foreign securities or
foreign currency may occur within a foreign country, and the Fund
may be required to accept or make delivery of the underlying
securities or currency in conformity with any applicable U.S. or
foreign restrictions or regulations, and may be required to pay
any fees, taxes or charges associated with such delivery. Such
investments may also involve the risk that an entity involved in
the settlement may not meet its obligations.
FOREIGN CURRENCY CONVERSION. Although foreign exchange dealers
do not charge a fee for currency conversion, they do realize a
profit based on the difference (the "spread") between prices at
which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the Fund at one
rate, while offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer.
RESTRICTED SECURITIES
The SEC Staff currently takes the view that any designation by
the Trustees of the authority to determine that a restricted
security is readily marketable (as described in the investment
restrictions of the Funds) must be pursuant to written procedures
established by the Trustees. It is the present intention of the
Funds' Trustees that, if the Trustees decide to delegate such
determinations to Putnam Management or another person, they would
do so pursuant to written procedures, consistent with the Staff's
position. Should the Staff modify its position in the future,
the Trustees would consider what action would be appropriate in
light of the Staff's position at that time.
TAXES
TAXATION OF THE FUND. The Fund intends to qualify each year as a
regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). In order so to
qualify and to qualify for the special tax treatment accorded
regulated investment companies and their shareholders, the Fund
must, among other things:
(a) Derive at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, and
gains from the sale of stock, securities and foreign currencies,
or other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to its
business of investing in such stock, securities, or currencies;
(b) derive less than 30% of its gross income from the sale or
other disposition of certain assets (including stock or
securities and certain options, futures contracts, forward
contracts and foreign currencies) held for less than three
months;
(c) distribute with respect to each taxable year at least 90% of
the sum of its taxable net investment income, its net tax-exempt
income, and the excess, if any, of net short-term capital gains
over net long-term capital losses for such year; and
(d) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the Fund's
assets is represented by cash and cash items, U.S. Government
securities, securities of other regulated investment companies,
and other securities limited in respect of any one issuer to a
value not greater than 5% of the value of the Fund's total assets
and to not more than 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities (other than those of the
U.S. Government or other regulated investment companies) of any
one issuer or of two or more issuers which the Fund controls and
which are engaged in the same, similar, or related trades or
businesses.
If the Fund qualifies as a regulated investment company that is
accorded special tax treatment, the Fund will not be subject to
federal income tax on income paid to its shareholders in the form
of dividends (including capital gain dividends).
If the Fund failed to qualify as a regulated investment company
accorded special tax treatment in any taxable year, the Fund
would be subject to tax on its taxable income at corporate rates,
and all distributions from earnings and profits, including any
distributions of net tax-exempt income and net long-term capital
gains, would be taxable to shareholders as ordinary income. In
addition, the Fund could be required to recognize unrealized
gains, pay substantial taxes and interest and make substantial
distributions before requalifying as a regulated investment
company that is accorded special tax treatment.
If the Fund fails to distribute in a calendar year substantially
all of its ordinary income for such year and substantially all of
its capital gain net income for the one-year period ending
October 31 (or later if the Fund is permitted so to elect and so
elects), plus any retained amount from the prior year, the Fund
will be subject to a 4% excise tax on the undistributed amounts.
A dividend paid to shareholders by the Fund in January of a year
generally is deemed to have been paid by the Fund on December 31
of the preceding year, if the dividend was declared and payable
to shareholders of record on a date in October, November or
December of that preceding year. The Fund intends generally to
make distributions sufficient to avoid imposition of the 4%
excise tax.
EXEMPT-INTEREST DIVIDENDS. The Fund will be qualified to pay
exempt-interest dividends to its shareholders only if, at the
close of each quarter of the Fund's taxable year, at least 50% of
the total value of the Fund's assets consists of obligations the
interest on which is exempt from federal income tax.
Distributions that the Fund properly designates as exempt-
interest dividends are treated by shareholders as interest
excludable from their gross income for federal income tax
purposes but may be taxable for federal alternative minimum tax
purposes and for state and local purposes. If the Fund intends
to be qualified to pay exempt-interest dividends, the Fund may be
limited in its ability to enter into taxable transactions
involving forward commitments, repurchase agreements, financial
futures, and options contracts on financial futures, tax-exempt
bond indices, and other assets.
Part or all of the interest on indebtedness, if any, incurred or
continued by a shareholder to purchase or carry shares of a Fund
paying exempt-interest dividends is not deductible. The portion
of interest that is not deductible is equal to the total interest
paid or accrued on the indebtedness, multiplied by the percentage
of the Fund's total distributions (not including distributions
from net long-term capital gains) paid to the shareholder that
are exempt-interest dividends. Under rules used by the Internal
Revenue Service for determining when borrowed funds are
considered used for the purpose of purchasing or carrying
particular assets, the purchase of shares may be considered to
have been made with borrowed funds even though such funds are not
directly traceable to the purchase of shares.
In general, exempt-interest dividends, if any, attributable to
interest received on certain private activity obligations and
certain industrial development bonds will not be tax-exempt to
any shareholders who are "substantial users" of the facilities
financed by such obligations or bonds or who are "related
persons" of such substantial users.
A Fund which is qualified to pay exempt-interest dividends will
inform investors within 60 days of the Fund's fiscal year-end of
the percentage of its income distributions designated as
tax-exempt. The percentage is applied uniformly to all
distributions made during the year. The percentage of income
designated as tax-exempt for any particular distribution may be
substantially different from the percentage of the Fund's income
that was tax-exempt during the period covered by the
distribution.
HEDGING TRANSACTIONS. If the Fund engages in transactions,
including hedging transactions in options, futures contracts, and
straddles, or other similar transactions, it will be subject to
special tax rules (including mark-to-market, straddle, wash sale,
and short sale rules), the effect of which may be to accelerate
income to the Fund, defer losses to the Fund, cause adjustments
in the holding periods of the Fund's securities, or convert
short-term capital losses into long-term capital losses. These
rules could therefore affect the amount, timing and character of
distributions to shareholders. The Fund will endeavor to make
any available elections pertaining to such transactions in a
manner believed to be in the best interests of the Fund.
Under the 30% of gross income test described above (see "Taxation
of the Fund"), the Fund will be restricted in selling assets held
or considered under Code rules to have been held for less than
three months, and in engaging in certain hedging transactions
(including hedging transactions in options and futures) that in
some circumstances could cause certain Fund assets to be treated
as held for less than three months.
Certain of the Fund's hedging activities (including its
transactions, if any, in foreign currencies or foreign
currency-denominated instruments) are likely to produce a
difference between its book income and its taxable income. If
the Fund's book income exceeds its taxable income, the
distribution (if any) of such excess will be treated as a
dividend to the extent of the Fund's remaining earnings and
profits (including earnings and profits arising from tax-exempt
income), and thereafter as a return of capital or as gain from
the sale or exchange of a capital asset, as the case may be. If
the Fund's book income is less than its taxable income, the Fund
could be required to make distributions exceeding book income to
qualify as a regulated investment company that is accorded
special tax treatment.
RETURN OF CAPITAL DISTRIBUTIONS. If the Fund makes a
distribution to you in excess of its current and accumulated
"earnings and profits" in any taxable year, the excess
distribution will be treated as a return of capital to the extent
of your tax basis in your shares, and thereafter as capital gain.
A return of capital is not taxable, but it reduces your tax basis
in your shares, thus reducing any loss or increasing any gain on
a subsequent taxable disposition by you of your shares.
SECURITIES ISSUED OR PURCHASED AT A DISCOUNT. The Fund's
investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a
discount may) require the Fund to accrue and distribute income
not yet received. In order to generate sufficient cash to make
the requisite distributions, the Fund may be required to sell
securities in its portfolio that it otherwise would have
continued to hold.
CAPITAL LOSS CARRYOVER. The amounts and expiration dates of any
capital loss carryovers available to the Fund are shown in Note 1
(Federal income taxes) to the financial statements included in
Part I of this Statement or incorporated by reference into this
Statement.
FOREIGN CURRENCY-DENOMINATED SECURITIES AND RELATED HEDGING
TRANSACTIONS. The Fund's transactions in foreign currencies,
foreign currency-denominated debt securities and certain foreign
currency options, futures contracts, and forward contracts (and
similar instruments) may give rise to ordinary income or loss to
the extent such income or loss results from fluctuations in the
value of the foreign currency concerned.
If more than 50% of the Fund's assets at year end consists of the
debt and equity securities of foreign corporations, the Fund may
elect to permit shareholders to claim a credit or deduction on
their income tax returns for their pro rata portion of qualified
taxes paid by the Fund to foreign countries. In such a case,
shareholders will include in gross income from foreign sources
their pro rata shares of such taxes. A shareholder's ability to
claim a foreign tax credit or deduction in respect of foreign
taxes paid by the Fund may be subject to certain limitations
imposed by the Code, as a result of which a shareholder may not
get a full credit or deduction for the amount of such taxes.
Shareholders who do not itemize on their federal income tax
returns may claim a credit (but no deduction) for such foreign
taxes.
Investment by the Fund in certain "passive foreign investment
companies" could subject the Fund to a U.S. federal income tax or
other charge on the proceeds from the sale of its investment in
such a company; however, this tax can be avoided by making an
election to mark such investments to market annually or to treat
the passive foreign investment company as a "qualified electing
fund."
SALE OR REDEMPTION OF SHARES. The sale, exchange or redemption
of Fund shares may give rise to a gain or loss. In general, any
gain or loss realized upon a taxable disposition of shares will
be treated as long-term capital gain or loss if the shares have
been held for more than 12 months, and otherwise as short-term
capital gain or loss. However, if a shareholder sells shares at
a loss within six months of purchase, any loss will be disallowed
for Federal income tax purposes to the extent of any exempt-
interest dividends received on such shares. In addition, any
loss (not already disallowed as provided in the preceding
sentence) realized upon a taxable disposition of shares held for
six months or less will be treated as long-term, rather than
short-term, to the extent of any long-term capital gain
distributions received by the shareholder with respect to the
shares. All or a portion of any loss realized upon a taxable
disposition of Fund shares will be disallowed if other Fund
shares are purchased within 30 days before or after the
disposition. In such a case, the basis of the newly purchased
shares will be adjusted to reflect the disallowed loss.
SHARES PURCHASED THROUGH TAX-QUALIFIED PLANS. Special tax rules
apply to investments though defined contribution plans and other
tax-qualified plans. Shareholders should consult their tax
adviser to determine the suitability of shares of a fund as an
investment through such plans and the precise effect of an
investment on their particular tax situation.
BACKUP WITHHOLDING. The Fund generally is required to withhold
and remit to the U.S. Treasury 31% of the taxable dividends and
other distributions paid to any individual shareholder who fails
to furnish the Fund with a correct taxpayer identification number
(TIN), who has underreported dividends or interest income, or who
fails to certify to the Fund that he or she is not subject to
such withholding. Shareholders who fail to furnish their currect
TIN are subject to a penalty of $50 for each such failure unless
the failure is due to reasonable cause and not wilful neglect.
An individual's taxpayer identification number is his or her
social security number.
MANAGEMENT OF THE FUND
TRUSTEES
*+GEORGE PUTNAM, Chairman and President. Chairman and Director
of Putnam Management and Putnam Mutual Funds. Director, The
Boston Company, Inc., Boston Safe Deposit and Trust Company,
Freeport-McMoRan, Inc., General Mills, Inc., Houghton Mifflin
Company, Marsh & McLennan Companies, Inc. and Rockefeller Group,
Inc.
+WILLIAM F. POUNDS, Vice Chairman. Professor of Management,
Alfred P. Sloan School of Management, Massachusetts Institute of
Technology. Director of EG&G, Inc., Fisher Price, Inc., IDEXX,
M/A-COM, Inc., and Sun Company, Inc.
JAMESON A. BAXTER, Trustee. President, Baxter Associates, Inc.
(consultants to management). Director of Avondale Federal Savings
Bank, ASHTA Chemicals, Inc. and Banta Corporation. Chairman of
the Board of Trustees, Mount Holyoke College.
+HANS H. ESTIN, Trustee. Vice Chairman, North American
Management Corp. (a registered investment adviser). Director of
The Boston Company, Inc. and Boston Safe Deposit and Trust
Company.
ELIZABETH T. KENNAN, Trustee. President of Mount Holyoke
College. Director, the Kentucky Home Life Insurance Companies,
NYNEX Corporation, Northeast Utilities and Talbots and Trustee of
the University of Notre Dame.
*LAWRENCE J. LASSER, Trustee and Vice President. President,
Chief Executive Officer and Director of Putnam Investments, Inc.
and Putnam Investment Management, Inc. Director of Marsh &
McLennan Companies, Inc. Vice President of the Putnam funds.
JOHN A. HILL, Trustee. Chairman and Managing Director, First
Reserve Corporation (a registered investment adviser). Director,
Lantana Corporation, Maverick Tube Corporation, Snyder Oil
Corporation and various First Reserve Funds.
+ROBERT E. PATTERSON, Trustee. Executive Vice President, Cabot
Partners Limited Partnership (a registered investment adviser).
DONALD S. PERKINS, Trustee. Chairman of the Board and Director,
Kmart Corporation. Director of various corporations, including
American Telephone & Telegraph Company, AON Corp., Cummins Engine
Company, Inc., Illinois Power Company, Inland Steel Industries,
Inc., LaSalle Street Fund, Inc., Springs Industries, Inc., TBG,
Inc. and Time Warner Inc.
*#GEORGE PUTNAM, III, Trustee. President, New Generation
Research, Inc. (publisher of bankruptcy information). Director,
World Environment Center.
*A.J.C. SMITH, Trustee. Chairman, Chief Executive Officer and
Director, Marsh & McLennan Companies, Inc.
W. NICHOLAS THORNDIKE, Trustee. Director of various corporations
and charitable organizations, including Courier Corporation and
Providence Journal Co. Also, Trustee and President of
Massachusetts General Hospital and Trustee of Bradley Real Estate
Trust and Eastern Utilities Associates.
OFFICERS
CHARLES E. PORTER, Executive Vice President. Managing Director
of Putnam Investments, Inc. and Putnam Investment Management,
Inc. Executive Vice President of the Putnam funds.
PATRICIA C. FLAHERTY, Senior Vice President. Senior Vice
President of Putnam Investments, Inc. and Putnam Investment
Management, Inc.
WILLIAM N. SHIEBLER, Vice President. Director and Senior
Managing Director of Putnam Investments, Inc. President, Chief
Operating Officer and Director of Putnam Mutual Funds. Vice
President of the Putnam funds.
GORDON H. SILVER, Vice President. Senior Managing Director of
Putnam Investments, Inc. and Putnam Investment Management, Inc.
Director, Putnam Investments, Inc. and Putnam Investment
Management, Inc. Vice President of the Putnam funds.
JOHN R. VERANI, Vice President. Senior Vice President of Putnam
Investments, Inc. and Putnam Investment Management, Inc. Vice
President of the Putnam funds.
PAUL M. O'NEIL, Vice President. Vice President of Putnam
Investments, Inc. and Putnam Investment Management, Inc. Vice
President of the Putnam funds.
JOHN D. HUGHES, Vice President and Treasurer. Vice President and
Treasurer of the Putnam funds.
KATHERINE HOWARD, Assistant Vice President. Assistant Vice
President of the Putnam funds.
BEVERLY MARCUS, Clerk and Assistant Treasurer. Clerk and
Assistant Treasurer of the Putnam funds.
*Trustees who are "interested persons" (as defined in the
Investment Company Act of 1940) of the Fund, Putnam Management or
Putnam Mutual Funds.
+Members of the Executive Committee of the Trustees. The
Executive Committee meets between regular meetings of the
Trustees as may be required to review investment matters and
other affairs of the Fund and may exercise all of the powers of
the Trustees.
#George Putnam, III is the son of George Putnam.
-----------------
Certain other officers of Putnam Management are officers of your
Fund. SEE "ADDITIONAL OFFICERS OF THE FUND" IN PART I OF THIS
STATEMENT. The mailing address of each of the officers and
Trustees is One Post Office Square, Boston, Massachusetts 02109.
Except as stated below, the principal occupations of the officers
and Trustees for the last five years have been with the employers
as shown above, although in some cases they have held different
positions with such employers. Also, prior to January, 1992, Ms.
Baxter was Vice President and Principal, Regency Group, Inc. and
Consultant, The First Boston Corporation. Prior to May, 1991,
Mr. Pounds was Senior Advisor to the Rockefeller Family and
Associates, Chairman of Rockefeller Trust Company and Director of
Rockefeller Group, Inc. Prior to November, 1990, Mr. Shiebler
was President and Chief Operating Officer of the Intercapital
Division of Dean Witter Reynolds, Inc., Vice President of the
Dean Witter Funds and Director of Dean Witter Trust Company.
Each Trustee of the Fund receives an annual fee and an additional
fee for each Trustees' meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on
committees of the Trustees receive additional fees for attendance
at certain committee meetings and for special services rendered
in that connection. All of the Trustees are Trustees of all the
Putnam funds and each receives fees for his or her services. FOR
DETAILS OF TRUSTEES' FEES PAID BY THE FUND, SEE "FUND CHARGES AND
EXPENSES" IN PART I OF THIS STATEMENT.
The Agreement and Declaration of Trust of the Fund provides that
the Fund will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the
Fund, except if it is determined in the manner specified in the
Agreement and Declaration of Trust that they have not acted in
good faith in the reasonable belief that their actions were in
the best interests of the Fund or that such indemnification would
relieve any officer or Trustee of any liability to the Fund or
its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties. The
Fund, at its expense, provides liability insurance for the
benefit of its Trustees and officers.
Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are subsidiaries of Putnam Investments, Inc., a holding
company which is in turn wholly owned by Marsh & McLennan
Companies, Inc., a publicly owned holding company whose principal
operating subsidiaries are international insurance and
reinsurance brokers, investment managers and management
consultants.
Trustees and officers of the Fund who are also officers of Putnam
Management or its affiliates or who are stockholders of Marsh &
McLennan Companies, Inc. will benefit from the advisory fees,
sales commissions, distribution fees (if any), custodian fees and
transfer agency fees paid or allowed by the Fund.
PUTNAM MANAGEMENT
Putnam Management is one of America's oldest and largest money
management firms. Putnam Management's staff of experienced
portfolio managers and research analysts selects securities and
constantly supervises the Fund's portfolio. By pooling an
investor's money with that of other investors, a greater variety
of securities can be purchased than would be the case
individually; the resulting diversification helps reduce
investment risk. Putnam Management has been managing mutual funds
since 1937. Today, the firm serves as the investment manager for
the funds in the Putnam Family, with over $67 billion in assets
in over 4.1 million shareholder accounts at December 31, 1994.
An affiliate, The Putnam Advisory Company, Inc., manages domestic
and foreign institutional accounts and mutual funds, including
the accounts of many Fortune 500 companies. Another affiliate,
Putnam Fiduciary Trust Company, provides investment advice to
institutional clients under its banking and fiduciary powers. At
December 31, 1994, Putnam Management and its affiliates managed
over $95 billion in assets, including over $15 billion in tax
exempt securities and over $36 billion in retirement plan assets.
THE MANAGEMENT CONTRACT
Under a Management Contract between the Fund and Putnam
Management, subject to such policies as the Trustees may
determine, Putnam Management, at its expense, furnishes
continuously an investment program for the Fund and makes
investment decisions on behalf of the Fund. Subject to the
control of the Trustees, Putnam Management also manages,
supervises and conducts the other affairs and business of the
Fund, furnishes office space and equipment, provides bookkeeping
and clerical services (including determination of the Fund's net
asset value, but excluding shareholder accounting services) and
places all orders for the purchase and sale of the Fund's
portfolio securities. Putnam Management may place Fund portfolio
transactions with broker-dealers which furnish Putnam Management,
without cost to it, certain research, statistical and quotation
services of value to Putnam Management and its affiliates in
advising the Fund and other clients. In so doing, Putnam
Management may cause the Fund to pay greater brokerage
commissions than it might otherwise pay.
FOR DETAILS OF PUTNAM MANAGEMENT'S COMPENSATION UNDER THE
MANAGEMENT CONTRACT, SEE "FUND CHARGES AND EXPENSES" IN PART I OF
THIS STATEMENT. Putnam Management's compensation under the
Management Contract may be reduced in any year if the Fund's
expenses exceed the limits on investment company expenses imposed
by any statute or regulatory authority of any jurisdiction in
which shares of the Fund are qualified for offer or sale. The
term "expenses" is defined in the statutes or regulations of such
jurisdictions, and generally, excludes brokerage commissions,
taxes, interest, extraordinary expenses and, if the Fund has a
Distribution Plan, payments made under such Plan. The only such
limitation as of the date of this Statement (applicable to any
Fund registered for sale in California) was 2.5% of the first $30
million of average net assets, 2% of the next $70 million and
1.5% of any excess over $100 million.
Under the Management Contract, Putnam Management may reduce its
compensation to the extent that the Fund's expenses exceed such
lower expense limitation as Putnam Management may, by notice to
the Fund, declare to be effective. The expenses subject to this
limitation are exclusive of brokerage commissions, interest,
taxes, deferred organizational and extraordinary expenses and,
if the Fund has a Distribution Plan, payments required under such
Plan. THE TERMS OF ANY EXPENSE LIMITATION FROM TIME TO TIME IN
EFFECT ARE DESCRIBED IN EITHER THE PROSPECTUS OR PART I OF THIS
STATEMENT.
In addition to the fee paid to Putnam Management, the Fund
reimburses Putnam Management for the compensation and related
expenses of certain officers of the Fund and their assistants who
provide certain administrative services for the Fund and the
other funds in the Putnam Family, each of which bears an
allocated share of the foregoing costs. The aggregate amount of
all such payments and reimbursements is determined annually by
the Trustees. THE AMOUNT OF THIS REIMBURSEMENT FOR THE FUND'S
MOST RECENT FISCAL YEAR IS INCLUDED IN "FUND CHARGES AND
EXPENSES" IN PART I OF THIS STATEMENT. Putnam Management pays
all other salaries of officers of the Fund. The Fund pays all
expenses not assumed by Putnam Management including, without
limitation, auditing, legal, custodial, investor servicing and
shareholder reporting expenses. The Fund pays the cost of
typesetting for its Prospectuses and the cost of printing and
mailing any Prospectuses sent to its shareholders. Putnam Mutual
Funds pays the cost of printing and distributing all other
Prospectuses.
The Management Contract provides that Putnam Management shall not
be subject to any liability to the Fund or to any shareholder of
the Fund for any act or omission in the course of or connected
with rendering services to the Fund in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
its duties on the part of Putnam Management.
The Management Contract may be terminated without penalty by vote
of the Trustees or the shareholders of the Fund, or by Putnam
Management, on 30 days' written notice. It may be amended only
by a vote of the shareholders of the Fund. The Management
Contract also terminates without payment of any penalty in the
event of its assignment. The Management Contract provides that
it will continue in effect only so long as such continuance is
approved at least annually by vote of either the Trustees or the
shareholders, and, in either case, by a majority of the Trustees
who are not "interested persons" of Putnam Management or the
Fund. In each of the foregoing cases, the vote of the
shareholders is the affirmative vote of a "majority of the
outstanding voting securities" as defined in the Investment
Company Act of 1940.
PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS. Investment decisions for the Fund and for
the other investment advisory clients of Putnam Management and
its affiliates are made with a view to achieving their respective
investment objectives. Investment decisions are the product of
many factors in addition to basic suitability for the particular
client involved. Thus, a particular security may be bought or
sold for certain clients even though it could have been bought or
sold for other clients at the same time. Likewise, a particular
security may be bought for one or more clients when one or more
other clients are selling the security. In some instances, one
client may sell a particular security to another client. It also
sometimes happens that two or more clients simultaneously
purchase or sell the same security, in which event each day's
transactions in such security are, insofar as possible, averaged
as to price and allocated between such clients in a manner which
in Putnam Management's opinion is equitable to each and in
accordance with the amount being purchased or sold by each.
There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on
other clients.
BROKERAGE AND RESEARCH SERVICES. Transactions on U.S. stock
exchanges, commodities markets and futures markets and other
agency transactions involve the payment by the Fund of negotiated
brokerage commissions. Such commissions vary among different
brokers. A particular broker may charge different commissions
according to such factors as the difficulty and size of the
transaction. Transactions in foreign investments often involve
the payment of fixed brokerage commissions, which may be higher
than those in the United States. There is generally no stated
commission in the case of securities traded in the
over-the-counter markets, but the price paid by the Fund usually
includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Fund includes a
disclosed, fixed commission or discount retained by the
underwriter or dealer. It is anticipated that most purchases and
sales of securities by funds investing primarily in tax-exempt
securities and certain other fixed-income securities will be with
the issuer or with underwriters of or dealers in those
securities, acting as principal. Accordingly, those funds would
not ordinarily pay significant brokerage commissions with respect
to securities transactions. SEE "FUND CHARGES AND EXPENSES" IN
PART I OF THIS STATEMENT FOR INFORMATION CONCERNING COMMISSIONS
PAID BY THE FUND.
It has for many years been a common practice in the investment
advisory business for advisers of investment companies and other
institutional investors to receive brokerage and research
services (as defined in the Securities Exchange Act of 1934, as
amended (the "1934 Act")) from broker-dealers that execute
portfolio transactions for the clients of such advisers and from
third parties with which such broker-dealers have arrangements.
Consistent with this practice, Putnam Management receives
brokerage and research services and other similar services from
many broker-dealers with which Putnam Management places the
Fund's portfolio transactions and from third parties with which
these broker-dealers have arrangements. These services include
such matters as general economic and market reviews, industry and
company reviews, evaluations of investments, recommendations as
to the purchase and sale of investments, newspapers, magazines,
pricing services, quotation services, news services and personal
computers utilized by Putnam Management's managers and analysts.
Where the services referred to above are not used exclusively by
Putnam Management for research purposes, Putnam Management, based
upon its own allocations of expected use, bears that portion of
the cost of these services which directly relates to their
non-research use. Some of these services are of value to Putnam
Management and its affiliates in advising various of their
clients (including the Fund), although not all of these services
are necessarily useful and of value in managing the Fund. The
management fee paid by the Fund is not reduced because Putnam
Management and its affiliates receive these services even though
Putnam Management might otherwise be required to purchase some of
these services for cash.
Putnam Management places all orders for the purchase and sale of
portfolio investments for the Fund and buys and sells investments
for the Fund through a substantial number of brokers and dealers.
In so doing, Putnam Management uses its best efforts to obtain
for the Fund the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage
commissions as described below. In seeking the most favorable
price and execution, Putnam Management, having in mind the Fund's
best interests, considers all factors it deems relevant,
including, by way of illustration, price, the size of the
transaction, the nature of the market for the security or other
investment, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the
reputation, experience and financial stability of the
broker-dealer involved and the quality of service rendered by the
broker-dealer in other transactions.
As permitted by Section 28(e) of the 1934 Act, and by the
Management Contract, Putnam Management may cause the Fund to pay
a broker-dealer which provides "brokerage and research services"
(as defined in the 1934 Act) to Putnam Management an amount of
disclosed commission for effecting securities transactions on
stock exchanges and other transactions for the Fund on an agency
basis in excess of the commission which another broker-dealer
would have charged for effecting that transaction. Putnam
Management's authority to cause the Fund to pay any such greater
commissions is also subject to such policies as the Trustees may
adopt from time to time. Putnam Management does not currently
intend to cause the Fund to make such payments. It is the
position of the staff of the Securities and Exchange Commission
that Section 28(e) does not apply to the payment of such greater
commissions in "principal" transactions. Accordingly Putnam
Management will use its best effort to obtain the most favorable
price and execution available with respect to such transactions,
as described above.
The Management Contract provides that commissions, fees,
brokerage or similar payments received by Putnam Management or an
affiliate in connection with the purchase and sale of portfolio
investments of the Fund, less any direct expenses approved by the
Trustees, shall be recaptured by the Fund through a reduction of
the fee payable by the Fund under the Management Contract.
Putnam Management seeks to recapture for the Fund soliciting
dealer fees on the tender of the Fund's portfolio securities in
tender or exchange offers. Any such fees which may be recaptured
are likely to be minor in amount.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking
the most favorable price and execution available and such other
policies as the Trustees may determine, Putnam Management may
consider sales of shares of the Fund (and, if permitted by law,
of the other Putnam funds) as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
PRINCIPAL UNDERWRITER
Putnam Mutual Funds is the principal underwriter of shares of the
Fund and the other continuously offered Putnam funds. Putnam
Mutual Funds is not obligated to sell any specific amount of
shares of the Fund and will purchase shares for resale only
against orders for shares. SEE "FUND CHARGES AND EXPENSES" IN
PART I OF THIS STATEMENT FOR INFORMATION ON SALES CHARGES AND
OTHER PAYMENTS RECEIVED BY PUTNAM MUTUAL FUNDS.
INVESTOR SERVICING AGENT AND CUSTODIAN
Putnam Investor Services, a division of Putnam Fiduciary Trust
Company ("PFTC"), is the Fund's investor servicing agent
(transfer, plan and dividend disbursing agent), for which it
receives fees which are paid monthly by the Fund as an expense of
all its shareholders. The fee paid to Putnam Investor Services
is determined by the Trustees taking into account the number of
shareholder accounts and transactions. Putnam Investor Services
has won the DALBAR Quality Tested Service Seal every year since
the award's 1990 inception. Over 10,000 tests of 38 separate
shareholders service components demonstrated that Putnam Investor
Services exceeded the industry standard in all categories.
PFTC is the custodian of the Fund's assets. In carrying out its
duties under its custodian contract, PFTC may employ one or more
subcustodians whose responsibilities will include safeguarding
and controlling the Fund's cash and securities, handling the
receipt and delivery of securities and collecting interest and
dividends on the Fund's investments. PFTC and any subcustodians
employed by it have a lien on the securities of the Fund (to the
extent permitted by the Fund's investment restrictions) to secure
charges and any advances made by such subcustodians at the end of
any day for the purpose of paying for securities purchased by the
Fund. The Fund expects that such advances will exist only in
unusual circumstances. Neither PFTC nor any subcustodian
determines the investment policies of the Fund or decides which
securities the Fund will buy or sell. PFTC pays the fees and
other charges of any subcustodians employed by it. The Fund may
from time to time pay custodial expenses in full or in part
through the placement by Putnam Management of the Fund's
portfolio transactions with the subcustodians or with a third-
party broker having an agreement with the subcustodians. The
Fund pays PFTC an annual fee based on the Fund's assets,
securities transactions and securities holdings and reimburses
PFTC for certain out-of-pocket expenses incurred by it or any
subcustodian employed by it in performing custodial services.
SEE "FUND CHARGES AND EXPENSES" IN PART I OF THIS STATEMENT FOR
INFORMATION ON FEES AND REIMBURSEMENTS FOR INVESTOR SERVICING AND
CUSTODY RECEIVED BY PFTC. THE FEES MAY BE REDUCED BY CREDITS
ALLOWED BY PFTC.
DETERMINATION OF NET ASSET VALUE
The Fund determines the net asset value per share of each class
of shares once each day the New York Stock Exchange (the
"Exchange") is open. Currently, the Exchange is closed
Saturdays, Sundays and the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, the Fourth of July,
Labor Day, Thanksgiving and Christmas. The Fund determines net
asset value as of the close of regular trading on the Exchange,
currently 4:00 p.m. However, equity options held by the Fund are
priced as of the close of trading at 4:10 p.m., and futures
contracts on U.S. Government securities and index options held by
the Fund are priced as of their close of trading at 4:15 p.m.
Securities for which market quotations are readily available are
valued at prices which, in the opinion of the Trustees or Putnam
Management, most nearly represent the market values of such
securities. Currently, such prices are determined using the last
reported sale price or, if no sales are reported (as in the case
of some securities traded over-the-counter), the last reported
bid price, except that certain U.S. Government securities are
stated at the mean between the last reported bid and asked
prices. Short-term investments having remaining maturities of 60
days or less are stated at amortized cost, which approximates
market value. All other securities and assets are valued at
their fair value following procedures approved by the Trustees.
Liabilities are deducted from the total, and the resulting amount
is divided by the number of shares of the class outstanding.
Reliable market quotations are not considered to be readily
available for long-term corporate bonds and notes, certain
preferred stocks, tax-exempt securities, and certain foreign
securities. These investments are stated at fair value on the
basis of valuations furnished by pricing services approved by the
Trustees, which determine valuations for normal,
institutional-size trading units of such securities using methods
based on market transactions for comparable securities and
various relationships between securities which are generally
recognized by institutional traders.
If any securities held by the Fund are restricted as to resale,
Putnam Management determines their fair value following
procedures approved by the Trustees. The fair value of such
securities is generally determined as the amount which the Fund
could reasonably expect to realize from an orderly disposition of
such securities over a reasonable period of time. The valuation
procedures applied in any specific instance are likely to vary
from case to case. However, consideration is generally given to
the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of
the restrictions on disposition of the securities (including any
registration expenses that might be borne by the Fund in
connection with such disposition). In addition, specific factors
are also generally considered, such as the cost of the
investment, the market value of any unrestricted securities of
the same class, the size of the holding, the prices
of any recent transactions or offers with respect to such
securities and any available analysts' reports regarding the
issuer.
Generally, trading in certain securities (such as foreign
securities) is substantially completed each day at various times
prior to the close of the Exchange. The values of these
securities used in determining the net asset value of the Fund's
shares are computed as of such times. Also, because of the
amount of time required to collect and process trading
information as to large numbers of securities issues, the values
of certain securities (such as convertible bonds, U.S. Government
securities, and tax-exempt securities) are determined based on
market quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange.
Occasionally, events affecting the value of such securities may
occur between such times and the close of the Exchange which will
not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such
securities occur during such period, then these securities will
be valued at their fair value following procedures approved by
the Trustees.
Money market funds generally value their portfolio securities at
amortized cost according to Rule 2a-7 under the Investment
Company Act of 1940.
HOW TO BUY SHARES
General
The Prospectus contains a general description of how investors
may buy shares of the Fund and states whether the Fund offers
more than one class of shares. This Statement contains
additional information which may be of interest to investors.
Class A shares and Class M shares are sold with a sales charge
payable at the time of purchase (except for Class A shares and
Class M shares of money market funds). As used in this Statement
and unless the context requires otherwise, the term "Class A
shares" includes shares of Funds that offer only one class of
shares. The Prospectus contains a table of applicable sales
charges. For information about how to purchase Class A shares of
a Putnam fund at net asset value through an employer's defined
contribution plan, please consult your employer. Certain
purchases of Class A shares and Class M shares may be exempt from
a sales charge or, in the case of Class A shares, may be subject
to a contingent deferred sales charge ("CDSC"). See "General--
Sales without sales charges or contingent deferred sales
charges", "Additional Information About Class A and Class M
Shares", and "Contingent Deferred Sales Charges--Class A shares".
Class B shares and Class C shares are sold subject to a CDSC
payable upon redemption within a specified period after purchase.
The Prospectus contains a table of applicable CDSCs.
Class Y shares, which are available only to employer-sponsored
defined contribution plans initially investing at least $250
million in a combination of Putnam funds and other investments
managed by Putnam Management or its affiliates, are not subject
to sales charges or a CDSC.
Certain purchase programs described below are not available to
defined contribution plans. Consult your employer for
information on how to purchase shares through your plan.
The Fund is currently making a continuous offering of its shares.
The Fund receives the entire net asset value of shares sold. The
Fund will accept unconditional orders for shares to be executed
at the public offering price based on the net asset value per
share next determined after the order is placed. In the case of
Class A shares and Class M shares, the public offering price is
the net asset value plus the applicable sales charge, if any. No
sales charge is included in the public offering price of other
classes of shares. In the case of orders for purchase of shares
placed through dealers, the public offering price will be based
on the net asset value determined on the day the order is placed,
but only if the dealer receives the order before the close of
regular trading on the Exchange. If the dealer receives the
order after the close of the Exchange, the price will be based on
the net asset value next determined. If funds for the purchase
of shares are sent directly to Putnam Investor Services, they
will be invested at the public offering price based on the net
asset value next determined after receipt. Payment for shares of
the Fund must be in U.S. dollars; if made by check, the check
must be drawn on a U.S. bank.
Initial and subsequent purchases must satisfy the minimums stated
in the Prospectus, except that (i) individual investments under
certain employee benefit plans or Tax Qualified Retirement Plans
may be lower, (ii) persons who are already shareholders may make
additional purchases of $50 or more by sending funds directly to
Putnam Investor Services (see "Your Investing Account" below),
and (iii) for investors participating in systematic investment
plans and military allotment plans, the initial and subsequent
purchases must be $25 or more. Information about these plans is
available from investment dealers or from Putnam Mutual Funds.
As a convenience to investors, shares may be purchased through a
systematic investment plan. Preauthorized monthly bank drafts
for a fixed amount (at least $25) are used to purchase Fund
shares at the applicable public offering price next determined
after Putnam Mutual Funds receives the proceeds from the draft
(normally the 20th of each month, or the next business day
thereafter). Further information and application forms are
available from investment dealers or from Putnam Mutual Funds.
Except for Putnam funds that declare a distribution daily,
distributions to be reinvested are reinvested without a sales
charge in shares of the same class as of the ex-dividend date
using the net asset value determined on that date, and are
credited to a shareholder's account on the payment date.
Dividends for Putnam money market funds are credited to a
shareholder's account on the payment date. Distributions for
Putnam Tax-Free Income Trust and Putnam Corporate Asset Trust are
reinvested without a sales charge as of the last day of the
period for which distributions are paid using the net asset value
determined on that date, and are credited to a shareholder's
account on the payment date. Distributions for all other Putnam
funds that declare a distribution daily are reinvested without a
sales charge as of the next day following the period for which
distributions are paid using the net asset value determined on
that date, and are credited to a shareholder's account on the
payment date.
PAYMENT IN SECURITIES. In addition to cash, the Fund may accept
securities as payment for Fund shares at the applicable net asset
value. Generally, the Fund will only consider accepting
securities to increase its holdings in a portfolio security, or
if Putnam Management determines that the offered securities are a
suitable investment for the Fund and in a sufficient amount for
efficient management.
While no minimum has been established, it is expected that the
Fund would not accept securities with a value of less than
$100,000 per issue as payment for shares. The Fund may reject in
whole or in part any or all offers to pay for purchases of Fund
shares with securities, may require partial payment in cash for
such purchases to provide funds for applicable sales charges, and
may discontinue accepting securities as payment for Fund shares
at any time without notice. The Fund will value accepted
securities in the manner described in the section "Determination
of Net Asset Value" for valuing shares of the Fund. The Fund
will only accept securities which are delivered in proper form.
The Fund will not accept options or restricted securities as
payment for shares. The acceptance of securities by certain
Funds in exchange for Fund shares are subject to additional
requirements. In the case of Putnam American Government Income
Fund, Putnam Asia Pacific Growth Fund, Putnam Asset Allocation
Funds: Balanced Portfolio, Putnam Asset Allocation Funds:
Conservative Portfolio, Putnam Asset Allocation Funds: Growth
Portfolio, Putnam Capital Appreciation Fund, Putnam Corporate
Asset Trust, Putnam Diversified Equity Trust, Putnam Equity
Income Fund, Putnam Europe Growth Fund, The Putnam Fund for
Growth & Income, Putnam Global Governmental Income Trust, Putnam
Growth and Income Fund II, Putnam High Yield Advantage Fund,
Putnam Intermediate Tax Exempt Fund, Putnam Municipal Income
Fund, Putnam OTC Emerging Growth Fund, Putnam Overseas Growth
Fund, Putnam Tax Exempt Income Fund and Putnam Total Return Bond
Funds, transactions involving the issuance of Fund shares for
securities or assets other than cash will be limited to a bona-
fide re-organization or statutory merger and to other
acquisitions of portfolio securities that meet all the following
conditions: (a) such securities meet the investment objectives
and policies of the Fund; (b) such securities are acquired for
investment and not for resale; (c) such securities are liquid
securities which are not restricted as to transfer either by law
or liquidity of market; and (d) such securities have a value
which is readily ascertainable, as evidenced by a listing on the
American Stock Exchange, the New York Stock Exchange or NASDAQ.
In addition, Putnam Global Governmental Income Trust may accept
only investment grade bonds with prices regularly stated in
publications generally accepted by investors, such as the London
Financial Times and the Association of International Bond Dealers
manual, or securities listed on the New York or American Stock
Exchanges or with NASDAQ, and Putnam Diversified Income Trust may
accept only bonds with prices regularly stated in publications
generally accepted by investors. For federal income tax
purposes, a purchase of Fund shares with securities will be
treated as a sale or exchange of such securities on which the
investor will realize a taxable gain or loss. The processing of
a purchase of Fund shares with securities involves certain delays
while the Fund considers the suitability of such securities and
while other requirements are satisfied. For information
regarding procedures for payment in securities, contact Putnam
Mutual Funds. Investors should not send securities to the Fund
except when authorized to do so and in accordance with specific
instructions received from Putnam Mutual Funds.
SALES WITHOUT SALES CHARGES OR CONTINGENT DEFERRED SALES CHARGES.
The Fund may sell shares without a sales charge or CDSC to:
(i) current and retired Trustees of the Fund; officers of
the Fund; directors and current and retired U.S. full-time
employees of Putnam Management, Putnam Mutual Funds, their
parent corporations and certain corporate affiliates;
family members of and employee benefit plans for the
foregoing; and partnerships, trusts or other entities in
which any of the foregoing has a substantial interest;
(ii) employee benefit plans, for the repurchase of shares
in connection with repayment of plan loans made to plan
participants (if the sum loaned was obtained by redeeming
shares of a Putnam fund sold with a sales charge) (not
offered by tax-exempt funds);
(iii) clients of administrators of tax-qualified employee
benefit plans which have entered into agreements with
Putnam Mutual Funds (not offered by tax-exempt funds);
(iv) registered representatives and other employees of
broker-dealers having sales agreements with Putnam Mutual
Funds; employees of financial institutions having sales
agreements with Putnam Mutual Funds or otherwise having an
arrangement with any such broker-dealer or financial
institution with respect to sales of Fund shares; and
their spouses and children under age 21 (Putnam Mutual
Funds is regarded as the dealer of record for all such
accounts);
(v) investors meeting certain requirements who sold shares
of certain Putnam closed-end funds pursuant to a tender
offer by such closed-end fund;
(vi) a trust department of any financial institution
purchasing shares of the Fund in its capacity as trustee
of any trust, if the value of the shares of the Fund and
other Putnam funds purchased or held by all such trusts
exceeds $1 million in the aggregate; and
(vii) "wrap accounts" maintained for clients of broker-
dealers, financial institutions or financial planners who
have entered into agreements with Putnam Mutual Funds with
respect to such accounts.
In addition, the Fund may issue its shares at net asset value in
connection with the acquisition of substantially all of the
securities owned by other investment companies or personal
holding companies.
PAYMENTS TO DEALERS. Putnam Mutual Funds may, at its expense,
pay concessions in addition to the payments disclosed in the
Prospectus to dealers which satisfy certain criteria established
from time to time by Putnam Mutual Funds relating to increasing
net sales of shares of the Putnam funds over prior periods, and
certain other factors.
ADDITIONAL INFORMATION ABOUT CLASS A AND CLASS M SHARES
The underwriter's commission is the sales charge shown in the
Prospectus less any applicable dealer discount. Putnam Mutual
Funds will give dealers ten days' notice of any changes in the
dealer discount. Putnam Mutual Funds retains the entire sales
charge on any retail sales made by it.
Putnam Mutual Funds offers several plans by which an investor may
obtain reduced sales charges on purchases of Class A shares and
Class M shares. The variations in sales charges reflect the
varying efforts required to sell shares to separate categories of
purchasers. These plans may be altered or discontinued at any
time.
COMBINED PURCHASE PRIVILEGE. The following persons may qualify
for the sales charge reductions or eliminations shown in the
Prospectus by combining into a single transaction the purchase of
Class A shares or Class M shares with other purchases of any
class of shares:
(i) an individual, or a "company" as defined in Section
2(a)(8) of the Investment Company Act of 1940 (which
includes corporations which are corporate affiliates of
each other);
(ii) an individual, his or her spouse and their children
under twenty-one, purchasing for his, her or their own
account;
(iii) a trustee or other fiduciary purchasing for a single
trust estate or single fiduciary account (including a
pension, profit-sharing, or other employee benefit trust
created pursuant to a plan qualified under Section 401 of
the Internal Revenue Code);
(iv) tax-exempt organizations qualifying under Section
501(c)(3) of the Internal Revenue Code (not including
403(b) plans); and
(v) employee benefit plans of a single employer or of
affiliated employers, other than 403(b) plans.
A combined purchase currently may also include shares of any
class of other continuously offered Putnam funds (other than
money market funds) purchased at the same time through a single
investment dealer, if the dealer places the order for such shares
directly with Putnam Mutual Funds.
CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION). A
purchaser of Class A shares or Class M shares may qualify for a
cumulative quantity discount by combining a current purchase (or
combined purchases as described above) with certain other shares
of any class of Putnam funds already owned. The applicable sales
charge is based on the total of:
(i) the investor's current purchase; and
(ii) the maximum public offering price (at the close of
business on the previous day) of:
(a) all shares held by the investor in all of the
Putnam funds (except money market funds); and
(b) any shares of money market funds acquired by
exchange from other Putnam funds; and
(iii) the maximum public offering price of all shares
described in paragraph (ii) owned by another shareholder
eligible to participate with the investor in a "combined
purchase" (see above).
To qualify for the combined purchase privilege or to obtain the
cumulative quantity discount on a purchase through an investment
dealer, when each purchase is made the investor or dealer must
provide Putnam Mutual Funds with sufficient information to verify
that the purchase qualifies for the privilege or discount. The
shareholder must furnish this information to Putnam Investor
Services when making direct cash investments.
STATEMENT OF INTENTION. Investors may also obtain the reduced
sales charges for Class A shares or Class M shares shown in the
Prospectus for investments of a particular amount by means of a
written Statement of Intention, which expresses the investor's
intention to invest that amount (including certain "credits," as
described below) within a period of 13 months in shares of any
class of the Fund or any other continuously offered Putnam fund
(excluding money market funds). Each purchase of Class A shares
or Class M shares under a Statement of Intention will be made at
the public offering price applicable at the time of such purchase
to a single transaction of the total dollar amount indicated in
the Statement. A Statement of Intention may include purchases of
shares made not more than 90 days prior to the date that an
investor signs a Statement; however, the 13-month period during
which the Statement is in effect will begin on the date of the
earliest purchase to be included.
An investor may receive a credit toward the amount indicated in
the Statement equal to the maximum public offering price as of
the close of business on the previous day of all shares he or she
owns on the date of the Statement which are eligible for purchase
under a Statement (plus any shares of money market funds acquired
by exchange of such eligible shares). Investors do not receive
credit for shares purchased by the reinvestment of distributions.
Investors qualifying for the "combined purchase privilege" (see
above) may purchase shares under a single Statement of Intention.
The Statement of Intention is not a binding obligation upon the
investor to purchase the full amount indicated. The minimum
initial investment under a Statement of Intention is 5% of such
amount, and must be invested immediately. Class A shares or
Class M shares purchased with the first 5% of such amount will be
held in escrow to secure payment of the higher sales charge
applicable to the shares actually purchased if the full amount
indicated is not purchased. When the full amount indicated has
been purchased, the escrow will be released. If an investor
desires to redeem escrowed shares before the full amount has been
purchased, the shares will be released from escrow only if the
investor pays the sales charge that, without regard to the
Statement of Intention, would apply to the total investment made
to date.
To the extent that an investor purchases more than the dollar
amount indicated on the Statement of Intention and qualifies for
a further reduced sales charge, the sales charge will be adjusted
for the entire amount purchased at the end of the 13-month
period, upon recovery from the investor's dealer of its portion
of the sales charge adjustment. Once received from the dealer,
which may take a period of time or may never occur, the sales
charge adjustment will be used to purchase additional shares at
the then current offering price applicable to the actual amount
of the aggregate purchases. These additional shares will not be
considered as part of the total investment for the purpose of
determining the applicable sales charge pursuant to the Statement
of Intention. No sales charge adjustment will be made unless and
until the investor's dealer returns any excess commissions
previously received.
To the extent that an investor purchases less than the dollar
amount indicated on the Statement of Intention within the 13-
month period, the sales charge will be adjusted upward for the
entire amount purchased at the end of the 13-month period. This
adjustment will be made by redeeming shares from the account to
cover the additional sales charge, the proceeds of which will be
paid to the investor's dealer and Putnam Mutual Funds in
accordance with the Prospectus. If the account exceeds an amount
that would otherwise qualify for a reduced sales charge, that
reduced sales charge will be applied.
Statements of Intention are not available for certain employee
benefit plans.
Statement of Intention forms may be obtained from Putnam Mutual
Funds or from investment dealers. Interested investors should
read the Statement of Intention carefully.
REDUCED SALES CHARGE FOR GROUP PURCHASES OF CLASS A SHARES.
Members of qualified groups may purchase Class A shares of the
Fund at a group sales charge rate of 4.5% of the public offering
price (4.71% of the net amount invested). The dealer discount on
such sales is 3.75% of the offering price.
To receive the group rate, group members must purchase Class A
shares through a single investment dealer designated by the
group. The designated dealer must transmit each member's initial
purchase to Putnam Mutual Funds, together with payment and
completed application forms. After the initial purchase, a
member may send funds for the purchase of Class A shares directly
to Putnam Investor Services. Purchases of Class A shares are
made at the public offering price based on the net asset value
next determined after Putnam Mutual Funds or Putnam Investor
Services receives payment for the shares. The minimum investment
requirements described above apply to purchases by any group
member. Only Class A shares are included in calculating the
purchased amount.
Qualified groups include the employees of a corporation or a sole
proprietorship, members and employees of a partnership or
association, or other organized groups of persons (the members of
which may include other qualified groups) provided that: (i) the
group has at least 25 members of which at least 10 members
participate in the initial purchase; (ii) the group has been in
existence for at least six months; (iii) the group has some
purpose in addition to the purchase of investment company shares
at a reduced sales charge; (iv) the group's sole organizational
nexus or connection is not that the members are credit card
holders of a company, policy holders of an insurance company,
customers of a bank or broker-dealer, clients of an investment
adviser or security holders of a company; (v) the group agrees to
provide its designated investment dealer access to the group's
membership by means of written communication or direct
presentation to the membership at a meeting on not less
frequently than an annual basis; (vi) the group or its investment
dealer will provide annual certification in form satisfactory to
Putnam Investor Services that the group then has at least 25
members and that at least ten members participated in group
purchases during the immediately preceding 12 calendar months;
and (vii) the group or its investment dealer will provide
periodic certification in form satisfactory to Putnam Investor
Services as to the eligibility of the purchasing members of the
group.
Members of a qualified group include: (i) any group which meets
the requirements stated above and which is a constituent member
of a qualified group; (ii) any individual purchasing for his or
her own account who is carried on the records of the group or on
the records of any constituent member of the group as being a
good standing employee, partner, member or person of like status
of the group or constituent member; or (iii) any fiduciary
purchasing shares for the account of a member of a qualified
group or a member's beneficiary. For example, a qualified group
could consist of a trade association which would have as its
members individuals, sole proprietors, partnerships and
corporations. The members of the group would then consist of the
individuals, the sole proprietors and their employees, the
members of the partnerships and their employees, and the
corporations and their employees, as well as the trustees of
employee benefit trusts acquiring Class A shares for the benefit
of any of the foregoing.
A member of a qualified group may, depending upon the value of
Class A shares of the Fund owned or proposed to be purchased by
the member, be entitled to purchase Class A shares of the Fund at
non-group sales charge rates shown in the Prospectus which may be
lower than the group sales charge rate, if the member qualifies
as a person entitled to reduced non-group sales charges. Such a
group member will be entitled to purchase at the lower rate if,
at the time of purchase, the member or his or her investment
dealer furnishes sufficient information for Putnam Mutual Funds
or Putnam Investor Services to verify that the purchase qualifies
for the lower rate.
Interested groups should contact their investment dealer or
Putnam Mutual Funds. The Fund reserves the right to revise the
terms of or to suspend or discontinue group sales at any time.
EMPLOYEE BENEFIT PLANS; INDIVIDUAL ACCOUNT PLANS. The term
"employee benefit plan" means any plan or arrangement, whether or
not tax-qualified, which provides for the purchase of Class A
shares. The term "affiliated employer" means employers who are
affiliated with each other within the meaning of Section
2(a)(3)(C) of the Investment Company Act of 1940. The term
"individual account plan" means any employee benefit plan whereby
(i) Class A shares are purchased through payroll deductions or
otherwise by a fiduciary or other person for the account of
participants who are employees (or their spouses) of an employer,
or of affiliated employers, and (ii) a separate Investing Account
is maintained in the name of such fiduciary or other person for
the account of each participant in the plan.
The table of sales charges in the Prospectus applies to sales to
employee benefit plans, except that the Fund may sell Class A
shares at net asset value to employee benefit plans, including
individual account plans, of employers or of affiliated employers
which have at least 750 employees to whom such plan is made
available, in connection with a payroll deduction system of plan
funding (or other system acceptable to Putnam Investor Services)
by which contributions or account information for plan
participation are transmitted to Putnam Investor Services by
methods acceptable to Putnam Investor Services. The Fund may
also sell Class A shares at net asset value to employee benefit
plans of employers or of affiliated employers which have at least
750 employees, if such plans are qualified under Section 401 of
the Internal Revenue Code.
Additional information about employee benefit plans and
individual account plans is available from investment dealers or
from Putnam Mutual Funds.
CONTINGENT DEFERRED SALES CHARGES
CLASS A SHARES. Class A shares purchased at net asset value by
shareholders investing $1 million or more, including purchases
pursuant to any Combined Purchase Privilege, Right of
Accumulation or Statement of Intention, are subject to a CDSC of
1.00% or 0.50%, respectively, if redeemed within the first or
second year after purchase. The Class A CDSC is imposed on the
lower of the cost and the current net asset value of the shares
redeemed. The CDSC does not apply to shares sold without a sales
charge through participant-directed qualified retirement plans
and shares purchased by certain investors investing $1 million or
more that have made arrangements with Putnam Mutual Funds and
whose dealer of record waived the commission described in the
next paragraph.
Except as stated below, Putnam Mutual Funds pays investment
dealers of record commissions on sales of Class A shares of $1
million or more based on an investor's cumulative purchases of
such shares, including purchases pursuant to any Combined
Purchase Privilege, Right of Accumulation or Statement of
Intention, during the one-year period beginning with the date of
the initial purchase at net asset value and each subsequent one-
year period beginning with the first net asset value purchase
following the end of the prior period. Such commissions are paid
at the rate of 1.00% of the amount under $3 million, 0.50% of the
next $47 million and 0.25% thereafter. On sales at net asset
value to a participant-directed qualified retirement plan
initially investing less than $20 million in Putnam funds and
other investments managed by Putnam Management or its affiliates
(including a plan sponsored by an employer with more than 750
employees), Putnam Mutual Funds pays commissions on cumulative
purchases during the life of the account at the rate of 1.00% of
the amount under $3 million and 0.50% thereafter. On sales at
net asset value to all other participant-directed qualified
retirement plans, Putnam Mutual Funds pays commissions on the
initial investment and on subsequent net quarterly sales (gross
sales minus gross redemptions during the quarter) at the rate of
0.15%. Money market fund shares are excluded from all commission
calculations, except for determining the amount initially
invested by a participant-directed qualified retirement plan.
Commissions on sales at net asset value to such plans are subject
to Putnam Mutual Funds' right to reclaim such commissions if the
shares are redeemed within two years.
Different CDSC and commission rates may apply to shares purchased
before April 1, 1994.
CLASS B AND CLASS C SHARES. Investors who set up an Automatic
Cash Withdrawal Plan (ACWP) for a Class B and Class C share
account (see "Plans Available To Shareholders -- Automatic Cash
Withdrawal Plan") may withdraw through the ACWP up to 12% of the
net asset value of the account (calculated as set forth below)
each year without incurring any CDSC. Shares not subject to a
CDSC (such as shares representing reinvestment of distributions)
will be redeemed first and will count toward the 12% limitation.
If there are insufficient shares not subject to a CDSC, shares
subject to the lowest CDSC liability will be redeemed next until
the 12% limit is reached. The 12% figure is calculated on a pro
rata basis at the time of the first payment made pursuant to a
ACWP and recalculated thereafter on a pro rata basis at the time
of each ACWP payment. Therefore, shareholders who have chosen a
ACWP based on a percentage of the net asset value of their
account of up to 12% will be able to receive ACWP payments
without incurring a CDSC. However, shareholders who have chosen
a specific dollar amount (for example, $100 per month from a fund
that pays income distributions monthly) for their periodic ACWP
payment should be aware that the amount of that payment not
subject to a CDSC may vary over time depending on the net asset
value of their account. For example, if the net asset value of
the account is $10,000 at the time of payment, the shareholder
will receive $100 free of the CDSC (12% of $10,000 divided by 12
monthly payments). However, if at the time of the next payment
the net asset value of the account has fallen to $9,400, the
shareholder will receive $94 free of any CDSC (12% of $9,400
divided by 12 monthly payments) and $6 subject to the lowest
applicable CDSC. This ACWP privilege may be revised or
terminated at any time.
ALL SHARES. No CDSC is imposed on shares of any class subject to
a CDSC ("CDSC Shares") to the extent that the CDSC Shares
redeemed (i) are no longer subject to the holding period
therefor, (ii) resulted from reinvestment of distributions on
CDSC Shares, or (iii) were exchanged for shares of another Putnam
fund, provided that the shares acquired in such exchange or
subsequent exchanges (including shares of a Putnam money market
fund) will continue to remain subject to the CDSC, if applicable,
until the applicable holding period expires. In determining
whether the CDSC applies to each redemption of CDSC Shares, CDSC
Shares not subject to a CDSC are redeemed first.
The Fund will waive any CDSC on redemptions, in the case of
individual or Uniform Transfers to Minors Act accounts, in case
of death or disability or for the purpose of paying benefits
pursuant to tax-qualified retirement plans. Such payments
currently include, without limitation, (1) distributions from an
IRA due to death or disability, (2) a return of excess
contributions to an IRA or 401(k) plan, and (3) distributions
from retirement plans qualified under section 401(a) or section
403(b)(7) (a "403(b) plan") of the Internal Revenue Code of 1986,
as amended (the "Code"), due to death, disability, retirement or
separation from service. The Fund will also waive any CDSC in
the case of the death of one joint tenant. These waivers may be
changed at any time. Additional waivers may apply to IRA
accounts opened prior to February 1, 1994.
DISTRIBUTION PLAN
If the Fund or a class of shares of the Fund has adopted a
Distribution Plan, the Prospectus describes the principal
features of the Plan. This Statement contains additional
information which may be of interest to investors.
Continuance of a Plan is subject to annual approval by a vote of
the Trustees, including a majority of the Trustees who are not
interested persons of the Fund and who have no direct or indirect
interest in the Plan or related arrangements (the "Qualified
Trustees"), cast in person at a meeting called for that purpose.
All material amendments to a Plan must be likewise approved by
the Trustees and the Qualified Trustees. No Plan may be amended
in order to increase materially the costs which the Fund may bear
for distribution pursuant to such Plan without also being
approved by a majority of the outstanding voting securities of
the Fund or the relevant class of the Fund, as the case may be.
A Plan terminates automatically in the event of its assignment
and may be terminated without penalty, at any time, by a vote of
a majority of the Qualified Trustees or by a vote of a majority
of the outstanding voting securities of the Fund or the relevant
class of the Fund, as the case may be.
If Plan payments are made to reimburse Putnam Mutual Funds for
payments to dealers based on the average net asset value of Fund
shares attributable to shareholders for whom the dealers are
designated as the dealer of record, "average net asset value"
attributable to a shareholder account means the product of (i)
the Fund's average daily share balance of the account and (ii)
the Fund's average daily net asset value per share (or the
average daily net asset value per share of the class, if
applicable). For administrative reasons, Putnam Mutual Funds may
enter into agreements with certain dealers providing for the
calculation of "average net asset value" on the basis of assets
of the accounts of the dealer's customers on an established day
in each quarter.
Financial institutions receiving payments from Putnam Mutual
Funds as described above may be required to comply with various
state and federal regulatory requirements, including among others
those regulating the activities of securities brokers or dealers.
INVESTOR SERVICES
SHAREHOLDER INFORMATION
Each time shareholders buy or sell shares, they will receive a
statement confirming the transaction and listing their current
share balance. (Under certain investment plans, a statement may
only be sent quarterly.) Shareholders will receive a statement
confirming reinvestment of distributions in additional Fund
shares (or in shares of other Putnam funds for Dividends Plus
accounts) promptly following the quarter in which the
reinvestment occurs. To help shareholders take full advantage of
their Putnam investment, they will receive a Welcome Kit and a
periodic publication covering many topics of interest to
investors. The Fund also sends annual and semiannual reports
that keep shareholders informed about its portfolio and
performance, and year-end tax information to simplify their
recordkeeping. Easy-to-read, free booklets on special subjects
such as the Exchange Privilege and IRAs are available from Putnam
Investor Services. Shareholders may call Putnam Investor
Services toll-free weekdays at 1-800-225-1581 between 8:30 a.m.
and 7:00 p.m. Boston time for more information, including account
balances.
YOUR INVESTING ACCOUNT
The following information provides more detail concerning the
operation of a Putnam Investing Account. For further information
or assistance, investors should consult Putnam Investor Services.
Shareholders who purchase shares through a defined contribution
plan should note that not all of the services or features
described below may be available to them, and they should contact
their employer for details.
A shareholder may reinvest a recent cash distribution without a
front-end sales charge or without the reinvested shares being
subject to a CDSC, as the case may be, by delivering to Putnam
Investor Services the uncashed distribution check, endorsed to
the order of the Fund. Putnam Investor Services must receive the
properly endorsed check within 30 days after the date of the
check. Upon written notice to shareholders, the Fund may permit
shareholders who receive cash distributions to reinvest amounts
representing returns of capital without a sales charge or without
being subject to the CDSC.
The Investing Account also provides a way to accumulate shares of
the Fund. In most cases, after an initial investment of $500, a
shareholder may send checks to Putnam Investor Services for $50
or more, made payable to the Fund, to purchase additional shares
at the applicable public offering price next determined after
Putnam Investor Services receives the check. For Putnam
Corporate Asset Trust, the minimum initial investment is $25,000
and the minimum subsequent investment is $5,000. Checks must be
drawn on a U.S. bank and must be payable in U.S. dollars.
Putnam Investor Services acts as the shareholder's agent whenever
it receives instructions to carry out a transaction on the
shareholder's account. Upon receipt of instructions that shares
are to be purchased for a shareholder's account, shares will be
purchased through the investment dealer designated by the
shareholder. Shareholders may change investment dealers at any
time by written notice to Putnam Investor Services, provided the
new dealer has a sales agreement with Putnam Mutual Funds.
Shares credited to an account are transferable upon written
instructions in good order to Putnam Investor Services and may be
sold to the Fund as described under "How to buy shares, sell
shares and exchange shares" in the Prospectus. Money market
funds and certain other funds will not issue share certificates.
A shareholder may send any certificates which have been
previously issued to Putnam Investor Services for safekeeping at
no charge to the shareholder.
Putnam Mutual Funds, at its expense, may provide certain
additional reports and administrative material to qualifying
institutional investors with fiduciary responsibilities to assist
these investors in discharging their responsibilities.
Institutions seeking further information about this service
should contact Putnam Mutual Funds, which may modify or terminate
this service at any time.
Putnam Investor Services may make special services available to
shareholders with investments exceeding $1,000,000. Contact
Putnam Investor Services for details.
The Fund pays Putnam Investor Services' fees for maintaining
Investing Accounts.
REINSTATEMENT PRIVILEGE
An investor who has redeemed shares to the Fund may reinvest
(within 1 year) the proceeds of such sale in shares of the same
class of the Fund, or may be able to reinvest (within 1 year) the
proceeds in shares of the same class of one of the other
continuously offered Putnam funds (through the Exchange Privilege
described in the Prospectus), including, in the case of shares
subject to a CDSC, the amount of CDSC charged on the redemption.
Any such reinvestment would be at the net asset value of the
shares of the fund(s) the investor selects, next determined after
Putnam Mutual Funds receives a Reinstatement Authorization. The
time that the previous investment was held will be included in
determining any applicable CDSC due upon redemptions and, in the
case of Class B shares, the eight-year period for conversion to
Class A shares. Shareholders will receive from Putnam Mutual
Funds the amount of any CDSC paid at the time of redemption as
part of the reinstated investment, which may be treated as
capital gains to the shareholder for tax purposes. Exercise of
the Reinstatement Privilege does not alter the federal income tax
treatment of any capital gains realized on a sale of Fund shares,
but to the extent that any shares are sold at a loss and the
proceeds are reinvested in shares of the Fund, some or all of the
loss may be disallowed as a deduction. Consult your tax adviser.
Investors who desire to exercise this Privilege should contact
their investment dealer or Putnam Investor Services.
EXCHANGE PRIVILEGE
Except as otherwise set forth in this section, by calling Putnam
Investor Services, investors may exchange shares valued up to
$500,000 between accounts with identical registrations, provided
that no certificates are outstanding for such shares and no
address change has been made within the preceding 15 days.
During periods of unusual market changes and shareholder
activity, shareholders may experience delays in contacting Putnam
Investor Services by telephone to exercise the Telephone Exchange
Privilege.
Putnam Investor Services also makes exchanges promptly after
receiving a properly completed Exchange Authorization Form and,
if issued, share certificates. If the shareholder is a
corporation, partnership, agent, or surviving joint owner, Putnam
Investor Services will require additional documentation of a
customary nature. Because an exchange of shares involves the
redemption of Fund shares and reinvestment of the proceeds in
shares of another Putnam fund, completion of an exchange may be
delayed under unusual circumstances if the Fund were to suspend
redemptions or postpone payment for the Fund shares being
exchanged, in accordance with federal securities laws. Exchange
Authorization Forms and prospectuses of the other Putnam funds
are available from Putnam Mutual Funds or investment dealers
having sales contracts with Putnam Mutual Funds. The prospectus
of each fund describes its investment objective(s) and policies,
and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange.
Shares of certain Putnam funds are not available to residents of
all states. The Fund reserves the right to change or suspend the
Exchange Privilege at any time. Shareholders would be notified
of any change or suspension. Additional information is available
from Putnam Investor Services.
Shares of the Fund must be held at least 15 days by the
shareholder requesting an exchange. There is no holding period
if the shareholder acquired the shares to be exchanged through
reinvestment of distributions, transfer from another shareholder,
prior exchange or certain employer-sponsored defined contribution
plans. In all cases, the shares to be exchanged must be
registered on the records of the Fund in the name of the
shareholder requesting the exchange.
Shareholders of other Putnam funds may also exchange their shares
at net asset value for shares of the Fund, as set forth in the
current prospectus of each fund.
For federal income tax purposes, an exchange is a sale on which
the investor generally will realize a capital gain or loss
depending on whether the net asset value at the time of the
exchange is more or less than the investor's basis. The Exchange
Privilege may be revised or terminated at any time. Shareholders
would be notified of any such change or suspension.
DIVIDENDS PLUS
Shareholders may invest the Fund's distributions of net
investment income or distributions combining net investment
income and short-term capital gains in shares of the same class
of another continuously offered Putnam fund (the "receiving
fund") using the net asset value per share of the receiving fund
determined on the date the Fund's distribution is payable. No
sales charge or CDSC will apply to the purchased shares unless
the Fund is a money market fund. The prospectus of each fund
describes its investment objective(s) and policies, and
shareholders should obtain a prospectus and consider these
objective(s) and policies carefully before investing their
distributions in the receiving fund. Shares of certain Putnam
funds are not available to residents of all states.
The minimum account size requirement for the receiving fund will
not apply if the current value of your account in this Fund is
more than $5,000.
Shareholders of other Putnam funds (except for money market
funds, whose shareholders must pay a sales charge or become
subject to a CDSC) may also use their distributions to purchase
shares of the Fund at net asset value.
For federal tax purposes, distributions from the Fund which are
reinvested in another fund are treated as paid by the Fund to the
shareholder and invested by the shareholder in the receiving fund
and thus, to the extent comprised of taxable income and deemed
paid to a taxable shareholder, are taxable.
The Dividends PLUS program may be revised or terminated at any
time.
PLANS AVAILABLE TO SHAREHOLDERS
The Plans described below are fully voluntary and may be
terminated at any time without the imposition by the Fund or
Putnam Investor Services of any penalty. All Plans provide for
automatic reinvestment of all distributions in additional shares
of the Fund at net asset value. The Fund, Putnam Mutual Funds or
Putnam Investor Services may modify or cease offering these Plans
at any time.
AUTOMATIC CASH WITHDRAWAL PLAN. An investor who owns or buys
shares of the Fund valued at $10,000 or more at the current
public offering price may open a Withdrawal Plan and have a
designated sum of money ($50 or more) paid monthly, quarterly,
semi-annually or annually to the investor or another person.
(Payments from the Fund can be combined with payments from other
Putnam funds into a single check through a Designated Payment
Plan.) Shares are deposited in a Plan account, and all
distributions are reinvested in additional shares of the Fund at
net asset value (except where the Plan is utilized in connection
with a charitable remainder trust). Shares in a Plan account are
then redeemed at net asset value to make each withdrawal payment.
Payment will be made to any person the investor designates;
however, if shares are registered in the name of a trustee or
other fiduciary, payment will be made only to the fiduciary,
except in the case of a profit-sharing or pension plan where
payment will be made to a designee. As withdrawal payments may
include a return of principal, they cannot be considered a
guaranteed annuity or actual yield of income to the investor.
The redemption of shares in connection with a Withdrawal Plan
generally will result in a gain or loss for tax purposes. Some
or all of the losses realized upon redemption may be disallowed
pursuant to the so-called wash sale rules if shares of the same
fund from which shares were redeemed are purchased (including
through the reinvestment of fund distributions) within a period
beginning 30 days before, and ending 30 days after, such
redemption. In such a case, the basis of the replacement shares
will be increased to reflect the disallowed loss. Continued
withdrawals in excess of income will reduce and possibly exhaust
invested principal, especially in the event of a market decline.
The maintenance of a Withdrawal Plan concurrently with purchases
of additional shares of the Fund would be disadvantageous to the
investor because of the sales charge payable on such purchases.
For this reason, the minimum investment accepted while a
Withdrawal Plan is in effect is $1,000, and an investor may not
maintain a Plan for the accumulation of shares of the Fund (other
than through reinvestment of distributions) and a Withdrawal Plan
at the same time. The cost of administering these Plans for the
benefit of those shareholders participating in them is borne by
the Fund as an expense of all shareholders. The Fund, Putnam
Mutual Funds or Putnam Investor Services may terminate or change
the terms of the Withdrawal Plan at any time. A Withdrawal Plan
will be terminated if communications mailed to the shareholder
are returned as undeliverable.
Investors should consider carefully with their own financial
advisers whether the Plan and the specified amounts to be
withdrawn are appropriate in their circumstances. The Fund and
Putnam Investor Services make no recommendations or
representations in this regard.
TAX QUALIFIED RETIREMENT PLANS; 403(B) AND SEP PLANS. (NOT
OFFERED BY FUNDS INVESTING PRIMARILY IN TAX-EXEMPT SECURITIES.)
Investors may purchase shares of the Fund through the following
Tax Qualified Retirement Plans, available to qualified
individuals or organizations:
Standard and variable profit-sharing (including 401(k))
and money purchase pension plans; and
Individual Retirement Account Plans (IRAs).
Each of these Plans has been qualified as a prototype plan by the
Internal Revenue Service. Putnam Investor Services will furnish
services under each plan at a specified annual cost. Putnam
Fiduciary Trust Company serves as trustee under each of these
Plans.
Forms and further information on these Plans are available from
investment dealers or from Putnam Mutual Funds. In addition,
specialized professional plan administration services are
available on an optional basis; contact Putnam Defined
Contribution Plan Services at 1-800-225-2465, extension 8600.
A 403(b) Retirement Plan is available for employees of public
school systems and organizations which meet the requirements of
Section 501(c)(3) of the Internal Revenue Code. Forms and
further information on the 403(b) Plan are also available from
investment dealers or from Putnam Mutual Funds. Shares of the
Fund may also be used in simplified employee pension (SEP) plans.
For further information on the Putnam prototype SEP plan, contact
an investment dealer or Putnam Mutual Funds.
Consultation with a competent financial and tax adviser regarding
these Plans and consideration of the suitability of Fund shares
as an investment under the Employee Retirement Income Security
Act of 1974, or otherwise, is recommended.
SIGNATURE GUARANTEES
Redemption requests for shares having a net asset value of
$100,000 or more must be signed by the registered owners or their
legal representatives and must be guaranteed by a bank,
broker/dealer, municipal securities dealer or broker, government
securities dealer or broker, credit union, national securities
exchange, registered securities association, clearing agency,
savings association or trust company, provided such institution
is acceptable under and conforms with Putnam Fiduciary Trust
Company's signature guarantee procedures. A copy of such
procedures is available upon request. If you want your
redemption proceeds sent to an address other than your address as
it appears on Putnam's records, you must provide a signature
guarantee. Putnam Investor Services usually requires additional
documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner.
Contact Putnam Investor Services for details.
SUSPENSION OF REDEMPTIONS
The Fund may not suspend shareholders' right of redemption, or
postpone payment for more than seven days, unless the New York
Stock Exchange is closed for other than customary weekends or
holidays, or if permitted by the rules of the Securities and
Exchange Commission during periods when trading on the Exchange
is restricted or during any emergency which makes it
impracticable for the Fund to dispose of its securities or to
determine fairly the value of its net assets, or during any other
period permitted by order of the Commission for protection of
investors.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of
the Fund. However, the Agreement and Declaration of Trust
disclaims shareholder liability for acts or obligations of the
Fund and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by
the Fund or the Trustees. The Agreement and Declaration of Trust
provides for indemnification out of Fund property for all loss
and expense of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund would be unable to
meet its obligations. The likelihood of such circumstances is
remote.
STANDARD PERFORMANCE MEASURES
Yield and total return data for the Fund may from time to time be
presented in Part I of this Statement and in advertisements. In
the case of funds with more than one class of shares, all
performance information is calculated separately for each class.
The data is calculated as follows.
Total return for one-, five- and ten-year periods (or for such
shorter periods as the Fund has been in operation or shares of
the relevant class have been outstanding) is determined by
calculating the actual dollar amount of investment return on a
$1,000 investment in the Fund made at the beginning of the
period, at the maximum public offering price for Class A shares
and Class M shares and net asset value for other classes of
shares, and then calculating the annual compounded rate of return
which would produce that amount. Total return for a period of
one year is equal to the actual return of the Fund during that
period. Total return calculations assume deduction of the Fund's
maximum sales charge or CDSC, if applicable, and reinvestment of
all Fund distributions at net asset value on their respective
reinvestment dates.
The Fund's yield is presented for a specified thirty-day period
(the "base period"). Yield is based on the amount determined by
(i) calculating the aggregate amount of dividends and interest
earned by the Fund during the base period less expenses accrued
for that period, and (ii) dividing that amount by the product of
(A) the average daily number of shares of the Fund outstanding
during the base period and entitled to receive dividends and (B)
the per share maximum public offering price for Class A shares or
Class M shares, as appropriate and net asset value for other
classes of shares on the last day of the base period. The result
is annualized on a compounding basis to determine the yield. For
this calculation, interest earned on debt obligations held by the
Fund is generally calculated using the yield to maturity (or
first expected call date) of such obligations based on their
market values (or, in the case of receivables-backed securities
such as GNMA's, based on cost). Dividends on equity securities
are accrued daily at their stated dividend rates.
If the Fund is a money market fund, yield is computed by
determining the percentage net change, excluding capital changes,
in the value of an investment in one share over the seven-day
period for which yield is presented (the "base period"), and
multiplying the net change by 365/7 (or approximately 52 weeks).
Effective yield represents a compounding of the yield by adding 1
to the number representing the percentage change in value of the
investment during the base period, raising that sum to a power
equal to 365/7, and subtracting 1 from the result.
If the Fund is a tax-exempt fund, the tax-equivalent yield during
the base period may be presented for shareholders in one or more
stated tax brackets. Tax-equivalent yield is calculated by
adjusting the tax-exempt yield by a factor designed to show the
approximate yield that a taxable investment would have to earn to
produce an after-tax yield equal, for that shareholder, to the
tax-exempt yield. The tax-equivalent yield will differ for
shareholders in other tax brackets.
At times, Putnam Management may reduce its compensation or assume
expenses of the Fund in order to reduce the Fund's expenses. The
per share amount of any such fee reduction or assumption of
expenses during the Fund's past ten fiscal years (or for the life
of the Fund, if shorter) is reflected in the table in the section
entitled "Financial history" in the Prospectus. Any such fee
reduction or assumption of expenses would increase the Fund's
yield and total return during the period of the fee reduction or
assumption of expenses.
All data are based on past performance and do not predict future
results.
COMPARISON OF PORTFOLIO PERFORMANCE
Independent statistical agencies measure the Fund's investment
performance and publish comparative information showing how the
Fund, and other investment companies, performed in specified time
periods. Three agencies whose reports are commonly used for such
comparisons are set forth below. From time to time, the Fund may
distribute these comparisons to its shareholders or to potential
investors. THE AGENCIES LISTED BELOW MEASURE PERFORMANCE BASED
ON THEIR OWN CRITERIA RATHER THAN ON THE STANDARDIZED
PERFORMANCE MEASURES DESCRIBED IN THE PRECEDING SECTION.
LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund
rankings monthly. The rankings are based on total return
performance calculated by Lipper, reflecting generally
changes in net asset value adjusted for reinvestment of
capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a
variety of performance periods, for example year-to-date,
1-year, 5-year, and 10-year performance. Lipper
classifies mutual funds by investment objective and asset
category.
MORNINGSTAR, INC. distributes mutual fund ratings twice a
month. The ratings are divided into five groups:
highest, above average, neutral, below average and lowest.
They represent a fund's historical risk/reward ratio
relative to other funds with similar objectives. The
performance factor is a weighted-average assessment of the
Fund's 3-year, 5-year, and 10-year total return
performance (if available) reflecting deduction of
expenses and sales charges. Performance is adjusted using
quantitative techniques to reflect the risk profile of the
fund. The ratings are derived from a purely quantitative
system that does not utilize the subjective criteria
customarily employed by rating agencies such as Standard &
Poor's Corporation and Moody's Investor Service, Inc.
CDA/WIESENBERGER'S MANAGEMENT RESULTS publishes mutual
fund rankings and is distributed monthly. The rankings
are based entirely on total return calculated by
Weisenberger for periods such as year-to-date, 1-year,
3-year, 5-year and 10-year. Mutual funds are ranked in
general categories (e.g., international bond,
international equity, municipal bond, and maximum capital
gain). Weisenberger rankings do not reflect deduction of
sales charges or fees.
Independent publications may also evaluate the Fund's
performance. Certain of those publications are listed below, at
the request of Putnam Mutual Funds, which bears full
responsibility for their use and the descriptions appearing
below. From time to time the Fund may distribute evaluations by
or excerpts from these publications to its shareholders or to
potential investors. The following illustrates the types of
information provided by these publications.
BUSINESS WEEK publishes mutual fund rankings in its
Investment Figures of the Week column. The rankings are
based on 4-week and 52-week total return reflecting
changes in net asset value and the reinvestment of all
distributions. They do not reflect deduction of any sales
charges. Funds are not categorized; they compete in a
large universe of over 2000 funds. The source for
rankings is data generated by Morningstar, Inc.
INVESTOR'S BUSINESS DAILY publishes mutual fund rankings
on a daily basis. The rankings are depicted as the top 25
funds in a given category. The categories are based
loosely on the type of fund, e.g., growth funds, balanced
funds, U.S. government funds, GNMA funds, growth and
income funds, corporate bond funds, etc. Performance
periods for sector equity funds can vary from 4 weeks to
39 weeks; performance periods for other fund groups vary
from 1 year to 3 years. Total return performance reflects
changes in net asset value and reinvestment of dividends
and capital gains. The rankings are based strictly on
total return. They do not reflect deduction of any sales
charges. Performance grades are conferred from A+ to E.
An A+ rating means that the fund has performed within the
top 5% of a general universe of over 2000 funds; an A
rating denotes the top 10%; an A- is given to the top 15%,
etc.
BARRON'S periodically publishes mutual fund rankings. The
rankings are based on total return performance provided by
Lipper Analytical Services. The Lipper total return data
reflects changes in net asset value and reinvestment of
distributions, but does not reflect deduction of any sales
charges. The performance periods vary from short-term
intervals (current quarter or year-to-date, for example)
to long-term periods (five-year or ten-year performance,
for example). Barron's classifies the funds using the
Lipper mutual fund categories, such as Capital
Appreciation Funds, Growth Funds, U.S. Government Funds,
Equity Income Funds, Global Funds, etc. Occasionally,
Barron's modifies the Lipper information by ranking the
funds in asset classes. "Large funds" may be those with
assets in excess of $25 million; "small funds" may be
those with less than $25 million in assets.
THE WALL STREET JOURNAL publishes its Mutual Fund
Scorecard on a daily basis. Each Scorecard is a ranking
of the top-15 funds in a given Lipper Analytical Services
category. Lipper provides the rankings based on its total
return data reflecting changes in net asset value and
reinvestment of distributions and not reflecting any sales
charges. The Scorecard portrays 4-week, year-to-date,
one-year and 5-year performance; however, the ranking is
based on the one-year results. The rankings for any given
category appear approximately once per month.
FORTUNE magazine periodically publishes mutual fund
rankings that have been compiled for the magazine by
Morningstar, Inc. Funds are placed in stock or bond fund
categories (for example, aggressive growth stock funds,
growth stock funds, small company stock funds, junk bond
funds, Treasury bond funds, etc.), with the top-10 stock
funds and the top-5 bond funds appearing in the rankings.
The rankings are based on 3-year annualized total return
reflecting changes in net asset value and reinvestment of
distributions and not reflecting sales charges.
Performance is adjusted using quantitative techniques to
reflect the risk profile of the fund.
MONEY magazine periodically publishes mutual fund rankings
on a database of funds tracked for performance by Lipper
Analytical Services. The funds are placed in 23 stock or
bond fund categories and analyzed for five-year risk
adjusted return. Total return reflects changes in net
asset value and reinvestment of all dividends and capital
gains distributions and does not reflect deduction of any
sales charges. Grades are conferred (from A to E): the
top 20% in each category receive an A, the next 20% a B,
etc. To be ranked, a fund must be at least one year old,
accept a minimum investment of $25,000 or less and have
had assets of at least $25 million as of a given date.
FINANCIAL WORLD publishes its monthly Independent
Appraisals of Mutual Funds, a survey of approximately 1000
mutual funds. Funds are categorized as to type, e.g.,
balanced funds, corporate bond funds, global bond funds,
growth and income funds, U.S. government bond funds, etc.
To compete, funds must be over one year old, have over $1
million in assets, require a maximum of $10,000 initial
investment, and should be available in at least 10 states
in the United States. The funds receive a composite past
performance rating, which weighs the intermediate- and
long-term past performance of each fund versus its
category, as well as taking into account its risk, reward
to risk, and fees. An A+ rated fund is one of the best,
while a D-rated fund is one of the worst. The source for
Financial World rating is Schabacker investment management
in Rockville, MD.
FORBES magazine periodically publishes mutual fund ratings
based on performance over at least two bull and bear
market cycles. The funds are categorized by type,
including stock and balanced funds, taxable bond funds,
municipal bond funds, etc. Data sources include Lipper
Analytical Services and CDA Investment Technologies. The
ratings are based strictly on performance at net asset
value over the given cycles. Funds performing in the top
5% receive an A+ rating; the top 15% receive an A rating;
and so on until the bottom 5% receive an F rating. Each
fund exhibits two ratings, one for performance in "up"
markets and another for performance in "down" markets.
KIPLINGER'S PERSONAL FINANCE MAGAZINE (formerly Changing
Times), periodically publishes rankings of mutual funds
based on one-, three- and five-year total return
performance reflecting changes in net asset value and
reinvestment of dividends and capital gains and not
reflecting deduction of any sales charges. Funds are
ranked by tenths: a rank of 1 means that a fund was among
the highest 10% in total return for the period; a rank of
10 denotes the bottom 10%. Funds compete in categories of
similar funds--aggressive growth funds, growth and income
funds, sector funds, corporate bond funds, global
governmental bond funds, mortgage-backed securities funds,
etc. Kiplinger's also provides a risk-adjusted grade in
both rising and falling markets. Funds are graded against
others with the same objective. The average weekly total
return over two years is calculated. Performance is
adjusted using quantitative techniques to reflect the risk
profile of the fund.
U.S. NEWS AND WORLD REPORT periodically publishes mutual
fund rankings based on an overall performance index (OPI)
devised by Kanon Bloch Carre & Co., a Boston research
firm. Over 2000 funds are tracked and divided into 10
equity, taxable bond and tax-free bond categories. Funds
compete within the 10 groups and three broad categories.
The OPI is a number from 0-100 that measures the relative
performance of funds at least three years old over the
last 1, 3, 5 and 10 years and the last six bear markets.
Total return reflects changes in net asset value and the
reinvestment of any dividends and capital gains
distributions and does not reflect deduction of any sales
charges. Results for the longer periods receive the most
weight.
THE 100 BEST MUTUAL FUNDS YOU CAN BUY (1992), authored by
Gordon K. Williamson. The author's list of funds is
divided into 12 equity and bond fund categories, and the
100 funds are determined by applying four criteria.
First, equity funds whose current management teams have
been in place for less than five years are eliminated.
(The standard for bond funds is three years.) Second, the
author excludes any fund that ranks in the bottom 20
percent of its category's risk level. Risk is determined
by analyzing how many months over the past three years the
fund has underperformed a bank CD or a U.S. Treasury bill.
Third, a fund must have demonstrated strong results for
current three-year and five-year performance. Fourth, the
fund must either possess, in Mr. Williamson's judgment,
"excellent" risk-adjusted return or "superior" return with
low levels of risk. Each of the 100 funds is ranked in
five categories: total return, risk/volatility,
management, current income and expenses. The rankings
follow a five-point system: zero designates "poor"; one
point means "fair"; two points denote "good"; three points
qualify as a "very good"; four points rank as "superior";
and five points mean "excellent."
In addition, Putnam Mutual Funds may distribute to shareholders
or prospective investors illustrations of the benefits of
reinvesting tax-exempt or tax-deferred distributions over
specified time periods, which may include comparisons to fully
taxable distributions. These illustrations use hypothetical
rates of tax-advantaged and taxable returns and are not intended
to indicate the past or future performance of any fund.
DEFINITIONS
"Putnam Management" -- Putnam Investment Management,
Inc., the Fund's investment
manager.
"Putnam Mutual Funds" -- Putnam Mutual Funds Corp., the
Fund's principal underwriter.
"Putnam Fiduciary Trust -- Putnam Fiduciary Trust Company,
Company" the Fund's custodian.
"Putnam Investor Services" -- Putnam Investor Services, a
division of Putnam Fiduciary
Trust Company, the Fund's
investor servicing agent.
<PAGE>
PUTNAM EQUITY INCOME FUND
FORM N-1A
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Index to Financial Statements and Supporting
Schedules:
(1) Financial Statements:
Statement of assets and liabilities
--November 30,
1994(a) .
Statement of operations -- year ended
November 30, 1994(a) .
Statement of changes in net assets -- years
ended November 30, 1994 and November
30, 1993(a) .
Financial highlights(a)(b).
Notes to financial statements(a).
(2) Supporting Schedules:
Schedule I -- Portfolio of investments owned
-- November 30, 1994(a) .
Schedule II through IX omitted because the
required matter is not present.
------------------------
(a) Incorporated by reference into Parts A
and B.
(b) Included in Part A.
(b) Exhibits
1a. Agreement and Declaration of Trust, as
amended through September 9, 1993 --
Exhibit 1.
1b. Written Instrument amending the Agreement and
Declaration of Trust -- Incorporated by
reference to Post-Effective Amendment No.
26 to the Registrant's Registration
Statement.<PAGE>
2. By-Laws, as amended through February 1,
1994 -- Exhibit 2.
3. Not applicable.
4a. Specimen Class A share certificate --
Incorporated by reference to Post-Effective
Amendment No. 26 to the Registrant's
Registration Statement.
4b. Specimen Class B share certificate - -
Incorporated by reference to Post-Effective
Amendment No. 26 to the Registrant's
Registration Statement.
4c.Specimen Class M share certificate -
Exhibit 3.
4d. Portions of Agreement and Declaration of
Trust relating to shareholders' rights - -
Exhibit 4.
4d. Portions of By-Laws relating to shareholders'
rights - - Exhibit 5 .
5. Copy of Management Contract dated May 2, 1986
- - Incorporated by reference to
Post-Effective Amendment 17 to the
Registrant's Registration Statement.
6a. Copy of Distributor's Contract dated May
6, 1994 -- Exhibit 6 .
6b. Copy of Specimen Dealer Sales Contract - -
Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registrant's Registration Statement.
6c. Copy of Specimen Financial Institution Sales
Contract - - Incorporated by reference
to Post-Effective Amendment No. 25 to the
Registrant's Registration Statement.
7. Not applicable.
8. Copy of Custodian Agreement with Putnam
Fiduciary Trust Company dated May 3, 1991, as
amended July 13, 1992 -- Incorporated by
reference to Post-Effective Amendment No. 26
to the Registrant's Registration
Statement .
9. Copy of Investor Servicing Agreement dated
June 3, 1991 with Putnam Fiduciary Trust
Company - - Incorporated by reference
to Post-Effective Amendment 23 to the
Registrant's Registration Statement.
10. Opinion of Ropes & Gray, including consent -
- Exhibit 7 .
11. Not applicable.
12. Not applicable. <PAGE>
13. Investment Letter from The Putnam Management
Company, Inc. to the Registrant - -
dated May 26, 1977. - Incorporated by
reference to Post-Effective Amendment No. 18
to the Registrant's Registration Statement.
14a. Copy of Prototype Individual Retirement
Account Plan - - Exhibit 8 .
14b. Copy of Prototype Basic Plan Document and
related Plan Agreements -- Exhibit 9 .
15a. Form of Class A Distribution Plan and
Agreement dated January 1, 1990, as amended
September 10, 1993 -- Incorporated by
reference to Post-Effective Amendment No. 25
to the Registrant's Registration Statement.
15b. Copy of Class B Distribution Plan and
Agreement dated September 10, 1993 --
Incorporated by reference to Post-Effective
Amendment No. 26 to the Registrant's
Registration Statement.
15c. Copy of Class M Distribution Plan and
Agreement dated November 28, 1994 --
Exhibit 10.
15d . Copy of Specimen Dealer Service
Agreement --Incorporated by reference to
Post-Effective Amendment No. 25 to the
Registrant's Registration Statement.
15e . Copy of Specimen Financial Institution
Service Agreement - - Incorporated by
reference to Post-Effective Amendment No. 25 to
the Registrant's Registration Statement.
16. Schedules for computation of performance
quotations - - Exhibit 11.
17a. Financial Data Schedule for Class A
shares --Exhibit 12.
17b. Financial Data Schedule for Class B shares
-- Exhibit 13.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of January 31, 1995, there were 29,535, 3,175
and 82 holders , respectively, of the Registrant's
Class A , Class B and Class M shares of beneficial interest
.
ITEM 27. INDEMNIFICATION
The information required by this item is incorporated herein
by reference from the Registrant's Initial Registration Statement
on Form N-8B-1 under the Investment Company Act of 1940 (File No.
811-2742). <PAGE>
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Except as set forth below, the directors and officers
of the Registrant's investment adviser have been engaged during
the past two fiscal years in no business, vocation or employment
of a substantial nature other than as directors or officers of
the investment adviser or certain of its corporate affiliates.
Certain officers of the investment adviser serve as officers of
some or all of the Putnam funds. The address of the investment
adviser, its corporate affiliates and the Putnam Funds is One
Post Office Square, Boston, Massachusetts 02109.
NAME NON-PUTNAM BUSINESS AND OTHER
CONNECTIONS
John V. Adduci Prior to July, 1993, Human Resources
Assistant Vice President Manager, First Security Services, 80
Main St., Reading, MA 01867
Gail S. Attridge Prior to November, 1993, International
Vice President Analyst, Keystone Custodian Funds,
200 Berkley Street, Boston, MA 02116
James D. Babcock Prior to June, 1994, Interest
Assistant Vice President Supervisor, Salomon Brothers, Inc.
7 World Trade Center, New York, NY
10048
Prior to June, 1993, Audit Manager,
Coopers & Lybrand, One Sylvan Way,
Parsipanny, NJ 07054
Robert K. Baumbach Prior to August, 1994, Vice President
Vice President and Analyst, Keystone Custodian
Funds, 200 Berkley St., Boston, MA
02110
Sharon A. Berka Prior to January, 1994, Vice
Vice President President - Compensation Manager,
BayBanks, Inc., 175 Federal Street,
Boston, MA 02110
Thomas Bogan Prior to November, 1994, Analyst
Senior Vice President Lord, Abbett & Co., 767 Fifth
Avenue, New York, NY 10153
Michael F. Bouscaren Prior to May, 1994, President and
Senior Vice President Chairman of the Board of Directors
at Salomon Series Funds, Inc. and a
Director of Salomon Brothers Asset
Management, 7 World Trade Center,
New York, NY 10048
Brett Browchuk Prior to April, 1994, Managing
Managing Director Director, Fidelity Investments, 82
Devonshire St., Boston, MA 02109
Carolyn S. Bunten Prior to July, 1993, Assistant Trader,
Assistant Vice President Scudder Stevens & Clark, Inc., 175
Federal St., Boston, MA 02110
Andrea Burke Prior to August, 1994, Vice President
Vice President and Portfolio Manager, Back Bay
Advisors, 399 Boylston St., Boston,
MA 02116
John M. Burton Prior to June, 1994, Manager --
Assistant Vice President Marketing Asset Management Pension
Services, The Travelers, Inc., 1
Tower Square, Hartford, CT 06183
Patricia A. Carey Prior to May, 1993, Research Analyst,
Assistant Vice President John Hancock Financial Services, 100
Clarendon St., Boston, MA 02116
Peter Carman Prior to August, 1993, Chief
Senior Managing Director Investment Officer, Chairman, U.S.
Equity Investment Policy Committee,
Member of Board of Directors,
Sanford C. Bernstein & Co., Inc.,
767 Fifth Avenue, New York, NY 10153
Steven Cheshire Prior to January, 1994, Assistant
Vice President Vice President, Wellington
Management, 75 State Street, Boston,
MA 02109
Anna Coppola Prior to May, 1993, Associate,
Assistant Vice President Heidrick & Struggles, One Post
Office Square, Boston, MA 02109
Kenneth L. Daly Prior to August, 1993, Vice
Senior Vice President President, Fidelity Investments,
82 Devonshire St., Boston, MA 02109
John A. DeTore Prior to January, 1994, Director of
Managing Director Quantitative Portfolio Management,
Wellington Management, 75 State
Street, Boston, MA 02109
<PAGE>
Theodore J. Deutz Prior to January, 1995, Senior Vice
Vice President President, Metropolitan West
Securities, Inc.
10880 Wilshire Blvd., Suite 200, Los Angeles, CA
90024
Michael G. Dolan Prior to February, 1994, Senior
Assistant Vice President Financial Analyst, General Electric
Company, 1000 Western Ave., Lynn, MA
01905
Joseph J. Eagleeye Prior to August, 1994, Associate,
Assistant Vice President David Taussig & Associates, 424
University Ave., Sacramento, CA
95813
Michael T. Fitzgerald Prior to September, 1994, Senior
Senior Vice President Vice President, Vantage Global
Advisers, 1201 Morningside Dr.,
Manhattan Beach, CA 90266
Jonathan H. Francis Prior to March, 1993, President,
Senior Vice President J.H. Francis & Co., N. Pheasant
Lane, Westport, CT 06880
James F. Giblin Prior to April, 1993, Managing
Senior Vice President Director, CIGNA Corp. Investments,
Inc., 900 Cottage Grove Rd.
Bloomfield, CT 06152
Thomas C. Goggins Prior to June, 1993, Portfolio
Vice President Manager, Transamerica Investment
Services, 1150 South Olive Street,
Los Angeles, CA 90015
Mark D. Goodwin Prior to May, 1994, Manager, Audit &
Assistant Vice President Operations Analysis, Mitre
Corporation, 202 Burlington Rd.,
Bedford, MA 01730
Stephen A. Gorman Prior to July, 1994, Financial
Assistant Vice President Analyst, Boston Harbor Trust
Company, 100 Federal St., Boston, MA
02110
Kimberly A. Gravel Prior to March, 1993, Account Manager,
Assistant Vice President Estee Lauder Corp. - Prescriptives
Division, 767 Fifth Ave., New York,
NY 10153
<PAGE>
Daniel J. Grim Prior to May 1993, Consultant,
Vice President Connie Lee, 2445 M Street N.W.,
Washington, D.C. 20037;
Chief Operating Officer, Boardwalk,
Inc., Minocqua, WI 54548
Deborah R. Healey Prior to June, 1994, Senior Equity
Senior Vice President Trader, Fidelity Management &
Research Company, 82 Devonshire St.,
Boston, MA 02109
Lisa Heitman Prior to July, 1994, Securities
Vice President Analyst, Lord, Abbett & Company, 767
Fifth Ave., New York, NY 10153
Michael F. Hotchkiss Prior to May, 1994, Vice President,
Vice President Massachusetts Financial Services,
500 Boylston St., Boston, MA 02116
Walter Hunnewell, Jr. Prior to April, 1994, Managing
Vice President Director, Veronis, Suhler &
Associates, 350 Park Avenue, New
York, NY 10022
Joseph Joseph Prior to October, 1994, Managing
Vice President Director, Vert Independent Capital
Research, 53 Wall St., New York, NY
10052
Prior to August, 1993, Manager,
Price Waterhouse, 6th Avenue, New
York, NY 10036
Jeffrey L. Knight Prior to March, 1993, Teacher,
Assistant Vice President Greater Newburyport Educational
Collaborative, Newburyport, MA 01950
Jeffrey J. Kobylarz Prior to May, 1993, Credit Analyst,
Vice President Dean Witter Reynolds, Inc.,
Two World Trade Center,
New York, NY 10048
D. William Kohli Prior to September, 1994, Executive
Senior Vice President Vice President and Co-Director of
Global Bond Managment; Prior to
1993, Portfolio Manager, Franklin
Advisors/Templeton Investments
Counsel, 777 Mariners Island Blvd.,
San Mateo, CA 94404
<PAGE>
Karen R. Korn Prior to June, 1994, Vice President,
Vice President Assistant to the President, Designs,
Inc. 1244 Boylston St., Chestnut
Hill, MA 02167
Prior to March, 1993, Vice President,
Paine Webber, Inc., 265 Franklin
St., Boston, MA 02110
Peter B. Krug Prior to January, 1995, Owner and
Vice President Director, Griswold Special Care, 42
Ethan Allen Drive, Acton, MA 01720
Lawrence J. Lasser Director, Marsh & McLennan Companies,
President, Director Inc., 1221 Avenue of the Americas,
and Chief Executive New York, NY 10020
Officer Director, INROADS/Central New England,
Inc., 99 Bedford St., Boston,
MA 02111
Jeffrey R. Lindsay Prior to April, 1994, Vice President
Vice President and Board Member, Strategic
Portfolio Management, 900 Ashwood
Parkway, Suite 290, Atlanta, GA
30338
Michael Martino Prior to January, 1994, Executive
Senior Vice President Vice President and Chief Investment
Officer until 1992; Senior Vice
President and Portfolio Manager from
1990 to 1992, Back Bay Advisors, 399
Boylston St, Boston, MA 02116
Andrew S. Matteis Prior to March, 1993, Vice President,
Vice President Fitch Investors Service, One
State Street Plaza, New York,
NY 10004
Susan A. McCormack Prior to May, 1994, Associate
Vice President Investment Banker, Merrill Lynch &
Co., 350 South Grand Ave., Suite
2830, Los Angeles, CA 90071
Maziar Minovi Prior to January, 1995, Associate
Vice President Privatization Specialist, The
International Bank for
Reconstruction and Development, 1818
H St. N.W., Washington, DC 20433
<PAGE>
Michael J. Mufson Prior to June, 1993, Senior Equity
Vice President Analyst, Stein Roe & Farnham,
One South Wacker Drive, Chicago, Il
60606
Paul G. Murphy Prior to January, 1995, Section
Assistant Vice President Manager, First Data Corp., 53 State
Street, Boston, MA 02109
Warren S. Naphtal Prior to January, 1994, Managing
Senior Vice President Director, Continental Bank, 231
So. Lasalle St., Chicago, IL 60697
C. Patrick O'Donnell, Jr. Prior to May, 1994, President,
Managing Director Exeter Research, Inc., 163 Water
Street, Exeter, New Hampshire, 03833
Brian O'Keefe Prior to December, 1993, Vice
Vice President President - Foreign Exchange Trader,
Bank of Boston, 100 Federal Street,
Boston, MA 02109
Pat G. Patel Prior to April, 1993, Regional
Vice President Manager, Zacks Investment Research,
155 N. Wacker Drive, Chicago,
IL 60606
Margaret Pietropaolo Prior to January, 1994, Data Base/
Assistant Vice President Production Analyst, Wellington
Management, 75 State Street, Boston,
MA 02109
George Putnam Chairman and Director, Putnam Mutual
Chairman and Director Funds Corp.
Director, The Boston Company, Inc.,
One Boston Place, Boston, MA 02108
Director, Boston Safe Deposit and
Trust Company, One Boston Place,
Boston, MA 02108
Director, Freeport-McMoRan, Inc., 200
Park Avenue, New York, NY 10166
Director, General Mills, Inc., 9200
Wayzata Boulevard, Minneapolis,
MN 55440
Director, Houghton Mifflin Company,
One Beacon Street, Boston, MA 02108
Director, Marsh & McLennan Companies,
Inc., 1221 Avenue of the Americas,
New York, NY 10020
Director, Rockefeller Group, Inc.,
1230 Avenue of the Americas,
New York, NY 10020
<PAGE>
Robert M. Shafto Prior to January, 1995, Account
Assistant Vice President Manager, IBM Corporation, 404 Wyman
St., Waltham, MA 02254
Mark J. Siegel Prior to June, 1993, Vice President,
Vice President Salomon Brothers International,
Ltd., Victoria Plaza, 111 Buckingham
Palace Road, London SW1W 0SB,
England
Joanne Soja Prior to June, 1993, Managing
Senior Vice President Director/Portfolio Manager,
Chancellor Capital Management,
153 East 53rd Street, New York, NY
10002
Steven Spiegel Prior to January, 1995, Managing
Senior Managing Director Director/Retirement, Lehman
Brothers, Inc., 200 Vesey St., World
Financial Center, New York, NY 10285
George W. Stairs Prior to July, 1994, Equity Research
Vice President Analyst, ValueQuest Limited,
Roundy's Hill, Marblehead, MA 01945
Roger Sullivan Prior to December, 1994, Vice
Senior Vice President President, State Street Research &
Management Co., One Financial
Center, Boston, MA 02111
Hillary F. Till Prior to May, 1994, Fixed-Income
Vice President Derivative Trader, Bank of Boston,
100 Federal Street, Boston, MA 02109
Prior to December, 1993, Equity
Analyst, Harvard Management Company,
600 Atlantic St., Boston, MA 02109
Bonnie L. Troped Prior to May, 1993, Assistant Vice
Vice President President/Director of Corporate
Events, The Boston Company, One
Boston Place, Boston, MA 02108
Elizabeth A. Underhill Prior to August, 1994, Vice President
Vice President and Senior Equity Analyst, State
Street Bank and Trust Company, 225
Franklin St., Boston, MA 02110
<PAGE>
Charles C. Van Vleet Prior to August, 1994, Vice President
Senior Vice President and Fixed-Income Manager, Alliance
Capital Management, 1345 Avenue of
the Americas, New York, NY 10105
Francis P. Walsh Prior to November, 1994, Research
Vice President Analyst, Furman, Selz, Inc. 230 Park
Avenue, New York, NY 10169
Prior to December, 1993, Strategic
Marketing Analyst, Lotus
Development, Corporation 55
Cambridge Parkway, Cambridge, MA
02142
Michael R. Weinstein Prior to March, 1994, Management
Vice President Consultant, Arthur D. Little, Acorn
Park, Cambridge, MA 02140
<PAGE>
Item 29. Principal Underwriter
(a) Putnam Mutual Funds Corp. is the principal underwriter for
each of the following investment companies, including the
Registrant:
Putnam Adjustable Rate U.S. Government Fund, Putnam American
Government Income Fund, Putnam Arizona Tax Exempt Income Fund,
Putnam Asia Pacific Growth Fund, Putnam Asset Allocation Funds,
Putnam Balanced Government Fund, Putnam California Tax Exempt
Income Trust, Putnam California Tax Exempt Money Market Fund,
Putnam Capital Appreciation Fund, Putnam Capital Growth and
Income Fund, Putnam Capital Manager Trust, Putnam Convertible
Income-Growth Trust, Putnam Corporate Asset Trust, Putnam
Diversified Equity Trust, Putnam Diversified Income Trust, Putnam
Dividend Growth Fund, Putnam Equity Income Fund, Putnam Europe
Growth Fund, Putnam Federal Income Trust, Putnam Florida Tax
Exempt Income Fund, The George Putnam Fund of Boston, Putnam
Global Governmental Income Trust, Putnam Global Growth Fund,
Putnam Growth Fund, Putnam Growth and Income Fund II, The Putnam
Fund for Growth and Income, Putnam Health Sciences Trust, Putnam
High Yield Trust, Putnam High Yield Advantage Fund, Putnam Income
Fund, Putnam Intermediate Tax Exempt Income Fund, Putnam
Investment Funds, Putnam Investment Grade Bond Fund, Putnam
Investors Fund, Putnam Managed Income Trust, Putnam Massachusetts
Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund
II, Putnam Minnesota Tax Exempt Income Fund II, Putnam Money
Market Fund, Putnam Municipal Income Fund, Putnam Natural
Resources Fund, Putnam New Jersey Tax Exempt Income Fund, Putnam
New Opportunities Fund, Putnam New York Tax Exempt Income Trust,
Putnam New York Tax Exempt Money Market Fund, Putnam New York Tax
Exempt Opportunities Fund, Putnam Ohio Tax Exempt Income Fund II,
Putnam OTC Emerging Growth Fund, Putnam Overseas Growth Fund,
Putnam Pennsylvania Tax Exempt Income Fund, Putnam Research
Analyst Fund, Putnam Tax-Free Income Trust, Putnam Tax Exempt
Income Fund, Putnam Tax Exempt Money Market Fund, Putnam U.S.
Government Income Trust, Putnam Utilities Growth and Income Fund,
Putnam Vista Fund, Putnam Voyager Fund
<TABLE>
<CAPTION>
(b) The directors and officers of the Registrant's principal underwriter are:
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
<C> <C> <C>
John V. Adduci Assistant Vice President None
Christopher S. Alpaugh Vice President None
Paulette C. Amisano Vice President None
Ronald J. Anwar Vice President None
Karen M. Apatow Assistant Vice President None
Steven E. Asher Senior Vice President None
Scott A. Avery Vice President None
Ira G. Baron Senior Vice President None
John L. Bartlett Senior Vice President None
Steven M. Beatty Vice President None
Matthew F. Beaudry Vice President None
Robert A. Benish Vice President None
John J. Bent Vice President None
Thomas A. Beringer Vice President None
Sharon A. Berka Vice President None
James R. Besher Vice President None
Suzanne J. Bessett Vice President None
Maureen L. Boisvert Vice President None
Keith R. Bouchard Vice President None
Leslee R. Bresnahan Vice President None
James D. Brockelman Senior Vice President None
Scott C. Brown Vice President None
Gail D. Buckner Senior Vice President None
Robert W. Burke Senior Managing Director None
Ellen S. Callahan Assistant Vice President None
Peter J. Campagna Vice President None
William A. Campagna Senior Vice President None
Charles A. Carey Assistant Vice President None
Patricia A. Cartwright Assistant Vice President None
Janet Casale-Sweeney Vice President None
Stephen J. Chaput Assistant Vice President None
Daniel J. Church Vice President None
James E. Clinton Assistant Vice President None
Kathleen M. Collman Managing Director None
Mark L. Coneeny Vice President None
Donald A. Connelly Senior Vice President None
Anna Coppola Assistant Vice President None
F. Nicholas Corvinus Senior Vice President None
Chad H. Cristo Assistant Vice President None
Jessica E. Dahill Vice President None
Kenneth L. Daly Senior Vice President None
Edward H. Dane Assistant Vice President None
Nancy M. Days Assistant Vice President None
Daniel J. Delianedis Vice President None
Teresa F. Dennehy Assistant Vice President None
J. Thomas Despres Senior Vice President None
Michael G. Dolan Assistant Vice President None
Scott M. Donaldson Vice President None
Emily J. Durbin Assistant Vice President None
Susan Cabana Dwyer Vice President None
David B. Edlin Senior Vice President None
James M. English Senior Vice President None
Vincent Esposito Senior Vice President None
Mary K. Farrell Assistant Vice President None
Michael J. Fechter Assistant Vice President None
Susan H. Feldman Vice President None
Paul F. Fichera Senior Vice President None
C. Nancy Fisher Senior Vice President None
Mitchell B. Fishman Vice President None
Joseph C. Fiumara Vice President None
Patricia C. Flaherty Senior Vice President None
Judy P. Frodigh Vice President None
Samuel F. Gagliardi Vice President None
Judy S. Gates Vice President None
Richard W. Gauger Assistant Vice President None
Joseph P. Gennaco Vice President None
Steven E. Gibson Managing Director None
Robert Goodman Managing Director None
Mark D. Goodwin Assistant Vice President None
Robert G. Greenly Vice President None
Jeffrey P. Gubala Vice President None
James E. Halloran Vice President None
Thomas W. Halloran Vice President None
Marilyn M. Hausammann Senior Vice President None
Howard W. Hawkins, III Vice President None
Deanna R. Hayes-Castro Assistant Vice President None
Paul P. Heffernan Vice President None
Susan M. Heimanson Vice President None
Bradley J. Hilsabeck Vice President None
Bess J.M. Hochstein Vice President None
Maureen A. Holmes Assistant Vice President None
Paula J. Hoyt Assistant Vice President None
William J. Hurley Senior Vice President None
Gregory E. Hyde Senior Vice President None
Dwight D. Jacobsen Senior Vice President None
Douglas B. Jamieson Director and Senior Managing Director None
Jay M. Johnson Vice President None
Kevin M. Joyce Senior Vice President None
Karen R. Kay Senior Vice President None
John P. Keating Vice President None
James J. Kilbane Vice President None
Deborah H. Kirk Senior Vice President None
Jill A. Koontz Assistant Vice President None
James D. Lathrop Vice President None
Howard H. Kreutzberg Senior Vice President None
Edward V. Lewandowski Senior Vice President None
Edward V. Lewandowski, Jr. Vice President None
Samuel L. Lieberman Vice President None
Maura A. Lockwood Assistant Vice President None
Rufino R. Lomba Vice President None
Robert F. Lucey Senior Managing Director None
Alana Madden Vice President None
Ann Malatos Assistant Vice President None
Renee L. Maloof Assistant Vice President None
Frederick S. Marius Assistant Vice President None
Karen E. Marotta Vice President None
Kathleen M. McAnulty Assistant Vice President None
Anne B. McCarthy Assistant Vice President None
Paul McConville Vice President None
Marla J. McDougall Assistant Vice President None
Walter S. McFarland Vice President None
Mark J. McKenna Vice President None
Greg J. McMillan Vice President None
Robert E. McMurtrie Vice President None
Claye A. Metelmann Assistant Vice President None
J. Chris Meyer Senior Vice President None
Douglas W. Miller Vice President None
Ronald K. Mills Vice President None
Timothy P. Moran Treasurer, Director, Senior Vice President None
Mitchell L. Moret Vice President None
Donald E. Mullen Vice President None
Paul G. Murphy Assistant Vice President None
Brendan R. Murray Vice President None
Robert Nadherny Vice President None
Alexander L. Nelson Managing Director None
Jane M. Nickodemus Vice President None
John P. Nickodemus Vice President None
Michael C. Noonis Assistant Vice President None
Kristen P. O'Brien Vice President None
Kevin L. O'Shea Vice President None
Philip G. Padgett, Jr. Vice President None
Joseph R. Palombo Managing Director None
Scott A. Papes Vice President None
Cynthia O. Parr Vice President None
John D. Pataccoli Vice President None
John G. Phoenix Vice President None
Joseph Phoenix Vice President None
Jeffrey E. Place Senior Vice President None
Keith Plapinger Vice President None
Douglas H. Powell Vice President None
Susannah Psomas Vice President None
George Putnam Director Chairman & President
Robert B. Rowe Vice President None
Kevin A. Rowell Senior Vice President None
Thomas C. Rowley Vice President None
Charles A. Ruys de Perez Vice President None
Deborah A. Ryan Assistant Vice President None
Catherine A. Saunders Senior Vice President None
Robbin L. Saunders Assistant Vice President None
Karl W. Saur Vice President None
Christine A. Scordato Vice President None
Joseph W. Scott Assistant Vice President None
Kathleen G. Sharpless Senior Vice President None
John B. Shamburg Vice President None
John F. Sharry Managing Director None
Vincent P. Sheehan Vice President None
William N. Shiebler Director, Chief Executive Vice President
Officer and President
Daniel S. Shore Vice President None
Mark J. Siebold Assistant Vice President None
Gordon H. Silver Senior Managing Director Vice President
Barry Sommers Vice President None
Nicholas T. Stanojev Senior Vice President None
Steven Spiegel Senior Managing Director None
Brian L. Sullivan Vice President None
Kevin J. Sullivan Vice President None
Moira A. Sullivan Vice President None
James S. Tambone Senior Vice President None
B. Iris Tanner Assistant Vice President None
Louis Tasiopoulos Senior Vice President None
David S. Taylor Vice President None
John R. Telling Vice President None
Richard B. Tibbetts Senior Vice President None
Patrice M. Tirado Vice President None
Janet E. Tosi Assistant Vice President None
John C. Tredinnick Vice President None
Bonnie L. Troped Vice President None
Larry R. Unger Vice President None
Douglas J. Vander Linde Vice President None
Edward F. Whalen Vice President None
Robert J. Wheeler Senior Vice President None
John B. White Vice President None
Kirk E. Williamson Senior Vice President None
Leigh T. Williamson Vice President None
Benjamin I. Woloshin Vice President None
William H. Woolverton Senior Vice President None
Timothy R. Young Vice President None
SooHee L. Zebedee Assistant Vice President None
Laura J. Zografos Vice President None
</TABLE>
<PAGE>
The principal business address of each person listed above is One
Post Office Square, Boston, MA 02109, except for:
Mr. Alpaugh, 5980 Richmond Highway, Alexandria, VA 22303
Mr. Anwar, 3000 Valley Forge Circle, King of Prussia, PA 19406
Mr. Avery, 7031 Spring Ridge Rd., Cary NC 27511
Mr. Baron, 31 Cala Moreya, Laguna Niguel, CA 92667
Mr. Bartlett, 7 Fairfield St., Boston, MA 02116
Mr. Beringer, 3722 West 50th St., Edina,MN 55410
Mr. Besher, 14000 Margaux, Town & Country, MO 63017
Ms. Besset, 1140 North LaSalle Blvd, Chicago, IL 60610
Mr. Bouchard, 18 Brice Rd., Annapolis, MD 21401
Mr. Brown, 2012 West Grove Drive, Gibson, PA 15044
Ms. Buckner, 8338 Timber Trail, Pittsburgh, PA 15237
Mr. Busher, 12005 Ridge Knoll Drive, Fairfax, VA 22033
Mr. Campagna, 2179-D Lake Park Drive, Smyrna, GA 30080
Ms. Castro, 26 Gould Road, Andover, MA 01810
Mr. Church, 4504 Sir Winston Place, Charlotte, NC 28211
Mr. Cristo, 11 Schenck Ave., Great Neck, NY 11021
Mr. Connelly, 4634 Mirada Way, Sarasota, FL 34238
Mr. Corvinus, 208 Water St., Newburyport, MA 01950
Ms. Dahill, 270-1C Iven Ave., St David's, PA 19087
Mr. Deliandis, 206 Promontory Drive, Newport Beach, CA 92660
Mr. Edlin, 7 River Road, 305 Palmer Point, Cos Cob, CT 06807
Mr. English, 1184 Pintail Circle, Boulder, CO 80303
Mr. Goodman, 14 Clover Place, Cos Cob, CT 06807
Mr. Gubala, 490 Beacon Knoll Lane, Ft. Mill, SC 29715
Mr. J. Halloran, 978 W. Creek Lane, Westlake Village, CA 91362
Mr. T. Halloran, 19449 Misty Lake Dr., Strongsville, OH 44136
Mr. Hyde, 3305 Sulky, Marietta, GA 30067
Mr. Jacobsen, 2744 Joyce Ridge Drive, Chesterfield, MO 63017
Mr. Johnson, 200 Clock Tower Place, Carmel, CA 93923
Mr. Keating, 5521 Greenville Avenue, Dallas, TX 75206
Ms. Kirk, 124 Rivermist Dr., Buffalo, NY 14202
Mr. Lathrop, 14814 Straub Hill Lane, Chesterfield, MO 63017
Mr. Lewandowski, 805 Darrell Road, Hillsborough, CA 94010
Mr. Lewandowski, Jr., 2120 The Strand, Manhattan Beach, CA 90266
Mr. Lieberman, 200 Roy St., Seattle, WA 98199
Ms. Madden, 8649 North Himes Avenue, Tampa, FL 33614
Mr. McConville, 515 S. Arlington Heights Rd., Arlington
Heights, IL 6005
Mr. McFarland, 8012 Dancing Fern Trail, Chattanooga, TN 37421
Mr. McMillan, 203 D. Zigler St., Zelienople, PA 16063
Mr. McMurtrie, 14529 Glastonbury, Detroit, MI 48223
Mr. Miller, 70 Williams St., Greenwich, CT 06830
Mr. Moret, 4519 Lawn Avenue, Western Springs, IL 60558
Mr. Murray, 13 Ridge Court, Saratoga Springs, NY 12866
Mr. Nadherny, 9714 Marmount Drive, Seattle, WA 98117
Mr. and Mrs. Nickodemus, 463 Village Oaks Court, Ann Arbor,
MI 48103
Mr. Padgett, Jr., 7709 Charleston Drive, Bethesda, MD 20817
Mr. Papes, 3102 Wood View Bridge Drive, Kansas City, KS 66103
Mr. Pataccoli, 1500 Bay Rd., Miami, FL 33139
Mr. Phoenix, 1426 Asbury Avenue, Hubbard Woods, IL 60093
Mr. Place, 4211 Loch Highland Parkway, Roswell, GA 30075
Mr. Powell, 1508 Ruth Lane, Newport Beach, CA 92660
Mr. Rowe, 109 Shore Drive, Longwood, FL 32779
Mr. Rowell, 1508 Ruth Lane, Newport Beach, CA 92660
Mr. Rowley, 237 Peeke Avenue, Kirkwood, MO 63122
Ms. Saunders, 39939 Stevenson Common, Freemont, CA 94538
Mr. Shamburg, 10603 N. 100th Street, Scottsdale, AZ 85260
Mr. Sheehan, Parkway Center, 1150 Galapago, Denver, CO 80204
Mr. Shore, 2870 Pharr Court South, N.W., Atlanta, BA 30305
Mr. Sommers, 397 North Little Tour, New City, NY 10956
Mr. B. Sullivan, 777 Pinoake Road, Mt. Lebanon, PA 15243
Ms. M. Sullivan, 493 Zinfandel Lane, St. Helena, CA 94574
Ms. Sweeney, 8 Surf Street, Marblehead, MA 01945
Mr. Syring, 7540 Mandarian Dr., Boca Raton, FL 33433
Mr. Tambone, 10 Commercial Wharf, Boston, MA 02110
Mr. Tredinnick, 2995 Glenwood Drive, Boulder, CO 80301
Mr. Telling, 1995 Delaware Ave., Buffalo, NY 14216
Mr. Unger, 212 E. Broadway, New York, NY 10002
Mr. Vessels, 7 Riverview Drive, Norwalk, CT 06850
Mr. Williamson, 640-4 Tete L'Ours, Mandeville, LA 70471
Mr. White, 10 Mannion Place, Littleton, MA 01460
Mr. Woloshin, 730 North Bundy Drive, Los Angeles, CA 90049
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Persons maintaining physical possession of accounts, books
and other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the Rules promulgated
thereunder are Registrant's Clerk, Beverly Marcus; Registrant's
investment adviser, Putnam Investment Management, Inc.;
Registrant's principal underwriter, Putnam Mutual Funds Corp.;
Registrant's custodian, Putnam Fiduciary Trust Company ("PFTC") ;
and Registrant's transfer and dividend disbursing agent, Putnam
Investor Services, a division of PFTC. The address of the Clerk,
investment adviser, principal underwriter, custodian and transfer
and dividend disbursing agent is One Post Office Square, Boston,
Massachusetts 02109.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom
a prospectus of the Registrant is delivered a copy of the
Registrant's latest annual report to shareholders, upon request
and without charge.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-
Effective Amendment No. 27 to the Registration
Statement of Putnam Equity Income Fund on Form N-1A (File
No. 2-58869) of our report dated January 20 , 1995 ,
on our audit of the financial statements and "Financial
highlights " of the Fund , which report is
included in the Annual Report for Putnam Equity Income Fund for
the year ended November 30, 1994, which is incorporated by
reference in the Registration Statement .
We also consent to the reference to our firm under the
caption "Independent Accountants and Financial Statements" in the
Statement of Additional Information.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 27, 1995 <PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust of Putnam
Equity Income Fund is on file with the Secretary of State of The
Commonwealth of Massachusetts and notice is hereby given that
this instrument is executed on behalf of the Registrant by an
officer of the Registrant as an officer and not individually and
the obligations of or arising out of this instrument are not
binding upon any of the Trustees, officers or shareholders
individually but are binding only upon the assets and property of
the Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant
certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1993 and has duly caused
this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Boston, and The Commonwealth of Massachusetts, on the
27th day of March, 1995 .
PUTNAM EQUITY INCOME FUND
By: Gordon H. Silver, Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement of Putnam Equity
Income Fund has been signed below by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE
George Putnam President and Chairman of the Board;
Principal Executive Officer; Trustee
William F. Pounds Vice Chairman; Trustee
John D. Hughes Vice President, Treasurer and
Principal Financial Officer
Paul G. Bucuvalas Assistant Treasurer and Principal
Accounting Officer
Jameson A. Baxter Trustee
Hans H. Estin Trustee
John A. Hill Trustee
Elizabeth T. Kennan Trustee
Lawrence J. Lasser Trustee
Robert E. Patterson Trustee
Donald S. Perkins Trustee
George Putnam, III Trustee
A.J.C. Smith Trustee
W. Nicholas Thorndike Trustee
By: Gordon H. Silver,
as Attorney-in-Fact
March 27, 1995
BYLAWS
OF
PUTNAM ADJUSTABLE RATE U.S. GOVERNMENT FUND,
PUTNAM AMERICAN GOVERNMENT INCOME FUND,
PUTNAM ARIZONA TAX EXEMPT INCOME FUND,
PUTNAM ASIA PACIFIC GROWTH FUND,
PUTNAM ASSET ALLOCATION FUNDS,
PUTNAM BALANCED GOVERNMENT FUND,
PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND,
PUTNAM CONVERTIBLE INCOME-GROWTH TRUST,
PUTNAM DIVERSIFIED INCOME TRUST,
PUTNAM DIVIDEND GROWTH FUND,
PUTNAM EQUITY INCOME FUND,
PUTNAM EUROPE GROWTH FUND,
PUTNAM FLORIDA TAX EXEMPT INCOME FUND,
THE GEORGE PUTNAM FUND OF BOSTON,
PUTNAM GLOBAL GOVERNMENTAL INCOME TRUST,
PUTNAM GLOBAL GROWTH FUND,
PUTNAM HEALTH SCIENCES TRUST,
PUTNAM HIGH YIELD TRUST,
PUTNAM INCOME FUND,
PUTNAM INVESTORS FUND,
PUTNAM MANAGED INCOME TRUST,
PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II,
PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II,
PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II,
PUTNAM MONEY MARKET FUND,
PUTNAM MUNICIPAL INCOME FUND,
PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND,
PUTNAM NEW OPPORTUNITIES FUND,
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND,
PUTNAM NEW YORK TAX EXEMPT OPPORTUNITIES FUND,
PUTNAM OHIO TAX EXEMPT INCOME FUND II,
PUTNAM OTC EMERGING GROWTH FUND,
PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND,
PUTNAM RESEARCH ANALYSTS FUND,
PUTNAM TAX EXEMPT INCOME FUND,
PUTNAM TAX EXEMPT MONEY MARKET FUND,
PUTNAM TAX-FREE INCOME TRUST,
PUTNAM U.S. GOVERNMENT INCOME TRUST,
PUTNAM UTILITIES GROWTH AND INCOME FUND,
PUTNAM VISTA FUND,
PUTNAM VOYAGER FUND
(AS AMENDED THROUGH FEBRUARY 1, 1994),
PUTNAM INTERMEDIATE TAX EXEMPT FUND
(AS AMENDED THROUGH MARCH 7, 1994),
PUTNAM CALIFORNIA TAX EXEMPT INCOME TRUST,
PUTNAM NEW YORK TAX EXEMPT INCOME TRUST
(AS AMENDED THROUGH APRIL 8, 1994),
PUTNAM DIVERSIFIED EQUITY TRUST
(AS APPROVED APRIL 13, 1994)
PUTNAM HIGH YIELD ADVANTAGE FUND,
PUTNAM OVERSEAS GROWTH FUND
(AS AMENDED THROUGH JUNE 1, 1994),
PUTNAM FEDERAL INCOME TRUST
(AS AMENDED THROUGH JUNE 6, 1994),
PUTNAM NATURAL RESOURCES FUND
(AS AMENDED THROUGH JULY 1, 1994),
THE PUTNAM FUND FOR GROWTH AND INCOME
(AS AMENDED THROUGH JULY 7, 1994), <PAGE>
PUTNAM TOTAL RETURN BOND FUNDS,
PUTNAM GROWTH AND INCOME FUND II,
(AS AMENDED THROUGH OCTOBER 5, 1994) AND
PUTNAM EQUITY FUNDS
(AS AMENDED THROUGH OCTOBER 30, 1994)
ARTICLE 1
Agreement and Declaration of Trust and Principal Office
1.1 AGREEMENT AND DECLARATION OF TRUST. These Bylaws shall
be subject to the Agreement and Declaration of Trust, as from
time to time in effect (the "Declaration of Trust"), of the
Massachusetts business trust established by the Declaration of
Trust (the "Trust").
1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of
the Trust shall be located in Boston, Massachusetts.
ARTICLE 2
MEETINGS OF TRUSTEES
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may
be held without call or notice at such places and at such times
as the Trustees may from time to time determine, provided that
notice of the first regular meeting following any such
determination shall be given to absent Trustees.
2.2 SPECIAL MEETINGS. Special meetings of the Trustees may
be held at any time and at any place designated in the call of
the meeting when called by the Chairman of the Trustees, the
President or the Treasurer or by two or more Trustees, sufficient
notice thereof being given to each Trustee by the Clerk or an
Assistant Clerk or by the officer or the Trustees calling the
meeting.
2.3 NOTICE OF SPECIAL MEETINGS. It shall be sufficient
notice to a Trustee of a special meeting to send notice by mail
at least forty-eight hours or by telegram at least twenty-four
hours before the meeting addressed to the Trustee at his or her
usual or last known business or residence address or to give
notice to him or her in person or by telephone at least
twenty-four hours before the meeting. Notice of a special
meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her before or after the meeting, is
filed with the records of the meeting, or to any Trustee who
attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him or her. Neither notice of
a meeting nor a waiver of a notice need specify the purposes of
the meeting.
2.4 QUORUM. At any meeting of the Trustees a majority of
the Trustees then in office shall constitute a quorum. Any
meeting may be adjourned from time to time by a majority of the
votes cast upon the question, whether or not a quorum is present,
and the meeting may be held as adjourned without further notice.
2.5 NOTICE OF CERTAIN ACTIONS BY CONSENT. If in accordance
with the provisions of the Declaration of Trust any action is
taken by the Trustees by a written consent of less than all of
the Trustees, then prompt notice of any such action shall be
<PAGE>
furnished to each Trustee who did not execute such written
consent, provided that the effectiveness of such action shall not
be impaired by any delay or failure to furnish such notice.
ARTICLE 3
OFFICERS
3.1 ENUMERATION; QUALIFICATION. The officers of the Trust
shall be a Chairman of the Trustees, a President, a Treasurer, a
Clerk and such other officers, if any, as the Trustees from time
to time may in their discretion elect. The Trust may also have
such agents as the Trustees from time to time may in their
discretion appoint. The Chairman of the Trustees and the
President shall be a Trustee and may but need not be a
shareholder; and any other officer may but need not be a Trustee
or a shareholder. Any two or more offices may be held by the
same person. A Trustee may but need not be a shareholder.
3.2 ELECTION. The Chairman of the Trustees, the President,
the Treasurer and the Clerk shall be elected by the Trustees upon
the occurrence of any vacancy in any such office. Other
officers, if any, may be elected or appointed by the Trustees at
any time. Vacancies in any such other office may be filled at
any time.
3.3 TENURE. The Chairman of the Trustees, the President,
the Treasurer and the Clerk shall hold office in each case until
he or she dies, resigns, is removed or becomes disqualified.
Each other officer shall hold office and each agent shall retain
authority at the pleasure of the Trustees.
3.4 POWERS. Subject to the other provisions of these
Bylaws, each officer shall have, in addition to the duties and
powers herein and in the Declaration of Trust set forth, such
duties and powers as are commonly incident to the office occupied
by him or her as if the Trust were organized as a Massachusetts
business corporation and such other duties and powers as the
Trustees may from time to time designate.
3.5 CHAIRMAN; PRESIDENT. Unless the Trustees otherwise
provide, the Chairman of the Trustees or, if there is none or in
the absence of the Chairman of the Trustees, the President shall
preside at all meetings of the shareholders and of the Trustees.
Unless the Trustees otherwise provide, the President shall be the
chief executive officer.
3.6 TREASURER. Unless the Trustees shall provide
otherwise, the Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the
provisions of the Declaration of Trust and to any arrangement
made by the Trustees with a custodian, investment adviser or
manager, or transfer, shareholder servicing or similar agent, be
in charge of the valuable papers, books of account and accounting
records of the Trust, and shall have such other duties and powers
as may be designated from time to time by the Trustees or by the
President.
3.7 CLERK. The Clerk shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which
books or a copy thereof shall be kept at the principal office of
the Trust. In the absence of the Clerk from any meeting of the
shareholders or Trustees, an Assistant Clerk, or if there be none
or if he or she is absent, a temporary Clerk chosen at such
meeting shall record the proceedings thereof in the aforesaid
books.
3.8 RESIGNATIONS AND REMOVALS. Any Trustee or officer may
resign at any time by written instrument signed by him or her and
delivered to the Chairman of the Trustees, the President or the
Clerk or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some
other time. The Trustees may remove any officer elected by them
with or without cause. Except to the extent expressly provided
in a written agreement with the Trust, no Trustee or officer
resigning and no officer removed shall have any right to any
compensation for any period following his or her resignation or
removal, or any right to damages on account of such removal.
ARTICLE 4
COMMITTEES
4.1 QUORUM; VOTING. A majority of the members of any
Committee of the Trustees shall constitute a quorum for the
transaction of business, and any action of such a Committee may
be taken at a meeting by a vote of a majority of the members
present (a quorum being present) or evidenced by one or more
writings signed by such a majority. Members of a Committee may
participate in a meeting of such Committee by means of a
conference telephone or other communications equipment by means
of which all persons participating in the meeting can hear each
other at the same time and participation by such means shall
constitute presence in person at a meeting.
ARTICLE 5
REPORTS
5.1 GENERAL. The Trustees and officers shall render
reports at the time and in the manner required by the Declaration
of Trust or any applicable law. Officers and Committees shall
render such additional reports as they may deem desirable or as
may from time to time be required by the Trustees.
ARTICLE 6
FISCAL YEAR
6.1 GENERAL. Except as from time to time otherwise
provided by the Trustees, the initial fiscal year of the Trust
shall end on such date as is determined in advance or in arrears
by the Treasurer, and subsequent fiscal years shall end on such
date in subsequent years.
<PAGE>
ARTICLE 7
SEAL
7.1 GENERAL. The seal of the Trust shall consist of a
flat-faced die with the word "Massachusetts", together with the
name of the Trust and the year of its organization cut or
engraved thereon but, unless otherwise required by the Trustees,
the seal shall not be necessary to be placed on and its absence
shall not impair the validity of, any document, instrument or
other paper executed and delivered by or on behalf of the Trust.
ARTICLE 8
EXECUTION OF PAPERS
8.1 GENERAL. Except as the Trustees may generally or in
particular cases authorize the execution thereof in some other
manner, all deeds, leases, contracts, notes and other obligations
made by the Trustees shall be signed by the President, the Vice
Chairman, a Vice President or the Treasurer and need not bear the
seal of the Trust.
ARTICLE 9
ISSUANCE OF SHARES AND SHARE CERTIFICATES
9.1 SALE OF SHARES. Except as otherwise determined by the
Trustees, the Trust will issue and sell for cash or securities
from time to time, full and fractional shares of its shares of
beneficial interest, such shares to be issued and sold at a price
of not less than the par value per share, if any, and not less
than the net asset value per share as from time to time
determined in accordance with the Declaration of Trust and these
Bylaws and, in the case of fractional shares, at a proportionate
reduction in such price. In the case of shares sold for
securities, such securities shall be valued in accordance with
the provisions for determining the value of the assets of the
Trust as stated in the Declaration of Trust and these Bylaws.
The officers of the Trust are severally authorized to take all
such actions as may be necessary or desirable to carry out this
Section 9.1.
9.2 SHARE CERTIFICATES. In lieu of issuing certificates
for shares, the Trustees or the transfer agent may either issue
receipts therefor or may keep accounts upon the books of the
Trust for the record holders of such shares, who shall in either
case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and
agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled
to a certificate stating the number of shares of each class owned
by him, in such form as shall be prescribed from time to time by
the Trustees. Such certificate shall be signed by the President
or a Vice President and by the Treasurer or an Assistant
Treasurer. Such signatures may be facsimile if the certificate
is signed by a transfer agent or by a registrar. In case any
officer who has signed or whose facsimile signature has been
placed on such certificate shall cease to be such officer before
such certificate is issued, it may be issued by the Trust with
the same effect as if he were such officer at the time of its
issue.
9.3 LOSS OF CERTIFICATES. The transfer agent of the Trust,
with the approval of any two officers of the Trust, is authorized
to issue and countersign replacement certificates for the shares
of the Trust which have been lost, stolen or destroyed upon (i)
receipt of an affidavit or affidavits of loss or non-receipt and
of an indemnity agreement executed by the registered holder or
his legal representative and supported by an open penalty surety
bond, said agreement and said bond in all cases to be in form and
content satisfactory to and approved by the President or the
Treasurer, or (ii) receipt of such other documents as may be
approved by the Trustees.
9.4 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. A pledgee of
shares transferred as collateral security shall be entitled to a
new certificate if the instrument of transfer substantially
describes the debt or duty that is intended to be secured
thereby. Such new certificate shall express on its face that it
is held as collateral security, and the name of the pledgor shall
be stated thereon, who alone shall be liable as a shareholder and
entitled to vote thereon.
9.5 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The
Trustees may at any time discontinue the issuance of share
certificates and may, by written notice to each shareholder,
require the surrender of share certificates to the Trust for
cancellation. Such surrender and cancellation shall not affect
the ownership of shares in the Trust.
ARTICLE 10
PROVISIONS RELATING TO THE CONDUCT OF THE TRUST'S BUSINESS
10.1 CERTAIN DEFINITIONS. When used herein the following
words shall have the following meanings: "Distributor" shall mean
any one or more corporations, firms or associations which have
distributor's or principal underwriter's contracts in effect with
the Trust providing that redeemable shares issued by the Trust
shall be offered and sold by such Distributor. "Manager" shall
mean any corporation, firm or association which may at the time
have an advisory or management contract with the Trust.
10.2 LIMITATIONS ON DEALINGS WITH OFFICERS OR TRUSTEES.
The Trust will not lend any of its assets to the Distributor or
Manager or to any officer or director of the Distributor or
Manager or any officer or Trustee of the Trust, and shall not
permit any officer or Trustee or any officer or director of the
Distributor or Manager to deal for or on behalf of the Trust with
himself or herself as principal or agent, or with any
partnership, association or corporation in which he or she has a
financial interest; provided that the foregoing provisions shall
not prevent (a) officers and Trustees of the Trust or officers
and directors of the Distributor or Manager from buying, holding
or selling shares in the Trust or from being partners, officers
or directors of or otherwise financially interested in the
Distributor or the Manager; (b) purchases or sales of securities
or other property if such transaction is permitted by or is
exempt or exempted from the provisions of the Investment Company
Act of 1940 or any Rule or Regulation thereunder and if such
transaction does not involve any commission or profit to any
security dealer who is, or one or more of whose partners,
shareholders, officers or directors is, an officer or Trustee of
the Trust or an officer or director of the Distributor or
Manager; (c) employment of legal counsel, registrar, transfer
agent, shareholder servicing agent, dividend disbursing agent or
custodian who is, or has a partner, shareholder, officer or
director who is, an officer or Trustee of the Trust or an officer
or director of the Distributor or Manager; (d) sharing
statistical, research, legal and management expenses and office
hire and expenses with any other investment company in which an
officer or Trustee of the Trust or an officer or director of the
Distributor or Manager is an officer or director or otherwise
financially interested.
10.3 SECURITIES AND CASH OF THE TRUST TO BE HELD BY
CUSTODIAN SUBJECT TO CERTAIN TERMS AND CONDITIONS.
(a) All securities and cash owned by the Trust
shall be held by or deposited with one or more banks or
trust companies having (according to its last published
report) not less than $1,000,000 aggregate capital,
surplus and undivided profits (any such bank or trust
company being hereby designated as "Custodian"),
provided such a Custodian can be found ready and
willing to act; subject to such rules, regulations and
orders, if any, as the Securities and Exchange
Commission may adopt, the Trust may, or may permit any
Custodian to, deposit all or any part of the securities
owned by the Trust in a system for the central handling
of securities pursuant to which all securities of any
particular class or series of any issue deposited
within the system may be transferred or pledged by
bookkeeping entry, without physical delivery. The
Custodian may appoint, subject to the approval of the
Trustees, one or more subcustodians.
(b) The Trust shall enter into a written contract
with each Custodian regarding the powers, duties and
compensation of such Custodian with respect to the cash
and securities of the Trust held by such Custodian.
Said contract and all amendments thereto shall be
approved by the Trustees.
(c) The Trust shall upon the resignation or
inability to serve of any Custodian or upon change of
any Custodian:
(i) in case of such resignation or inability to
serve, use its best efforts to obtain a successor
Custodian;
(ii) require that the cash and securities owned
by the Trust be delivered directly to the successor
Custodian; and
(iii) in the event that no successor Custodian
can be found, submit to the shareholders, before
permitting delivery of the cash and securities owned by
the Trust otherwise than to a successor Custodian, the
question whether the Trust shall be liquidated or shall
function without a Custodian.
10.4 REPORTS TO SHAREHOLDERS. The Trust shall send to each
shareholder of record at least semi-annually a statement of the
condition of the Trust and of the results of its operations,
containing all information required by applicable laws or
regulations.
10.5 DETERMINATION OF NET ASSET VALUE PER SHARE. Net asset
value per share of each class or series of shares of the Trust
shall mean: (i) the value of all the assets properly allocable
to such class or series; (ii) less total liabilities properly
allocable to such class or series; (iii) divided by the number of
shares of such class or series outstanding, in each case at the
time of each determination. Except as otherwise determined by
the Trustees, the net asset value per share of each class or
series shall be determined no less frequently than once daily,
Monday through Friday, on days on which the New York Stock
Exchange is open for trading, at such time or times that the
Trustees set at least annually.
In valuing the portfolio investments of any class or series
of shares for the determination of the net asset value per share
of such class or series, securities for which market quotations
are readily available shall be valued at prices which, in the
opinion of the Trustees or the person designated by the Trustees
to make the determination, most nearly represent the market value
of such securities, and other securities and assets shall be
valued at their fair value as determined by or pursuant to the
direction of the Trustees, which in the case of debt obligations,
commercial paper and repurchase agreements may, but need not, be
on the basis of yields for securities of comparable maturity,
quality and type, or on the basis of amortized cost. Expenses
and liabilities of the Trust shall be accrued each day.
Liabilities may include such reserves for taxes, estimated
accrued expenses and contingencies as the Trustees or their
designates may in their sole discretion deem fair and reasonable
under the circumstances. No accruals shall be made in respect of
taxes on unrealized appreciation of securities owned unless the
Trustees shall otherwise determine.
ARTICLE 11
SHAREHOLDERS
11.1 MEETINGS. A meeting of the shareholders shall be
called by the Clerk whenever ordered by the Trustees, the
Chairman of the Trustees or requested in writing by the holder or
holders of at least one-tenth of the outstanding shares entitled
to vote at such meeting. If the Clerk, when so ordered or
requested, refuses or neglects for more than two days to call
such meeting, the Trustees, Chairman of the Trustees or the
shareholders so requesting may, in the name of the Clerk, call
the meeting by giving notice thereof in the manner required when
notice is given by the Clerk.
11.2 ACCESS TO SHAREHOLDER LIST. Shareholders of record
may apply to the Trustees for assistance in communicating with
other shareholders for the purpose of calling a meeting in order
to vote upon the question of removal of a Trustee. When ten or
more shareholders of record who have been such for at least six
months preceding the date of application and who hold in the
aggregate shares having a net asset value of at least $25,000 so
apply, the Trustees shall within five business days either:
(i) afford to such applicants access to a list of
names and addresses of all shareholders as recorded on
the books of the Trust; or
(ii) inform such applicants of the approximate
number of shareholders of record and the approximate
cost of mailing material to them, and, within a
reasonable time thereafter, mail, at the applicants'
expense, materials submitted by the applicants, to all
such shareholders of record. The Trustees shall not be
obligated to mail materials which they believe to be
misleading or in violation of applicable law.
11.3 RECORD DATES. For the purpose of determining the
shareholders of any class or series of shares of the Trust who
are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to receive payment of any dividend
or of any other distribution, the Trustees may from time to time
fix a time, which shall be not more than 90 days before the date
of any meeting of shareholders or more than 60 days before the
date of payment of any dividend or of any other distribution, as
the record date for determining the shareholders of such class or
series having the right to notice of and to vote at such meeting
and any adjournment thereof or the right to receive such dividend
or distribution, and in such case only shareholders of record on
such record date shall have such right notwithstanding any
transfer of shares on the books of the Trust after the record
date; or without fixing such record date the Trustees may for any
such purposes close the register or transfer books for all or
part of such period.
11.4 PROXIES. The placing of a shareholder's name on a
proxy pursuant to telephone or electronically transmitted
instructions obtained pursuant to procedures reasonably designed
to verify that such instructions have been authorized by such
shareholder shall constitute execution of such proxy by or on
behalf of such shareholder.
<PAGE>
ARTICLE 12
PREFERENCES, RIGHTS AND PRIVILEGES OF THE
TRUST'S CLASSES OF SHARES
12.1 GENERAL. Each class of shares of the Trust or of a
particular series of the Trust, as the case may be, will
represent interests in the same portfolio of investments of the
Trust (or that series) and be identical in all respects, except
as set forth below: (a) each class of shares shall be charged
with the expense of any Distribution Plan adopted by the Trust
pursuant to Rule 12b-1 under the Investment Company Act of 1940
with respect to such class of shares, (b) each class of shares
will be charged with any incremental shareholder servicing
expense attributable solely to such class, as determined by the
Trustees, (c) each class of shares shall be charged with any
other expenses properly allocated to such class, as determined by
the Trustees and approved by the Securities and Exchange
Commission, (d) each class of shares shall vote as a separate
class on matters which pertain to any Rule 12b-1 Distribution
Plan pertaining to such class of shares, (e) each class of shares
will have only such exchange privileges as may from time to time
be described in the Trust's prospectus with respect to such
class, (f) each class of shares shall bear such designation as
may be approved from time to time by the Trustees and (g)
reinvestments of distributions from the Trust paid with respect
to the shares of a particular class will be paid in additional
shares of such class.
12.2. CONVERSION OF CLASS B SHARES. Except as hereinafter
provided with respect to shares acquired by exchange or
reinvestment of distributions, Class B shares of the Trust will
automatically convert into Class A shares of the Trust at the end
of the month eight years after the month of purchase, or at such
earlier time as the Trustees may in their sole discretion
determine from time to time as to all Class B shares purchased on
or before such date as the Trustees may specify. Class B shares
acquired by exchange from Class B shares of another Putnam Fund
will convert into Class A shares based on the date of the initial
purchase of the Class B shares of such other Fund. Class B
shares acquired through reinvestment of distributions will
convert into Class A shares based on the date of the initial
purchase of Class B shares to which such reinvestment shares
relate. For this purpose, Class B shares acquired through
reinvestment of distributions will be attributed to particular
purchases of Class B shares in accordance with such procedures,
which may include without limitation methods of proration or
approximation, as the Trustees may in their sole discretion
determine from time to time.
<PAGE>
ARTICLE 13
AMENDMENTS TO THE BYLAWS
13.1 GENERAL. These Bylaws may be amended or repealed, in
whole or in part, by a majority of the Trustees then in office at
any meeting of the Trustees, or by one or more writings signed by
such a majority.
NF-04F
(PORTIONS OF BYLAWS OF
PUTNAM EQUITY INCOME FUND
RELATING TO SHAREHOLDERS' RIGHTS)
ARTICLE 9
ISSUANCE OF SHARES AND SHARE CERTIFICATES
9.1 SALE OF SHARES. Except as otherwise determined by the
Trustees, the Trust will issue and sell for cash or securities
from time to time, full and fractional shares of its shares of
beneficial interest, such shares to be issued and sold at a price
of not less than the par value per share, if any, and not less
than the net asset value per share as from time to time
determined in accordance with the Declaration of Trust and these
Bylaws and, in the case of fractional shares, at a proportionate
reduction in such price. In the case of shares sold for
securities, such securities shall be valued in accordance with
the provisions for determining the value of the assets of the
Trust as stated in the Declaration of Trust and these Bylaws.
The officers of the Trust are severally authorized to take all
such actions as may be necessary or desirable to carry out this
Section 9.1.
9.2 SHARE CERTIFICATES. In lieu of issuing certificates
for shares, the Trustees or the transfer agent may either issue
receipts therefor or may keep accounts upon the books of the
Trust for the record holders of such shares, who shall in either
case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and
agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled
to a certificate stating the number of shares of each class owned
by him, in such form as shall be prescribed from time to time by
the Trustees. Such certificate shall be signed by the President
or a Vice President and by the Treasurer or an Assistant
Treasurer. Such signatures may be facsimile if the certificate
is signed by a transfer agent or by a registrar. In case any
officer who has signed or whose facsimile signature has been
placed on such certificate shall cease to be such officer before
such certificate is issued, it may be issued by the Trust with
the same effect as if he were such officer at the time of its
issue.
9.3 LOSS OF CERTIFICATES. The transfer agent of the Trust,
with the approval of any two officers of the Trust, is authorized
to issue and countersign replacement certificates for the shares
of the Trust which have been lost, stolen or destroyed upon (i)
receipt of an affidavit or affidavits of loss or non-receipt and
of an indemnity agreement executed by the registered holder or
his legal representative and supported by an open penalty surety
bond, said agreement and said bond in all cases to be in form and
content satisfactory to and approved by the President or the
Treasurer, or (ii) receipt of such other documents as may be
approved by the Trustees.
9.4 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. A pledgee of
shares transferred as collateral security shall be entitled to a
new certificate if the instrument of transfer substantially
describes the debt or duty that is intended to be secured
thereby. Such new certificate shall express on its face that it
is held as collateral security, and the name of the pledgor shall
be stated thereon, who alone shall be liable as a shareholder and
entitled to vote thereon.
9.5 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The
Trustees may at any time discontinue the issuance of share
certificates and may, by written notice to each shareholder,
require the surrender of share certificates to the Trust for
cancellation. Such surrender and cancellation shall not affect
the ownership of shares in the Trust.
ARTICLE 10
PROVISIONS RELATING TO THE CONDUCT OF THE TRUST'S BUSINESS
10.4 REPORTS TO SHAREHOLDERS. The Trust shall send to each
shareholder of record at least semi-annually a statement of the
condition of the Trust and of the results of its operations,
containing all information required by applicable laws or
regulations.
ARTICLE 11
SHAREHOLDERS
11.1 MEETINGS. A meeting of the shareholders shall be
called by the Clerk whenever ordered by the Trustees, the
Chairman of the Trustees or requested in writing by the holder or
holders of at least one-tenth of the outstanding shares entitled
to vote at such meeting. If the Clerk, when so ordered or
requested, refuses or neglects for more than two days to call
such meeting, the Trustees, Chairman of the Trustees or the
shareholders so requesting may, in the name of the Clerk, call
the meeting by giving notice thereof in the manner required when
notice is given by the Clerk.
11.2 ACCESS TO SHAREHOLDER LIST. Shareholders of record
may apply to the Trustees for assistance in communicating with
other shareholders for the purpose of calling a meeting in order
to vote upon the question of removal of a Trustee. When ten or
more shareholders of record who have been such for at least six
months preceding the date of application and who hold in the
aggregate shares having a net asset value of at least $25,000 so
apply, the Trustees shall within five business days either:
(i) afford to such applicants access to a list of
names and addresses of all shareholders as recorded on
the books of the Trust; or
(ii) inform such applicants of the approximate
number of shareholders of record and the approximate
cost of mailing material to them, and, within a
reasonable time thereafter, mail, at the applicants'
expense, materials submitted by the applicants, to all
such shareholders of record. The Trustees shall not be
obligated to mail materials which they believe to be
misleading or in violation of applicable law.
11.3 RECORD DATES. For the purpose of determining the
shareholders of any class or series of shares of the Trust who
are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to receive payment of any dividend
or of any other distribution, the Trustees may from time to time
fix a time, which shall be not more than 90 days before the date
of any meeting of shareholders or more than 60 days before the
date of payment of any dividend or of any other distribution, as
the record date for determining the shareholders of such class or
series having the right to notice of and to vote at such meeting
and any adjournment thereof or the right to receive such dividend
or distribution, and in such case only shareholders of record on
such record date shall have such right notwithstanding any
transfer of shares on the books of the Trust after the record
date; or without fixing such record date the Trustees may for any
such purposes close the register or transfer books for all or
part of such period.
11.4 PROXIES. The placing of a shareholder's name on a
proxy pursuant to telephone or electronically transmitted
instructions obtained pursuant to procedures reasonably designed
to verify that such instructions have been authorized by such
shareholder shall constitute execution of such proxy by or on
behalf of such shareholder.
ARTICLE 12
PREFERENCES, RIGHTS AND PRIVILEGES OF THE
TRUST'S CLASSES OF SHARES
12.1 GENERAL. Each class of shares of the Trust or of a
particular series of the Trust, as the case may be, will
represent interests in the same portfolio of investments of the
Trust (or that series) and be identical in all respects, except
as set forth below: (a) each class of shares shall be charged
with the expense of any Distribution Plan adopted by the Trust
pursuant to Rule 12b-1 under the Investment Company Act of 1940
with respect to such class of shares, (b) each class of shares
will be charged with any incremental shareholder servicing
expense attributable solely to such class, as determined by the
Trustees (c) each class of shares shall be charged with any other
expenses properly allocated to such class, as determined by the
Trustees and approved by the Securities and Exchange Commission,
(d) each class of shares shall vote as a separate class on
matters which pertain to any Rule 12b-1 Distribution Plan
pertaining to such class of shares, (e) each class of shares will
have only such exchange privileges as may from time to time be
described in the Trust's prospectus with respect to such class,
(f) each class of shares shall bear such designation as may be
approved from time to time by the Trustees and (g) reinvestments
of distributions from the Fund paid with respect to the shares of
a particular class will be paid in additional shares of such
class.
12.2. CONVERSION OF CLASS B SHARES. Except as hereinafter
provided with respect to shares acquired by exchange or
reinvestment of distributions, Class B shares of the Fund will
automatically convert into Class A shares of the Fund at the end
of the month eight years after the month of purchase, or at such
earlier time as the Trustees may in their sole discretion
determine from time to time as to all Class B shares purchased on
or before such date as the Trustees may specify. Class B shares
acquired by exchange from Class B shares of another Putnam Fund
will convert into Class A shares based on the date of the initial
purchase of the Class B shares of such other Fund. Class B
shares acquired through reinvestment of distributions will
convert into Class A shares based on the date of the initial
purchase of Class B shares to which such reinvestment shares
relate. For this purpose, Class B shares acquired through
reinvestment of distributions will be attributed to particular
purchases of Class B shares in accordance with such procedures,
which may include without limitation methods of proration or
approximation, as the Trustees may in their sole discretion
determine from time to time.
PUTNAM EQUITY INCOME FUND
DISTRIBUTOR'S CONTRACT
Distributor's Contract dated May 6, 1994, by and between
PUTNAM EQUITY INCOME FUND, a Massachusetts business trust (the
"Fund"), and PUTNAM MUTUAL FUNDS CORP., a Massachusetts
corporation ("Putnam").
WHEREAS, the Fund and Putnam are desirous of entering into
this agreement to provide for the distribution by Putnam of
shares of the Fund;
NOW, THEREFORE, in consideration of the mutual agreements
contained in the Terms and Conditions of Distributor's Contract
attached to and forming a part of this Contract (the "Terms and
Conditions"), the Fund hereby appoints Putnam as a distributor of
shares of the Fund, and Putnam hereby accepts such appointment,
all as set forth in the Terms and Conditions.
A copy of the Agreement and Declaration of Trust of the Fund
is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this instrument is
executed on behalf of the Trustees of the Fund as Trustees and
not individually, and that the obligations of or arising out 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.
IN WITNESS WHEREOF, PUTNAM EQUITY INCOME FUND and PUTNAM
MUTUAL FUNDS CORP. have each caused this Distributor's Contract
to be signed in duplicate in its behalf, all as of the day and
year first above written.
PUTNAM EQUITY INCOME FUND
By: -----------------------------
Executive Vice President
PUTNAM MUTUAL FUNDS CORP.
By: -----------------------------
President<PAGE>
TERMS AND CONDITIONS
OF
DISTRIBUTOR'S CONTRACT
1. RESERVATION OF RIGHT NOT TO SELL. The Fund reserves the
right to refuse at any time or times to sell any of its shares of
beneficial interest ("shares") hereunder for any reason deemed
adequate by it.
2. PAYMENTS TO PUTNAM. In connection with the distribution of
shares of the Fund, Putnam will be entitled to receive: (a)
payments pursuant to any Distribution Plan and Agreement from
time to time in effect between the Fund and Putnam with respect
to the Fund or any particular class of shares of the Fund, (b)
any contingent deferred sales charges applicable to the
redemption of shares of the Fund or of any particular class of
shares of the Fund, determined in the manner set forth in the
then current Prospectus and Statement of Additional Information
of the Fund and (c) subject to the provisions of Section 3 below,
any front-end sales charges applicable to the sale of shares of
the Fund or of any particular class of shares of the Fund, less
any applicable dealer discount.
3. SALES OF SHARES TO PUTNAM AND SALES BY PUTNAM. Putnam will
have the right, as principal, to sell shares of the Fund to
investment dealers against orders therefor (a) at the public
offering price (calculated as described below) less a discount
determined by Putnam, which discount shall not exceed the amount
of the sales charge referred to below, or (b) at net asset value.
Upon receipt of an order to purchase Fund shares from an
investment dealer with whom Putnam has a Sales Contract, Putnam
will promptly purchase shares from the Fund to fill such order.
The public offering price of a class of shares shall be the net
asset value of such shares then in effect, plus any applicable
front-end sales charge determined in the manner set forth in the
then current Prospectus and Statement of Additional Information
of the Fund or as permitted by the Investment Company Act of
1940, as amended, and the Rules and Regulations of the Securities
and Exchange Commission promulgated thereunder. In no event
shall the public offering price exceed 1000/915ths of such net
asset value, and in no event shall any applicable sales charge
exceed 8 1/2% of the public offering price. The net asset value
of the shares shall be determined in the manner provided in the
Agreement and Declaration of Trust of the Fund as then amended
and when determined shall be applicable to transactions as
provided for in the then current Prospectus and Statement of
Additional Information of the Fund.
Putnam will also have the right, as principal, to purchase
shares from the Fund at their net asset value and to sell such
shares to the public against orders therefor at the public
offering price or at net asset value.
Putnam will also have the right, as principal, to sell
shares at their net asset value and not subject to a contingent
deferred sales charge to such persons as may be approved by the
Trustees of the Fund, all such sales to comply with the
provisions of the Investment Company Act of 1940, as amended, and
the Rules and Regulations of the Securities and Exchange
Commission promulgated thereunder.
Putnam will also have the right, as agent for the Fund, to
sell shares at the public offering price or at net asset value to
such persons and upon such conditions as the Trustees of the Fund
may from time to time determine.
On every sale the Fund shall receive the applicable net
asset value of the shares. Putnam will reimburse the Fund for
any increased issue tax paid on account of sales charges. Upon
receipt of registration instructions in proper form and payment
for shares, Putnam will transmit such instructions to the Fund or
its agent for registration of the shares purchased.
4. SALES OF SHARES BY THE FUND. The Fund reserves the right to
issue shares at any time directly to its shareholders as a stock
dividend or stock split and to sell shares to its shareholders or
to other persons approved by Putnam at not less than net asset
value.
5. REPURCHASE OF SHARES. Putnam will act as agent for the Fund
in connection with the repurchase of shares by the Fund upon the
terms and conditions set forth in the then current Prospectus and
Statement of Additional Information of the Fund.
6. BASIS OF PURCHASES AND SALES OF SHARES. Putnam will use its
best efforts to place shares sold by it on an investment basis.
Putnam does not agree to sell any specific number of shares.
Shares will be sold by Putnam only against orders therefor.
Putnam will not purchase shares from anyone other than the Fund
except in accordance with Section 5, and will not take "long" or
"short" positions in shares contrary to the Agreement and
Declaration of Trust of the Fund.
7. RULES OF NASD, ETC. Putnam will conform to the Rules of
Fair Practice of the National Association of Securities Dealers,
Inc. and the sale of securities laws of any jurisdiction in which
it sells, directly or indirectly, any shares. Putnam also agrees
to furnish to the Fund sufficient copies of any agreements or
plans it intends to use in connection with any sales of shares in
adequate time for the Fund to file and clear them with the proper
authorities before they are put in use, and not to use them until
so filed and cleared.
8. PUTNAM INDEPENDENT CONTRACTOR. Putnam shall be an
independent contractor and neither Putnam nor any of its officers
or employees as such is or shall be an employee of the Fund.
Putnam is responsible for its own conduct and the employment,
control and conduct of its agents and employees and for injury to
such agents or employees or to others through its agents or
employees. Putnam assumes full responsibility for its agents and
employees under applicable statutes and agrees to pay all
employer taxes thereunder.
Putnam will maintain at its own expense insurance against
public liability in such an amount as the Trustees of the Fund
may from time to time reasonably request.
9. EXPENSES. Putnam will pay all expenses of qualifying shares
of the Fund for sale under the so-called "Blue Sky" laws of any
state (except expenses of any action by the Fund relating to its
Agreement and Declaration of Trust or other matters in which the
Fund has a direct concern), and expenses of preparing, printing
and distributing advertising and sales literature (apart from
expenses of registering shares under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
and the preparation and printing of Prospectuses and Statements
of Additional Information and reports as required by said Acts
and the direct expenses of the issue of shares, except that
Putnam will pay the cost of the preparation and printing of
Prospectuses and Statements of Additional Information and
shareholders' reports used by it and by others in the sale of
Fund shares to the extent such cost is not paid by others).
10. INDEMNIFICATION OF FUND. Putnam agrees to indemnify and
hold harmless the Fund and each person who has been, is, or may
hereafter be a Trustee of the Fund against expenses reasonably
incurred by any of them in connection with any claim or in
connection with any action, suit or proceeding to which any of
them may be a party, which arises out of or is alleged to arise
out of any misrepresentation or omission to state a material
fact, or out of any alleged misrepresentation or omission to
state a material fact, on the part of Putnam or any agent or
employee of Putnam or any other person for whose acts Putnam is
responsible or is alleged to be responsible unless such
misrepresentation or omission was made in reliance upon written
information furnished by the Fund. Putnam also agrees likewise
to indemnify and hold harmless the Fund and each such person in
connection with any claim or in connection with any action, suit
or proceeding which arises out of or is alleged to arise out of
Putnam's (or an affiliate of Putnam's) failure to exercise
reasonable care and diligence with respect to its services
rendered in connection with investment, reinvestment, automatic
withdrawal and other plans for shares. The term "expenses"
includes amounts paid in satisfaction of judgments or in
settlements which are made with Putnam's consent. The foregoing
rights of indemnification shall be in addition to any other
rights to which the Fund or a Trustee may be entitled as a matter
of law.
11. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS
CONTRACT. This Contract shall automatically terminate, without
the payment of any penalty, in the event of its assignment. This
Contract may be amended only if such amendment be approved either
by action of the Trustees of the Fund or at a meeting of the
shareholders of the Fund by the affirmative vote of a majority of
the outstanding shares of the Fund, and by a majority of the
Trustees of the Fund who are not interested persons of the Fund
or of Putnam by vote cast in person at a meeting called for the
purpose of voting on such approval.
12. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT. This
Contract shall take effect upon the date first above written and
shall remain in full force and effect continuously (unless
terminated automatically as set forth in Section 11) until
terminated:
(a) Either by the Fund or Putnam by not more
than sixty (60) days' nor less than ten (10) days'
written notice delivered or mailed by registered
mail, postage prepaid, to the other party; or
(b) If the continuance of this Contract after
January 31, 1995 is not specifically approved at
least annually by the Trustees of the Fund or the
shareholders of the Fund by the affirmative vote of a
majority of the outstanding shares of the Fund, and
by a majority of the Trustees of the Fund who are not
interested persons of the Fund or of Putnam by vote
cast in person at a meeting called for the purpose of
voting on such approval.
Action by the Fund under (a) above may be taken either (i) by
vote of its Trustees or (ii) by the affirmative vote of a
majority of the outstanding shares of the Fund. The requirement
under (b) above that continuance of this Contract be
"specifically approved at least annually" shall be construed in a
manner consistent with the Investment Company Act of 1940, as
amended, and the Rules and Regulations thereunder.
Termination of this Contract pursuant to this Section 12
shall be without the payment of any penalty.
13. CERTAIN DEFINITIONS. For the purposes of this
Contract, the "affirmative vote of a majority of the outstanding
shares of the Fund" means the affirmative vote, at a duly called
and held meeting of shareholders of the Fund, (a) of the holders
of 67% or more of the shares of the Fund present (in person or by
proxy) and entitled to vote at such meeting, if the holders of
more than 50% of the outstanding shares of the Fund entitled to
vote at such meeting are present in person or by proxy, or (b) of
the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "interested
person" and "assignment" shall have the meanings defined in the
Investment Company Act of 1940, as amended, subject, however, to
such exemptions as may be granted by the Securities and Exchange
Commission under said Act.
S:\shared\discon1
ROPES & GRAY
One International Place
Boston, Massachusetts 02110-2624
(617) 951-7000
March 23, 1995
Putnam Equity Income Fund (the "Fund")
One Post Office Square
Boston, Massachusetts 02109
Gentlemen:
You have informed us that you propose to offer and sell from
time to time 7,261,167 of your shares of beneficial interest (the
"Shares"), for cash or securities at the net asset value per
share, determined in accordance with your Bylaws, which Shares
are in addition to your shares of beneficial interest which you
have previously offered and sold or which you are currently
offering.
We have examined copies of (i) your Agreement and
Declaration of Trust as on file at the office of the Secretary of
State of The Commonwealth of Massachusetts, which provides for an
unlimited number of authorized shares of beneficial interest, and
(ii) your Bylaws, which provide for the issue and sale by the
Fund of such Shares.
We assume that appropriate action will be taken to register
or qualify the sale of the Shares under any applicable state and
federal laws regulating offerings and sales of securities.
Based upon the foregoing, we are of the opinion that:
1. The Fund is a legally organized and validly existing
voluntary association with transferable shares of beneficial
interest under the laws of The Commonwealth of Massachusetts and
is authorized to issue an unlimited number of shares of
beneficial interest.
2. Upon the issue of any of the Shares referred to in the
first paragraph hereof for cash or securities at net asset value,
and the receipt of the appropriate consideration therefor as
provided in your Bylaws, such Shares so issued will be validly
issued, fully paid and nonassessable by the Fund.
<PAGE>
ROPES & GRAY
Putnam Equity Income Fund -2- March 23, 1995
The Fund is an entity of the type commonly known as a
"Massachusetts business trust". Under Massachusetts law,
shareholders could, under certain circumstances, be held
personally liable for the obligations of the Fund. However, the
Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Fund and requires that
notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Fund or its
Trustees. The Agreement and Declaration of Trust provides for
indemnification out of the property of the Fund for all loss and
expense of any shareholder of the Fund held personally liable for
the obligations of the Fund solely by reason of his being or
having been a shareholder. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable
to meet its obligations.
We understand that this opinion is to be used in connection
with the registration of the Shares for offering and sale
pursuant to the Securities Act of 1933, as amended, and the
provisions of Rule 24e-2 under the Investment Company Act of
1940, as amended. We consent to the filing of this opinion with
and as a part of Post-Effective Amendment No. 27 to your
Registration Statement No. 2-58869.
Very truly yours,
Ropes & Gray
<PAGE>
PUTNAM INDIVIDUAL RETIREMENT ACCOUNT PLAN
ARTICLE I
INTRODUCTION
By executing the related Adoption Agreement, the
Participant, or the Employer on behalf of the Participants, has
established an Individual Retirement Account Plan for the
exclusive benefit of the Participant(s) and his or their
Beneficiaries intended to qualify under Section 408(a) or 408(c),
in the case of a Plan established by the Employer on behalf of
the Participants, of the Code.
ARTICLE II
DEFINITIONS
As used in this Plan the following terms shall have the
following meanings, unless a different meaning is plainly
required by the context:
2.1 "Agreement" shall mean the Adoption Agreement pursuant
to which the Participant or the Employer has adopted the Plan.
2.2 "Annuity" shall mean an annuity contract or
participating in any annuity contract which is made available as
a funding option by the Trustee to an Employer or a particular
class of Participants under the Plan. Each such contract or
participating interest, when it is issued in the name of any
person other than the Trustee, shall provide that it is non-
transferable, that the owner shall have no right or power to
sell, assign, discount or pledge as collateral or security for
the performance of any obligation or for any other purpose, any
interest in such annuity contract other than to the issuer.
2.3 "Beneficiary" shall mean the person or persons
designated by a Participant pursuant to Section 7.4.
2.4 "Code" shall mean the Internal Revenue Code of 1986, as
it may be amended from time to time.
2.5 "Compensation" shall mean wages, salaries, professional
fees, or other amounts derived from or received for personal
service actually rendered (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 includes earned income, as defined in
Section 401(c)(2) of the Code (reduced by the deduction the self-
employed individual takes for contributions to a plan qualified
under Section 401(a) of the Code). For purposes of this
definition, section 401(c)(2) shall be applied as if the term
trade or business for purposes of section 1402 included service
described in subsection (c)(6). Compensation shall not include
any amounts derived from or received as earnings or profits from
property (including, but not limited to, interest and dividends)
or amounts not includible in gross income. Compensation shall
not include any amount received as a pension or annuity or as
deferred compensation. Compensation shall include any amount
includible in the individual's gross income under Section 71 of
the Code with respect to a divorce or separation instrument
described in subparagraph (A) of Section 71(b)(2) of the Code.
2.6 "Designated Beneficiary" shall mean the Beneficiary who
is considered as such under Sections 401(a)(9) and 408 of the
Code and the regulations promulgated thereunder.
2.7 "Effective Date" shall mean the date on which the
Employer or Participant signs the Agreement.
2.8 "Employer" shall mean the employer or an association of
employees (within the meaning of Section 408(c) of the Code)
named in the Agreement, if any is so named.
2.9 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as it may be amended from time to time.
2.10 "Excess Contribution" shall mean the amount of any
contribution (other than a Rollover Contribution) made by or on
behalf of a Participant for any Plan Year which is in excess of
the contribution limitations under Sections 219 and 408(o) of the
Code.
2.11 "Investment Company Shares" shall mean shares issued
by any registered investment company for which Putnam Investment
Management, Inc., or its affiliate, serves as investment advisor,
or for which Putnam Mutual Funds Corp., or its affiliate, serves
as principal underwriter; provided, however, that in the case of
any open-end investment company, the then current prospectus of
such investment company offers its shares for purchase under the
Plan.
2.12 "IRA Account" shall mean the property held in trust by
the Trustee for the account of the Participant and his
Beneficiaries.
2.13 "Participant" shall mean each individual named as a
participant in the Agreement.
2.14 "Plan" shall mean The Putnam Individual Retirement
Account Plan set forth in this instrument, as it may be amended
from time to time.
2.15 "Plan Year" shall mean the calendar year.
2.16 "Required Beginning Date" shall mean April 1 following
the calendar year in which the Participant attains age 70 1/2.
2.17 "Rollover Contribution" shall mean, after December 31,
1992, a rollover contribution described in Section 402(c),
403(a)(4), 403(b)(8), or 408(d)(3). Prior to January 1, 1990 a
Rollover Contribution includes a rollover contribution 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.
2.18 "Simplified Employee Pension Program" shall mean an
arrangement as defined in Section 408(k) of the Code.
2.19 "Term Deposit" shall mean a deposit offered by a bank
and which is made available as a funding option by the Trustee to
an Employer or a particular class of Participants under the Plan.
2.20 "Trustee" shall mean Putnam Fiduciary Trust Company.
2.21 A pronoun in the masculine gender includes the
feminine gender unless the context indicates otherwise.
<PAGE>
ARTICLE III
CONTRIBUTIONS
3.1 For each Plan Year, contributions to the IRA Account of
each Participant may be made in accordance with the following
provisions:
(a) The contribution made by or on behalf of each
Participant may not exceed the less of $2,000 or
100% of the Participant's Compensation.
(b) If the Participant has no Compensation (or elects
to be treated as having no Compensation) and is
the spouse of another Participant in a similar
individual account retirement plan, the
contribution may not exceed the amount in (a);
provided, that the aggregate of (a) and (b) may
not exceed the lesser of $2,250 or 100% of the
spouse's Compensation.
(c) A contribution on behalf of a Participant by an
Employer pursuant to a Simplified Employee Pension
Program shall be made in accordance with the terms
of the Simplified Employee Pension Program and in
accordance with Section 408(k) of the Code.
(d) If the Participant has attained age 70 1/2 before the
close of a Plan Year, no contribution may be made
for the Plan Year except Rollover Contributions or
Employer contributions made pursuant to a
Simplified Employee Pension.
3.2 In addition to the current cash contributions
contemplated by Section 3.1, any Participant may cause a Rollover
Contribution to be contributed to his IRA Account at any time.
3.3 In no event shall a contribution, other than a Rollover
Contribution or an employer contribution to a Simplified Employee
Pension Program, by or on behalf of a Participant be made if (a)
the contribution, when added to other contributions (other than
Rollover Contributions) for the same Plan Year, exceeds the
applicable limits set forth in Section 3.1, or (b) the
contribution is not in cash.
A Rollover Contribution shall not be accepted under the Plan
unless it is in cash or is in a form of investment permitted
under Article V.
The Participant assumes sole responsibility for making sure
that all contributions made to his IRA Account satisfy the
applicable limits set forth in Section 3.1 and the Trustee shall
have no duty to determine whether such contributions are in
excess of such limits.
3.4 The Employer shall notify the Trustee in writing or
other medium acceptable to the Trustee of the amount of each
contribution made by it on behalf of each Participant (and such
Participant's spouse).
3.5 For purposes of Section 3.1, a contribution to a
Participant's IRA Account shall be deemed to have been made for
the Plan Year in which it is made unless the Participant directs
that it was made with respect to the preceding Plan Year. A
contribution shall be deemed to have been made on the last day of
the preceding Plan Year if the contribution is made on account of
such Plan Year, and it is made no later than the due date of the
Participant's Federal income tax return.
3.6 The deductibility or non-deductibility of contributions
made by or on behalf of the Participant (other than contributions
made under Section 3.1(c)) shall be determined under Sections 219
and 408(o) of the Code. The Participant, and not the Trustee,
determines whether contributions are deductible or non-
deductible.
ARTICLE IV
PARTICIPANT'S IRA ACCOUNTS
4.1 Each Participant's interest in his IRA Account shall be
fully vested and nonforfeitable at all times.
4.2 The Trustee shall keep records showing the amount of
each Participant's interest in his IRA Account. The Trustee
shall establish and maintain such other accounts and records as
it deems in its discretion to be reasonably required in order to
discharge its duties under the Plan.
4.3 The Trustee shall have no duty to account for
deductible contributions separately from nondeductible
contributions. In determining the taxable amount of a
distribution, the Participant shall only rely on his annual
Federal income tax returns and not on any reports of the Trustee.
The Trustee shall withhold Federal income tax from any
distribution from the Participant's IRA Account as if the total
amount of the distribution is includible in the Participant's
income, unless otherwise permitted by applicable law.
ARTICLE V
INVESTMENT OF THE IRA ACCOUNT
The Participant shall determine what proportion of each
contribution by or on behalf of the Participant to the IRA
Account shall be invested in Investment Company Shares, an
Annuity, a Term Deposit, and/or in such other securities that are
acceptable to the Trustee. The Participant shall from time to
time direct the Trustee with respect to the investment and
reinvestment of assets held in the IRA Account by means of
written instructions given to the Trustee in such manner required
by the Trustee. Notwithstanding the foregoing, the Employer may
limit on the Agreement the funding choices available to the
Participant.
The Trustee shall invest all contributions made to the IRA
Account and all income received thereon in the funding option(s)
in accordance with the Participant's directions and shall
reinvest in each such funding option all income, interest or
other distributions thereon (unless directed otherwise by the
Participant). If at any time investment instructions given by
the Participant to the Trustee are unclear in the opinion of the
Trustee, the Trustee may invest part or all of the assets in the
IRA Account in the Putnam Daily Dividend Trust or any other
similar fund. The Trustee reserves the right, however, when
prudent, to postpone the investment of initial contributions for
seven days from the date of adoption of the Agreement.
The Participant may change the choice of funding options as
often as desired but subject to any restrictions or penalties
imposed by the underlying investment. Any such change shall be
made in the manner required by the Trustee; except that the
Employer may place further restrictions on the change of funding
options by the Participant if the Employer so elects in the
Agreement.
The Trustee assumes no responsibility for rendering advice
with respect to the investment and reinvestment of the
Participant's IRA Account and shall not be liable for any loss
incurred with respect to any investment made or retained in
accordance with the Participant's instructions. The Participant
shall have and exercise exclusive responsibility and control over
the investment of the assets of his IRA Account in accordance
with the terms of this Plan and the Agreement, and the Trustee
shall have no duty to question his instructions in that regard or
to advise him regarding purchase, retention, or sale of such
assets.
No part of the IRA Account shall be invested in life
insurance contracts or in collectibles, as defined in Section
408(m) of the Code, except as otherwise permitted under Section
408(m)(3) which permits investment in certain gold and silver
coins and coins issued under the laws of any state. No part of
the IRA Account shall be commingled with any other property
except in a common trust fund or common investment fund (within
the meaning of Section 408(a)(5) of the Code and the regulations
thereunder), and no part of the IRA Account shall be commingled
with other property in any common trust fund or common investment
fund which includes assets other than the assets of individual
retirement accounts as described in Section 408(a) or (c) of the
Code and the assets of trusts exempt from taxation under Section
501(a) of the Code which are parts of plans described in Section
401(a) of the Code.
If the Participant authorizes the Employer to withhold
contributions from the Participant's pay and remit them to the
Trustee periodically, those contributions may be invested in a
group trust maintained by the Trustee, and commingled with
contributions made by other individual retirement plan
participants pending allocation of the Participant's
contributions to his IRA Account. The group trust assets shall
be invested, and its earnings shall be allocated, as described in
the Adoption Agreement signed by the Participant, and the
governing instrument of that group trust shall be deemed to be
adopted as a part of this Plan.
ARTICLE VI
POWERS AND DUTIES OF THE TRUSTEE
6.1 Each Participant may direct the manner in which any
Investment Company Shares and such other securities (including
fractional shares) held in his IRA Account shall be voted with
respect to any matters coming before any meeting of shareholders
of the investment company which issued such shares. The
Participant's directions must be in writing on a form approved by
the Trustee, signed by the Participant and delivered to the
Trustee within the time prescribed by it. Subject to any
requirements of applicable law, the Trustee shall deliver to each
Participant copies of any notices of shareholders' meetings,
proxies and proxy-soliciting materials, prospectuses and the
annual and other reports to shareholders which have been received
by the Trustee with respect to Investment Company Shares and any
other securities held for that Participant. The Trustee shall
not vote any Investment Company Shares or any other securities
except upon receipt by the Trustee of adequate written
instructions from the Participant.
6.2 In addition to and not in limitation of such powers as
the Trustee has by law or under any other provisions of the Plan,
the Trustee shall, subject to the limitations set forth in
Article V hereof, have the following powers:
(a) to deal with all or any part of the IRA Account;
(b) to retain uninvested such cash as it may deem
necessary or advisable, without liability for
interest thereon;
(c) to enforce by suit or otherwise, or to waive, its
rights on behalf of the IRA Account, and to defend
claims asserted against it or the IRA Account,
provided that the Trustee is indemnified by the
Participant to its satisfaction against liability
and expenses;
(d) to compromise, adjust and settle any and all
claims against or in favor of it or the IRA
Account;
(e) to register securities in its own name (with or
without indication of its fiduciary capacity
hereunder), including commingling with other
securities held by the Trustee as provided in
Article V;
(f) to enter into contracts or participating interests
for investments permitted under the Plan;
(g) to make, execute, acknowledge and deliver any and
all instruments that it deems necessary or
appropriate to carry out the powers herein
granted; and
(h) except as otherwise provided herein, generally to
exercise any of the powers of an owner with
respect to all or any part of the IRA Account.
6.3 Within a reasonable period after (a) the end of each
Plan Year and (b) the termination of the Plan, the Trustee shall
render to each Participant, and to other persons as required by
law, accounts for its administration under the Plan during the
preceding Plan Year or interim period. The Trustee shall make
reports regarding such accounts to the Commissioner of Internal
Revenue or his delegate and individuals for whom the IRA Account
is maintained with respect to contributions, distributions and
such other matters as the Commissioner or his delegate may be
required by regulation. The Participant or, in the case of a
Plan adopted by an Employer, the Employer shall furnish such
information as is necessary to prepare such reports. Such
reports shall be filed at such time and in such manner and
furnished to such individuals at such time and in such manner as
may be required by regulation. The Trustee shall also give
access to its records with respect to the Plan at reasonable
times and upon reasonable notice to any person designated by a
Participant or to any person required by law to have access to
such records. Should no person or persons to whom an account is
rendered, as required by law, file with the Trustee written
objection to specific items in such account within a period of 60
days after its mailing, and commence legal proceedings within a
further 60 days after the filing of written objection, the
account shall be considered approved to the extent permitted by
applicable law, with the same effect as though it had been
judicially allowed. If any Participant, or any other person
required by law to receive such accounts, files any exceptions or
objections within such 60-day period with respect to any matters
or transactions stated or shown in the account and questions
raised in such exception or objections cannot be amicably
settled, the Trustee or any person required by law to receive
such accounts shall have the right to have such questions settled
by judicial proceedings although the Participant or any person
required by law to receive such accounts shall have, to the
extent permitted by applicable law, only 60 days from the filing
of written objection to the account to commence legal
proceedings. Nothing herein contained shall be construed as
depriving the Trustee of the right to have a judicial settlement
of accounts. In any proceeding for a judicial settlement, the
only necessary parties, except as required by law, shall be the
Trustee and all persons to whom the accounting was rendered; and
any judgment or decree entered in any such proceeding shall, to
the extent permitted by applicable law, be binding and conclusive
on all persons claiming to have any interest in the IRA Account.
6.4 The Trustee shall be entitled to reasonable
compensation for services, determined from time to time on such
basis as shall be specified in the last preceding account
rendered by the Trustee. Unless otherwise provided, the
Trustee's compensation and all reasonable expenses incurred by it
in the administration of the Plan shall be paid from the
Participant's IRA Account. The Trustee is expressly authorized
to cause IRA Account assets to be redeemed for the purpose of
paying such amounts.
6.5 Any corporation into which the Trustee may merge or
with which it may consolidate or any corporation resulting from
any such merger or consolidation shall be the successor of the
Trustee, as the case may be, without the execution or filing of
any additional instrument or the performance of any further act.
6.6 Except as may otherwise be required by law and other
provisions of this Plan,
(a) the Trustee shall be responsible only for the
management and disbursement of amounts actually
contributed to the IRA Account;
(b) the Trustee shall not have any responsibility for
determining the correctness of the amount of any
contributions, the propriety of any contribution
as a Rollover Contribution, the failure of a
Participant or an Employer to make the
contributions provided for in the Agreement, the
correctness of any disbursement made pursuant to
the written directions of a Participant or an
Employer, the taxable amount of a distribution or
whether any Participant is an individual by or on
behalf of whom deductible contributions within the
meaning of Section 219 of the Code may be made;
(c) the Trustee shall not be liable for any acts or
omissions except its own negligence or bad faith
in failing to carry out the terms contained in the
Plan and the Agreement; and
(d) the Trustee shall not be liable for any loss or
breach caused by any Participant's exercise of
control over assets in his IRA Account.
ARTICLE VII
PAYMENTS TO PARTICIPANT AND BENEFICIARY
7.1 Subject to the further provisions of this Article VII,
the Trustee shall make distributions to a Participant and/or his
Beneficiary from the Participant's IRA Account in accordance with
instructions in writing from the Participant (or his Beneficiary
if the Participant is deceased). It shall be the responsibility
of the Participant (or his Beneficiary if the Participant is
deceased) to determine that any such distribution is in
accordance with Sections 408(a)(6) and 408(b)(3) of the Code and
the regulations promulgated thereunder. The Trustee shall not
assume any responsibility to make any distributions to the
Participant (or his Beneficiary if the Participant is deceased)
unless and until such written instructions specify the occasion
for such distribution, the amount of such distribution, the
elected manner of distribution, and any written statement
required by this Article VII. Prior to making any such
distributions from the IRA Account, the Trustee shall be
furnished with any and all applications, certificates, tax
waivers, signature guarantees, and other documents (including
power of any legal representative's authority) deemed necessary
or desirable by the Trustee, but the Trustee shall not be liable
for complying with written instructions which appear on their
face to be genuine, or for refusing to comply if not satisfied
that such instructions are genuine, and assumes no duty of
further inquiry. Upon receipt of proper written instructions as
required above, the Trustee shall cause the assets of the IRA
Account to be distributed in cash and/or in Investment Company
Shares or other securities, as specified in such written
instructions, to the Participant (or his Beneficiary if the
Participant is deceased).
7.2 (a) Distributions to a Participant may be paid in any
one or more of the following ways as the Participant may direct
the Trustee in writing, on a form acceptable to the Trustee:
(i) in a lump sum in cash and/or in Investment
Company Shares or other securities;
(ii) in systematic monthly, quarterly, semiannual or
annual installments in cash and/or in Investment
Company Shares or other securities over a period
not to exceed the life expectancy of the
Participant or the joint life and last survivor
expectancy of the Participant and his Designated
Beneficiary;
(iii) in systematic monthly, quarterly, semiannual or
annual installments in cash and/or in Investment
Company Shares or other securities over a period
designated by the Participant;
(iv) in a dollar amount designated by the Participant
in cash and/or in Investment Company Shares or
other securities;
(v) in installments in cash consisting of current
dividends and capital gains earned by the IRA
Account;
(vi) in installments in cash consisting only of
current dividends earned by the IRA Account; or
(vii) if the IRA Account is invested in an Annuity, in
periodic payments under any form of annuity
payment then available under the Annuity.
Payments under the Annuity must be made in
periodic payments at intervals of no longer than
one year and must be either nonincreasing or
increase only as provided in Q & A F-3 of section
1.401(a)(9)-1 of the Proposed Income Tax
Regulations.
(b) With respect to any distributions made under this
Article VII to or on behalf of a Participant who has not attained
the age of 59 1/2 (unless the distribution is made after the
Participant's death or the Participant has become disabled), the
Trustee prior to making a distribution must receive a written
statement, on a form acceptable to it, addressed to the Trustee
from that Participant declaring his intention as to the
disposition of the amount distributed.
A Participant shall be considered to be disabled only if he
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 to be of long continued and
indefinite duration. All other distributions may be subject to
any penalties imposed by the Code. Any distributions from the
Term Deposit or Annuity may be subject to penalties and other
conditions.
7.3 Unless distribution of the entire balance standing in
the credit of a Participant's IRA Account has commenced in
accordance with Section 7.1 by the Participant's Required
Beginning Date, the Participant shall direct the Trustee to begin
the distribution of his remaining balance in his IRA Account
beginning no later than his Required Beginning Date pursuant to
the distribution method specified in either Section 7.2(a)(i) or
(ii) as the Participant may select in writing on a form
acceptable to the Trustee.
If distribution is to be made over a period under Section
7.2(a)(ii) above, the minimum amount to be distributed for each
year, beginning with the Participant's Required Beginning Date
and each December 31 thereafter, shall be made in accordance with
the requirements of Section 408(a)(6), Proposed Regulation
Section 1.408-8, and the incidental death benefit rules described
in Proposed Regulation Section 1.401(a)(9)-2. Such minimum
amount shall be at least an amount equal to the lesser of the
balance standing to the credit of the Participant's IRA Account
or the quotient obtained by dividing the Participant's entire
interest in his IRA 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 his Designated Beneficiary, whichever is
applicable. Life expectancy and joint and last survivor
expectancy shall be computed by use of the return multiples
contained in Section 1.72-9 of the Income Tax Regulation. The
initial life expectancy or joint life and last survivor
expectancy shall be computed using the attained ages of the
Participant and his designated Beneficiary as of their birthdays
in the year the Participant attains age 70 1/2. The life expectancy
of the Participant (and the life expectancy of his spouse, if
applicable) shall be recalculated annually using their attained
ages as of their birthdays in the year for which the minimum
annual payment is being determined. The life expectancy of any
other Designated Beneficiary shall not be recalculated. If the
Designated Beneficiary of a Participant is not his spouse, the
method of distribution selected must assure that at least 50% of
the present value of the amount available for distribution is
paid within the life expectancy of the Participant. Therefore,
the period over which annual distributions shall be made to the
Participant and his Beneficiary shall not exceed the applicable
period determined by use of the table contained in Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations.
7.4 If a Participant dies after his Required Beginning Date
but before his entire interest in his IRA Account has been
distributed or if the Participant dies before his Required
Beginning Date and payments have irrevocably commenced under an
Annuity, the Participant's remaining interest in his IRA Account
shall continue to be distributed to his Beneficiary at least as
rapidly as under the method of distribution being used prior to
the Participant's death. The Beneficiary shall be the person
whom the Participant shall have designated in a writing prior to
this death, which writing shall have been deposited with the
Trustee in a form acceptable to it. Such designation may be
changed by the Participant during his lifetime, except as
otherwise provided by the terms of the Annuity, if applicable.
If no Beneficiary has been properly designated, or if no
Beneficiary survives the Participant, distribution shall be made
to the Participant's surviving spouse, or if no spouse, to his
issue per stirpes, or if none, to his estate.
7.5 If the Participant dies prior to his Required Beginning
Date (except where the IRA Account has been invested in an
Annuity and payments have irrevocably commenced), the following
provisions shall apply:
(a) Distribution to his Beneficiary may be made by one of
the following methods as the Beneficiary shall request
in writing on a form acceptable to the Trustee:
(i) lump sum in cash and/or in Investment Company
Shares or other securities distributed no later
than December 31 of the year containing the fifth
anniversary of the Participant's death;
(ii) in systematic monthly, quarterly, semiannual or
annual installments in cash and/or in Investment
Company Shares or other securities over a period
of time ending no later than December 31 of the
year containing the fifth anniversary of the
Participant's death; provided, however, that the
Trustee shall not be required to pay installments
amounting to less than fifty dollars per month;
(iii) in substantial equal monthly, quarterly,
semiannual or annual installments in cash and/or
in Investment Company Shares or other securities
over a period of years not exceeding the life
expectancy of the Designated Beneficiary;
provided, however, that the Trustee shall not be
required to pay installments amounting to less
than fifty dollars per month; or
(iv) if the IRA Account is invested in an Annuity, in
periodic payments under any form of annuity
payment then available under the Annuity.
(b) The Beneficiary who is other than a surviving spouse
shall elect one of the distribution methods described
in (a) above no later than December 31 of the year
following the year of the Participant's death and shall
so inform the Trustee in writing. The Beneficiary who
is a surviving spouse shall elect one of the
distribution methods described in (a) above no later
than December 31 of the year containing the fifth (5th)
anniversary of the Participant's death and shall so
inform the Trustee in writing. If the Beneficiary or
Beneficiaries do not make such election, the Trustee
shall make a distribution in cash in accordance with
Section 7.5(a)(i) if the Beneficiary is other than the
surviving spouse, and in accordance with Section
7.5(a)(iii) if the Beneficiary is the Participant's
surviving spouse.
(c) If distribution is to be made in accordance with either
Section 7.5(a)(iii) or (iv), it must commence by
December 31 of the year following the year of the
Participant's death; provided, however, that if the
Participant's spouse is the Designated Beneficiary,
distribution may be delayed until December 31 of the
year the Participant would have attained age 70 1/2, if
later. The minimum amount to be distributed each year
shall be at least an amount equal to the lesser of the
balance standing to the credit of the Participant's IRA
Account or the quotient obtained by dividing the
Participant's entire interest in his IRA Account as of
the close of business on December 31 of the preceding
year by the life expectancy of the Designated
Beneficiary. The Beneficiary may elect at any time to
receive a greater amount of distribution or to
accelerate the method of distribution.
Life expectancy shall be calculated by use of the return
multiples specified in Section 1.72-9 of the Income Tax
Regulations. The initial life expectancy shall be computed using
the attained age of the Designated Beneficiary as of his birthday
in the year distributions are required to commence. Life
expectancy of a surviving spouse shall be recalculated annually
using the spouse's attained age as of the spouse's birthday in
the year for which the minimum annual payment is being
determined. In the case of any other Designated Beneficiary,
payments for any calendar year after the year in which
distributions are required to commence shall be based on the
initial life expectancy minus the number of whole years passed
since distribution first commenced.
7.6 Notwithstanding the foregoing, if the Designated
Beneficiary is the Participant's surviving spouse, such spouse
may treat the IRA Account as the spouse's own individual
retirement account (IRA). This election will be deemed to have
been made if such surviving spouse makes a regular IRA
contribution to the account, makes a rollover to or from such
account, or fails to receive distribution pursuant to Section 7.4
or 7.5 above.
7.7 In making distributions to a Participant, the Trustee
shall, to the extent allowed by applicable law, be entitled to
rely on the written certification by a Participant as to the
Participant's and Designated Beneficiary's age or as to the
Participant's having become disabled within the meaning of
Section 7.2(b).
7.8 Whenever the consent of the Participant or a direction
by the Participant is required under this Article VII, action by
the Trustee may be taken without such consent or direction by
reason of death, illness or absence of the Participant.
7.9 Notwithstanding any of the foregoing, any Employer
contribution to the IRA Account pursuant to a Simplified Employee
Pension Program may be withdrawn by the Participant at any time.
ARTICLE VIII
RETURN OF EXCESS CONTRIBUTIONS; LIABILITY OF TAXES
8.1 If a Participant, an Employer on behalf of the Participant
if the Agreement so provides, or the Commissioner of Internal
Revenue notifies the Trustee in writing that there has been made
by or on behalf of the Participant a contribution which has been
determined by the Participant, the Employer or the Commissioner
to be an Excess Contribution, or nondeductible contribution, the
Trustee shall, as soon as practicable, pay to such Participant in
cash (if permitted by the terms of the investment in his IRA
Account) an amount equal to the amount of the Excess Contribution
or nondeductible contribution made by him or on his behalf and,
if the payment is made on or prior to the due date of the
Participant's tax return (including extensions) for the year in
which the Excess Contribution or nondeductible contribution was
made, the net income attributable thereto (reduced by any
administrative charge or penalty applicable thereto).
Alternatively, the Participant may, by written instructions on a
form acceptable to the Trustee, elect to treat the Excess
Contribution and the net income attributable thereto (reduced by
any administrative charge applicable thereto), to the extent it
does not exceed the limitations under Section 219 and 408(o) of
the Code, as a contribution for the Plan Year in which notice is
received (and reducing, as is appropriate, the contributions that
can be made under Section 3.1 for such Plan Year).
8.2 If a Participant or an Employer on behalf of the
Participant in the case of an IRA Account established under a
Simplified Employee Pension Program, notifies the Trustee in
writing that there has been an employer contribution to the IRA
Account which is in excess of the limitation under Section 402(h)
or 408(k)(6)(A)(iii) of the Code, the Trustee shall, as soon as
practicable, pay to such Participant in cash (if permitted by the
terms of the investment in his IRA Account) an amount equal to
the amount of such excess employer contribution made on his
behalf, as adjusted for income or loss, and reduced by any
administrative charge or penalty applicable thereto.
8.3 In the event the Trustee shall be required to pay any
tax with respect to an IRA Account, the amount of such tax
(including interest) shall be paid from such IRA Account.
ARTICLE IX
AMENDMENT AND TERMINATION
9.1 A Participant may at any time terminate the Plan adopted by
the Participant, and an Employer may at any time terminate a Plan
adopted by the Employer. Termination may be effected by
delivering to the Trustee a written notice of termination
addressed to the Trustee and signed by the Participant or the
Employer. On termination, if permitted by the terms of the
investment, distribution of the IRA Account (reduced by any
penalty applicable thereto) shall be made by payment of a lump
sum in cash and/or in Investment Company Shares or other
securities to the Participant as the Participant elects. Upon
complete distribution of the assets in the IRA Account, this Plan
shall terminate and shall have no further force and effect and
the Trustee shall be relieved from all further liability with
respect to the Plan, the IRA Account, and all assets thereof so
established.
9.2 Putnam Fiduciary Trust Company may at any time and from
time to time modify or amend this Plan as is necessary or
appropriate to qualify this Plan as an Individual Retirement
Account under Section 408(a) of the Code, or as is necessary or
appropriate under any applicable law by delivering to the Trustee
and mailing to the Employer, or, in the case of a Plan where
there is no Employer, the Participant at his last known address
shown on the books of the Trustee, a copy of such amendment.
Each Participant and each Employer shall be deemed to have
consented to any modification or amendment so made. No amendment
of this Plan shall cause any part of the IRA Account to be used
for a purpose other than for the exclusive benefit of the
Participant and his Beneficiary. No amendment shall change the
rights, duties or responsibilities of the Trustee without the
written consent of either of them.
ARTICLE X
TRANSFER TO OTHER QUALIFIED PLANS
A Participant or an Employer, subject to the provisions of
the Agreement and to the extent allowed by applicable law, may
request the Trustee to transfer assets held in the IRA Account of
the Participant or Participants to another bank or banks as
custodian or trustee or to any other plan or plans maintained by
the Participant or the Employer or the Employers of a Participant
for the benefit of the Participant, provided the Trustee, before
transfer, may at its discretion require an opinion of counsel
satisfactory to it that the requirements of Section 401(a) or
Section 408, whichever is applicable, of the Code or any
successor provision of law are satisfied by such other plan or
plans; and provided, further, that the Trustee shall have the
right to reduce from the amount to be transferred (a) any amounts
referred to in Section 6.4, and (b) any amounts required to be
distributed in the calendar year of the transfer to the
Participant under Section 408(a)(6) or 408(b)(3) of the Code.
Upon such transfer, the provisions of the plan to which such
transfer is made shall govern and the provisions of this Plan
shall have no further effect.
ARTICLE XI
RESIGNATION OF THE TRUSTEE
11.1 Either the Trustee may resign at any time upon thirty (30)
days' notice, in writing, to the Participant or the Employer in
the case of a Plan established by the Employer.
11.2 Within thirty (30) days of the effective date of a
successor trustee's appointment, the Trustee shall perform all
acts necessary to transfer and deliver the assets and records of
the IRA Account to its successor. However, the Trustee may
reserve such portion of the IRA Account as it may reasonably
determine to be necessary for payment of its fees and any taxes
and expenses and any balance of such reserve remaining after
payment of such fees, taxes and expenses shall be paid over to
the successor.
11.3 Resignation of the Trustee will not terminate the Plan
adopted by an Employer or a Participant. In the event of any
vacancy due to the resignation of the Trustee, the Trustee shall
appoint a successor unless the Agreement is sooner terminated.
Any successor Trustee shall be a "bank" within the meaning of
Section 581 of the Code or another person found qualified to act
as a trustee or custodian under an individual retirement account
plan by the Secretary of the Treasury, or his delegate. The
appointment of a successor Trustee shall be effective upon
receipt by the Trustee of such written acceptance which shall be
submitted to the Participant, the Employer in the case of a Plan
established by the Employer and the Trustee. In the event no
successor Trustee is appointed within thirty (30) days after
resignation becomes effective, each Participant or Employer may
request the Trustee to transfer the assets held in the
Participant's IRA Account as is provided in Article X.
ARTICLE XII
NOTICES
12.1 All notices required to be given by the Trustee to a
Participant or an Employer shall be deemed to have been given
when sent by mail to the address of the Participant or the
Employer indicated by the Trustee's records.
12.2 All notices required to be given by a Participant or
an Employer to the Trustee shall be deemed to have been given
when received by the Trustee.
12.3 Whenever the Trustee is required or authorized to take
any action under the Plan on the direction of a Participant, such
action shall be taken on the direction of the duly appointed
representative of the Participant or his estate, in the event of
his incompetency or death.
ARTICLE XIII
SPENDTHRIFT PROVISION
To the extent permitted by applicable law, a Participant's
beneficial interest in the Plan shall not be assignable, subject
to hypothecation, pledge, or lien, nor subject to attachment or
receivership, nor shall it pass to any trustee in bankruptcy or
be reached or applied by the legal process for the payment of any
obligation of the Participant or any Beneficiary hereunder;
provided, however, that in the case of the Participant's death
the value of his IRA Account shall be paid, as provided in
Article VII; and provided, further, that the Participant (or the
Trustee) shall have the right to direct the transfer or
distribution of the value of his IRA Account, or any part thereof
as provided in Article VII, VIII, X or XI.
ARTICLE XIV
GOVERNING LAW
The terms of this Plan and the Agreement shall be construed,
administered and enforced according to the laws of the
Commonwealth of Massachusetts except to the extent such laws are
preempted by the provisions of ERISA.
<PAGE>
Putnam
Retirement
Plans:
Basic Plan
Document
Putnam Standard Profit
Sharing Plan - "Keogh"
Putnam Standard Profit
Sharing and 401 (k) Plan
Putnam Standard Money
Purchase Pension Plan - "Keogh"
Putnam Variable Profit Sharing
and 401 (k) Plan
Putnam Variable Money
Purchase Pension Plan
Boston London Tokyo
<PAGE>
Contents I. Putnam Basic Plan Document
Article I: Introduction 2
Article II: Definitions 2
Article III: Participation 6
Article IV: Contributions 7
Article V: Cash or Deferred Arrangement
under Section 401(k) (CODA) 9
Article VI: Limitations on Allocations 15
Article VII: Eligibility for Distribution of Benefits 17
Article VIII: Vesting 18
Article IX: Payment of Benefits 19
Article X: Joint and Survivor Annuity
Requirements 20
Article XI: Minimum Distribution Requirements 22
Article XII: Withdrawals and Loans 25
Article XIII: Trust Fund and Investments 26
Article XIV: Insurance Policies 27
Article XV: Top-Heavy Plans 28
Article XVI: Administration of the Plan 30
Article XVII: Trustee and Insurance Trustee 31
Article XVIII: Amendment 33
Article XIX: Termination of Plan and Trust 34
Article XX: Transfers from Other Qualified
Plans; Mergers 35
Article XXI: Miscellaneous 35
II. IRS Opinion Letters
The Putnam Standard Profit sharing and
401(k) Plan Opinion Letter 38
The Putnam Standard Money Purchase
Pension Plan Opinion Letter 39
The Putnam Variable Profit Sharing and
401 (k) Plan Opinion Letter 40
Putnam Variable Money Purchase Pension
Plan Opinion Letter 41
<PAGE>
I. Putnam Basic Plan Document
Article I: Introduction 2
Article II: Definitions 2
Article III: Participation 6
Article IV: Contributions 7
Article V: Cash or Deferred Arrangement
under Section 401 (k) (CODA) 9
Article VI: Limitations on Allocations 15
Article VII: Eligibility for Distribution of Benefits 17
Article VIII: Vesting 18
Article IX: Payment of Benefits 19
Article X: Joint and Survivor Annuity
Requirements 20
Article XI: Minimum Distribution Requirements 22
Article XII: Withdrawals and Loans 25
Article XIII: Trust Fund and Investments 26
Article XIV: Insurance Policies 27
Article XV: Top-Heavy Plans 28
Article XVI: Administration of the Plan 30
Article XVII: Trustee and Insurance Trustee 31
Article XVIII: Amendment 33
Article XIX: Termination of Plan and Trust 34
Article XX: Transfers from Other Qualified
Plans; Mergers 35
Article XXI: Miscellaneous 35
<PAGE>
The Putnam Basic Plan Document
ARTICLE 1:
Introduction
By executing the Plan Agreement, the Employer has established a
retirement plan (the "Plan") according to the terms and
conditions of the Plan Agreement and this Putnam Basic Plan
Document, for the purpose of providing a retirement fund for the
benefit of Participants and Beneficiaries.
ARTICLE II:
Definitions
The terms defined in Sections 2.1 through 2.50 appear generally
throughout the document. Sections 2.51 through 2.63 and Article
V contain definitions of terms used only in a CODA or in a
Variable Plan which permits nondeductible Participant
Contributions pursuant to Section 5.9 and Section 10.4 contains
additional definitions related to distributions from the Plan.
Articles VI and XI contain additional definitions of terms used
only in those Articles.
2.1 Account means any of, and Accounts means all of, a
Participant's Employer contribution Account, Participant
Contribution Account, Rollover Account, and if the Plan contains
a CODA, the accounts maintained for the Participant pursuant to
Article V.
2.2 Affiliated Employer, for purposes of the Plan other than
Article VI, means the Employer and a trade or business, whether
or not incorporated, which is any of the following:
(a) A member of a group of controlled corporations (within the
meaning of Section 414(b) of the Code) which includes the
Employer; or
(b) A trade or business under common control (within the meaning
of Section 414(c) of the Code) with the Employer; or
(c) A member of an affiliated service group (within the meaning
of Section 414(m) of the Code) which includes the Employer; or
(d) An entity otherwise required to be aggregated with the
Employer pursuant to Section 414(o) of the Code.
In determining an Employee's service for vesting and for
eligibility to participate in the Plan, all employment with
Affiliated Employers will be treated as employment by the
Employer.
<PAGE>
In a Variable Plan, in addition to the Employer, any Affiliated
Employer may adopt the Plan for the benefit of its Employees by
executing a Plan Agreement.
For purposes of Article VI only, the definitions in paragraphs
(a) and (b) of this Section 2.2 shall be modified by adding at
the conclusion of the parenthetical phrase in each such paragraph
the words "as modified by Section 415(h) of the Code."
2.3 Authorized Leave of Absence means a leave of absence from
employment granted in writing by an Affiliated Employer.
Authorized Leave of Absence shall be granted on account of
military service for any period during which an Employee's right
to re-employment is guaranteed by law, and for such other reasons
and periods as an Affiliated Employer shall consider proper,
provided that Employees in similar situations shall be similarly
treated.
2.4 Base Contribution Percentage means the percentage so
specified in the Plan Agreement.
2.5 Beneficiary means a person entitled to receive benefits under
the Plan upon the death of a Participant, in accordance with
Section 7.2 and Articles 10 and 11.
2.6 CODA means a cash or deferred arrangement that meets the
requirements of Section 401(k) of the Code, adopted as part of a
profit sharing plan.
2.7 Code means the Internal Revenue Code of 1986, as amended.
2.8 Compensation means all of an Employee's compensation
determined in accordance with the definition elected by the
Employer in the Plan Agreement. For purposes of that election,
"Form W-2 earnings" means "wages" as defined in Section 3401(a)
of the Code in connection with income tax withholding at the
source, and all other compensation paid to the Employee by the
Employer in the course of its trade or business, for which the
Employer is required to furnish the Employee with a written
statement under sections 6041(d), 6051(a)(3), and 6052 of the
Code, determined without regard to exclusions based on the nature
or location of the employment or the services performed (such as
the exception for agricultural labor in section 3401(a)(2) of the
Code).
2.9 Date of Employment means the first date on which an Employee
performs an Hour of Service; or, in the case of an Employee who
has incurred one or more One-Year Eligibility Breaks and who is
treated as a new Employee under the rules of Section 3.3, the
first date on which he performs an Hour of Service after his
return to employment.
<PAGE>
2.10 Deductible Employee Contribution Account means an account
maintained on the books of the Plan on behalf of a Participant,
in which are recorded amounts contributed by him to the Plan on a
tax-deductible basis under prior law, and the income, expenses,
gains and losses thereon.
2.11 Disabled means unable to engage in any substantial gainful
activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or
which has lasted or can be expected to last for a continuous
period of not less than 12 months. The permanence and degree of
such impairment shall be supported by medical evidence.
2.12 Earned Income means a Self-Employed Individual's net
earnings from self-employment in the trade or business with
respect to which the Plan is established, excluding items not
included in gross income and the deductions allocable such items,
and reduced by (i) contributions by the Employer to qualified
plans, to the extent deductible under Section 404 of the Code,
and (ii) the deduction allowed to the Employer under Section
164(f) of the Code for taxable years beginning after December 31,
1989.
2.13 Earnings, effective for all Plan Years beginning after
December 31, 1988, means the first $200,000 (as adjusted by the
Secretary of the Treasury at the same time and in the same manner
as under Section 415(d) of the Code) of the sum of the
Compensation and the Earned Income received by an Employee during
a Plan Year. In determining the Earnings of a Participant, the
rules of Section 414(q)(6) of the Code shall apply, except that
in applying those rules the term "family" shall include only the
Participant's spouse and the Participant's lineal descendants who
have not reached age 19 by the last day of the Plan Year. If, as
a result of the application of such rules the adjusted $200,000
limitation is exceeded, then (except for purposes of determining
the portion of compensation up to the Integration Level), 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.
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 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.
2.14 Effective Date means the date so designated in the Plan
Agreement. If the Plan Agreement indicates that the Employer is
adopting the Plan as an amendment of an existing plan, the
provisions of the existing plan apply to all events preceding the
Effective Date, except as to specific provisions of the Plan
which set forth a retroactive effective date in accordance with
Section 1140 of the Tax Reform Act of 1986.
2.15 Eligibility Period means a period of 12 consecutive months
beginning on an Employee's most recent Date of Employment or any
anniversary thereof, in which he is credited with at least 1,000
Hours of Service; provided that if the Employer has elected in
the Plan Agreement to establish a number less than 1,000 as the
requisite for crediting an Eligibility Period, that number shall
be substituted for 1,000, and provided further that in the case
of an Employee in a seasonal industry (as defined under
regulations prescribed by the Secretary of Labor) in which the
customary extent of employment during a calendar year is fewer
than 1,000 Hours of Service, the number specified in any
regulations prescribed by the Secretary of Labor dealing with
years of service shall be substituted for 1,000.
2.16 Employee means a common law Employee of an Affiliated
Employer; in the case of an Affiliated Employer which is a sole
proprietorship, the sole proprietor thereof; in the case of an
Affiliated Employer which is a partnership, a partner thereof;
and a Leased Employee of an Affiliated Employer. The term
"Employee" includes an individual on Authorized Leave of Absence,
a Self-employed Individual and an Owner-Employee.
2.17 Employer means the Employer named in the Plan Agreement and
any successor to all or the major portion of its assets or
business which assumes the obligations of the Employer under the
Plan Agreement.
<PAGE>
2.18 Employer Contribution Account means an account maintained on
the books of the Plan on behalf of a Participant, in which are
recorded the amounts allocated for his benefit from contributions
by the Employer (other than contributions pursuant to Article 5),
Forfeitures by former Participants (if the Plan provides for
reallocation of Forfeitures), amounts reapplied under Section
6.1(d), and the income, expenses, gains and losses incurred
thereon.
2.19 ERISA means the Employee Retirement Income Security Act of
1974, as amended.
2.20 Excess Earnings means a Participant's Earnings in excess of
the Integration Level of the Plan.
2.21 Forfeiture means a nonvested amount forfeited by a former
Participant in a Variable Plan, pursuant to Section 8.3; or an
amount forfeited by a former Participant or Beneficiary who
cannot be located, pursuant to Section 9.5; or a Qualified
Matching Contribution or Employer Matching Contribution forfeited
pursuant to Section 5.8.
2.22 Hour of Service means each hour described in paragraphs (a),
(b), (c), (d) or (e) below, subject to paragraphs (f) and (g)
below.
(a) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for an Affiliated
Employer. These hours shall be credited to the Employee for the
computation period or periods in which the duties are performed.
(b) Each hour for which an Employee is paid, or entitled to
payment, by an Affiliated 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 501 Hours of
Service shall be credited under this paragraph for any single
continuous period of absence (whether or not such period occurs
in a single computation period) unless the Employee's absence in
not an Authorized Leave of Absence. Hours under this paragraph
shall 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 an Affiliated
Employer. The same Hours of Service shall not be credited under
both paragraph (a) or paragraph (b), as the case may be, and
under this paragraph (c); and no more than 501 Hours of Service
shall be credited under this paragraph (c) with respect to
payments of back pay, to the extent that such pay is agreed to or
awarded for a period of time described in paragraph (b) during
which the Employee did not perform or would not have performed
any duties. 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) Each hour during an Authorized leave of Absence. Such hours
shall be credited at the rate of a customary full work week for
an Employee.
(e) Solely for purposes of determining whether a One-Year Vesting
Break or a One-Year Eligibility Break has occurred, each hour
which otherwise would have been credited to an Employee but for
an absence from work by reason of: the pregnancy of the Employee,
the birth of a child of the Employee, the placement of a child
with the Employee in connection with the adoption of the child by
the Employee, or caring for a child for a period beginning
immediately after its birth or placement. If the Plan
Administrator cannot determine the fours which would normally
have been credited during such an absence, the Employee shall be
credited with eight Hours of Service for each day of absence. No
more than 501 Hours of Service shall be credited under this
paragraph by reason of any pregnancy or placement. Hours
credited under this paragraph shall be treated as Hours of
Service only in the Plan Year or Eligibility Period or both, as
the case may be, in which the absence from work begins, if
necessary to prevent the Participant's incurring a One-Year
Vesting Break or One-Year Eligibility Break in that Period, or,
if not, in the period immediately following that in which the
absence begins. The Employee must timely furnish to the Employer
information reasonably required to establish (i) that an absence
from work is for a reason specified above, and (ii) the number of
days for which the absence continued.
(f) Hours of Service shall be determined on the basis of actual
hours for which an Employee is paid or entitled to payment, or as
otherwise specified in the Plan Agreement.
(g) If the Employer maintains the plan of a predecessor employer,
service for the predecessor Employer shall be treated as service
for the Employer.
2.23 Insurance Trustee means the person named in the Plan
Agreement as Insurance Trustee, and any successor thereto.
2.24 Integration Level means the Earnings amount selected by the
Employer in the Plan Agreement.
2.25 Investment Company means an open-end registered investment
company for which Putnam Financial Services, Inc., or its
affiliate acts a principal underwriter, or for which The Putnam
Management Company, Inc., or its affiliate serves as an
investment adviser; provided that its prospectus offers its
shares under the Plan.
2.26 Investment Company Shares means shares issued by an
Investment Company.
2.27 Investment Products means any of the investment products
specified by the Employer in accordance with Section 13.2, fro
the group of those products sponsored, underwritten or managed by
Putnam as shall be made available by Putnam under the Plan, and
such other products as shall be accepted in writing by Putnam for
availability under the Plan. The term "Investment Products" does
not include any Policy selected pursuant to Article XIV.
2.28 Leased Employee means any person (other than an Employee of
the recipient) who pursuant to an agreement between the recipient
and any other person ("leasing organization") has performed
services for the recipient (or for the recipient 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 year, and such services are of a type historically performed
by Employees in the business field of the recipient Employer.
The compensation of a Leased Employee for purposes of the Plan
means the Compensation (as defined in Section 2.8) of the Leased
Employee attributable to services performed for the recipient
Employer. Contributions or benefits provided to a leased
Employee by the leasing organization which are attributable to
services performed for the recipient Employer shall be treated as
provided by the recipient Employer. Provided that leased
Employees do not constitute more than 20 percent of the
recipient's nonhighly compensated workforce, a leased Employee
shall not be considered an Employee of the recipient if he is
covered by a money purchase pension plan providing; (1) a
nonintegrated Employer contribution rate of at least 10 percent
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 Section 125, Section 402(a)(8), Section 402(h) or Section
403(b) of the Code), (2) immediate participation, and (3) full
and immediate vesting.
2.29 One-Year Eligibility Break means an Eligibility Period
during which an individual is not credited with more than 500
Hours of Service; provided, however, that in the case of an
Employee in a seasonal industry, there shall be substituted for
500 the number of Hours of Service specified in any regulations
of the Secretary of Labor dealing with breaks in service, and
provided further that if the Employer has elected in the Plan
Agreement to establish a number less than 500 as the requisite
Hours of Service for crediting an Eligibility Period, that number
shall be substituted for 500.
2.30 One-Year Vesting Break means a Plan Year during which an
individual is not credited with more than 500 Hours of Service;
provided, however, that in the case of an Employee in a seasonal
industry, there shall be substituted for the 500 the number of
Hours of Service specified in any regulations for the Secretary
of Labor dealing with breaks in service, and provided further
that if the Employer has elected in the Plan Agreement to
establish a number less than 500 as the requisite Hours of
Service for crediting a Year of Service, that number shall be
substituted for 500.
2.31 Owner-Employee means the sole proprietor of an Affiliated
Employer that is a sole proprietorship, or a partner owning more
than 10 percent of either the capital or profits interest of an
Affiliated Employer that is a partnership.
2.32 Participant means each Employee who has met the requirements
for participation in Article III.
2.33 Participant Contribution Account means an account maintained
on the books of the plan, in which are recorded non deductible
contributions by a Participant in accordance with Section 4.2(e)
or a similar provision in effect under the Plan or a predecessor
plan for periods before the first Plan Year beginning after
December 31, 1986, and any income, expenses, gains or losses
incurred thereon.
2.34 Plan means the form of defined contribution retirement plan
and trust agreement adopted by the Employer, consisting of the
Plan Agreement and the Putnam Basic Plan Document as set forth
herein, together with any and all amendments and supplements
thereto.
2.35 Plan Administrator means the Employer or its appointee
pursuant to Section 16.1.
2.36 Plan Agreement means the separate agreement entered into
between the Employer and the Trustee (and the Insurance Trustee,
if any) and accepted by Putnam, under which the Employer adopts
the Plan and selects among its optional provisions.
2.37 Plan Year means the period of 12 consecutive months
specified by the Employer in the Plan Agreement; provided that if
the Effective Date is not the first day of the Employer's taxable
year, the initial Plan Year shall begin on the Effective Date and
end on the last day of the Employer's taxable year.
2.38 Policy means an ordinary life insurance, term insurance,
retirement income or endowment policy or an individual or group
annuity contract issued by a life insurance company in connection
with the Plan, or an interest therein. An ordinary life
insurance policy within the meaning of this definition provides
non-decreasing death benefits and non-increasing premiums.
2.39 Putnam means Putnam Financial Services, Inc., or a company
affiliated with it which Putnam Financial Services, Inc. has
designated as its agent to perform specified actions or
procedures in connection with the prototype Plan.
2.40 Qualified Participant means (i) in a Standard Plan, any
Participant who is an active Employee on the last day of the Plan
Year in question or who is credited with more than 500 Hours of
Service during the Plan Year in question or whose Retirement or
death occurred during the Plan Year in question; and (ii) in a
Variable Plan, any Participant who meets the requirements
specified by the Employer in the Plan Agreement. If the Plan is
not adopted to replace an existing plan, this Section 2.40 is
effective on the Effective Date. If the Plan replaces an
existing plan, this Section 2.40 is effective on the first day of
the first Plan Year that begins after December 31, 1988, or if
later, on the Effective Date, and the provision of the existing
plan that this Section 2.40 replaces shall continue to apply
until that time.
2.41 Recordkeeper means the person or entity designated by the
Employer in the Plan Agreement to perform the duties described in
Section 16.4, and any successor thereto.
2.42 Retirement means ceasing to be an Employee in accordance
with Section 7.1.
2.43 Rollover Account means an account established for an
Employee who makes a rollover contribution to the Plan pursuant
to Section 4.5.
2.44 Self-Employed Individual means an individual whose personal
services are a material income-producing factor in the trade or
business for which the Plan is established, and who has Earned
Income for the taxable year from that trade or business, or would
have Earned Income but for the fact that the trade or Business
had no net profits for the taxable year.
2.45 Shareholder-Employee means any officer or Employee of an
electing small business corporation, within the meaning of
Section 1362 of the Code, who on any day during a taxable year of
the Employer owns (or is considered as owning under Section
318(a)(1) of the Code) more than 5% of the outstanding stock of
the Employer.
2.46 Social Security Wage Base means the maximum amount
considered as wages under Section 3121(a)(1) of the Code as in
effect on the first day of the Plan Year.
2.47 Standard Plan means a Plan adopted by execution of a Putnam
Standard Profit Sharing Plan Agreement #001 (including such a
Plan with a CODA) or a Putnam Standard Money Purchase Pension
Plan Agreement #002.
2.48 Trust and Trust Fund means the trust fund established under
Section 13.1.
<PAGE>
2.49 Trustee means the person, or the entity with trustee powers,
named in the Plan Agreement as trustee, and any successor
thereto.
2.50 Valuation Date means (i) for a Standard Plan, each business
day, and (ii) for a Variable Plan, the last day of each Plan
Year, and such other dates as the Employer may designate by
written agreement with the Recordkeeper.
2.51 Variable Plan means a Plan adopted by execution of a Putnam
Variable Profit Sharing Plan Agreement #003 or a Putnam Variable
Money Purchase Pension Plan Agreement #004.
2.52 Year of Service means a Plan Year in which an Employee is
credited with at least 1,000 Hours of Service; provided, however,
that if the Employer has elected in the Plan Agreement to
establish a number less than 1,000 as the requisite for crediting
a Year of Service, that number shall be substituted for 1,000,
and provided further that in the case of an Employee in a
seasonal industry (as defined under regulations prescribed by the
Secretary of Labor) in which the customary extent of employment
during a calendar year is fewer than 1,000 Hours of Service, the
number specified in any regulations prescribed by the Secretary
of Labor dealing with years of service shall be substituted for
1,000. An Employee's Years of Service shall include service
credited prior to the Effective Date under any predecessor plan.
If the initial Plan Year is shorter than 12 months, each Employee
who is credited with at least 1,000 Hours of Service in the
12-month period ending on the last day of the initial Plan Year
shall be credited with a Year of Service with respect to the
initial Plan Year.
(a) Service in any Plan Year (or comparable period prior to the
Effective Date) completed before the Employee reached age 18;
(b) Service completed during a period in which the Employer did
not maintain the Plan or any predecessor plan (as defined under
regulations prescribed by the Secretary of the Treasury).
The following definitions apply only to cash or deferred
arrangements under Section 401(k)(CODA) and to Variable Plans
which permits nondeductible Participant contributions pursuant to
Section 5.9:
2.53 Deferral Agreement means an Employee's agreement to make one
or more Elective Deferrals in accordance with Section 5.2.
2.54 Elective Deferral means any contribution made to the Plan by
the Employer at the election of a Participant, in lieu of cash
compensation, including contributions made pursuant to a Deferral
Agreement or other deferral mechanism.
<PAGE>
2.55 Elective Deferral Account means an account maintained on the
books of the Plan, in which are recorded a Participant's Elective
Deferrals and the income, expenses, gains and losses incurred
thereon.
2.56 Employer Matching contribution means a contribution made by
the Employer (i) to the Plan pursuant to Section 5.,8 or (ii) to
another defined contribution plan on account of a Participant's
"elective deferrals" or "employee contributions," as those terms
are defined in Section 401(m)(4) of the Code.
2.57 Employer Matching Account means an account maintained on the
books of the Plan, in which are recorded the Employer Matching
Contributions made on behalf of a Participant and the income,
expenses, gains and losses incurred thereon.
2.58 Highly Compensated Employee means any highly compensated
active Employee or highly compensated former Employee, as defined
in this Section 2.58. For this purpose, the "determination year"
shall be the Plan Year, and the "look-back year" shall be the
12-month period immediately preceding the determination year;
provided, however, that in a Variable Plan for which the Plan
Year is the calendar year, the current Plan Year shall be both
the "determination year" and the "look-back year" if the Employer
so elects in the Plan Agreement.
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 $75,000 (as adjusted pursuant to
Section 415(d) of the Code); (ii) received compensation from the
Employer in excess of $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 50 percent of
the dollar limitation in effect under Section 415(b)(1)(A) of the
Code. The term also includes (i) Employees who are both
described in the preceding sentence if the term "determination
year" is substituted for the term "look-back year," and among the
100 Employees who received the most compensation from the
Employer during the determination year; and (ii) Employees who
are 5 percent owners at any time during the look-back year or
determination year. If no officer has satisfied the compensation
requirement of (iii) above during either a year or a look-back
year, the highest paid officer for such year shall be treated as
a Highly Compensated Employee.
A highly compensated former Employee includes any Employee who
separated from service (or was deemed to have separated) before
the determination year, performed no service for the Employer
during the determination year, and was a highly compensated
active Employee for either the year of separation from service or
any determination year ending on or after the Employee's 55th
birthday.
If during a determination year or look-back year an Employee is a
family member of either a 5 percent owner who is an active or
former Employee, or a Highly Compensated Employee who is one of
the 10 most highly paid Highly Compensated Employees ranked on
the basis of compensation paid by the Employer during the year,
then the family member and the 5 percent owner or top-ten Highly
Compensated Employee shall be treated as a single Employee
receiving compensation and plan contributions or benefits equal
to the sum of the compensation and contributions or benefits of
the family member and the 5 percent owner or top-ten highly
compensated Employee. For purposes of this Section 2.58, family
members include the spouse, lineal ascendants and descendants of
the Employee or former Employee and the spouses of such lineal
ascendants and descendants.
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 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.
2.59 Non-Highly Compensated Employee means an Employee who is not
a Highly Compensated Employee.
2.60 Qualified Matching Contribution means a contribution made by
the Employer that: (i) is allocated in proportion to a
Participant's Elective Deferrals or Participant Contributions, as
specified by the Employer in the Plan Agreement; (ii) is fully
vested at all times, and (iii) is distributable only in
accordance with Section 5.13.
2.61 Qualified Matching Account means an account maintained on
the books of the Plan, in which are recorded the Qualified
Matching Contributions on behalf of a Participant and the income,
expense, gain and loss attributable thereto.
2.62 Qualified Nonelective Contribution means a contribution
(other than an Employer Matching contribution or Qualified
Matching Contribution) made by the Employer, that: (i) a
Participant may no elect to receive in cash until it is
distributed from the plan; (ii) is fully vested at all times; and
(iii) is distributable only in accordance with Section 5.13.
2.63 Qualified Nonelective Contribution Account means an account
maintained on the books of the Plan, in which are recorded the
Qualified Nonelective Contributions on behalf of a Participant
and the income, expense, gain and loss attributable thereto.
<PAGE>
ARTICLE III:
Participation
3.1 Initial Participation. An Employee shall become a
Participant in the Plan as of the first day of the month in which
he first satisfies the age and service requirements specified by
the Employer in the Plan Agreement, or as of the Effective Date,
whichever is later; provided, however, that:
(a) If the Plan is adopted as an amendment of a predecessor plan
of the Employer, every Employee who was participating under the
predecessor plan when it was so amended shall become a
Participant in the Plan as of the Effective Date, whether or not
he has satisfied the age and service requirements specified in
the Plan Agreement; and
(b) Unless the Employer specifies otherwise in the Plan
Agreement, any individual who is (i) a nonresident alien
receiving no earned income from an Affiliated Employer which
constitutes income from sources within the United States, or (ii)
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 (unless the collective bargaining agreement
specifically provides for coverage by the Plan or involves as an
employee representative an organization more than one-half of
whose members are Employees who are owners, officers or
executives of the Employer) shall not participate in the Plan;
and
(c) If the Plan is a Variable Plan and is not adopted as an
amendment of a predecessor plan of the Employer, all Employees on
the Effective Date shall become Participants on the Effective
Date; if the Employer so elects in the Plan Agreement; and
(d) If the Plan is a Variable Plan, (i) only Employees in the
eligible classes specified by the Employer in the Plan Agreement
shall participate in the Plan; and (ii) eligible Employees will
begin participation on the entry date specified in the Plan
Agreement.
Notwithstanding paragraphs (c) and (d), the Plan must comply with
the coverage and participation rules of Sections 410(b) and
401(a)(26) of the Code and the regulations thereunder.
3.2 Special Participation Rule. With respect to a Standard Plan,
or a Variable Plan in which the Employer has specified full and
immediate vesting in the Plan Agreement, and Employee who incurs
a One-Year Eligibility Break before completing the number of
Eligibility Periods required under Section 3.1 shall not
thereafter be credited with any Eligibility Period completed
before the One-Year Eligibility Break.
<PAGE>
3.3 Resumed Participation. A former Employee who incurs a
One-Year Eligibility Break after having become a Participant
shall participate in the Plan as of the date on which he again
become an Employee, if (i) his Employer Contribution Account of
Employer Matching Account had become partially or fully vested
before he incurred a One-Year Vesting Break, or (ii) he incurred
fewer than five consecutive One-Year Eligibility Breaks. In any
other case, when he again becomes an Employee he shall be treated
as a new Employee under Section 3.1.
3.4 Changes in Classification (Variable Plans Only). If a
Participant in a Variable Plan ceases to be a member of a
classification of Employees eligible to participate in the Plan,
but does not incur a One-Year Eligibility Break, he will continue
to b e credited with Eligibility Periods while he remains an
Employee, and he will resume participation as of the date on
which he again becomes a member of a classification of Employees
eligible to participate in the Plan. If such a Participant
incurs a One-Year Eligibility Break, Section 3.3 will apply.
If an Employee who is not a member of a classification of
Employees eligible to participate in the Plan satisfies the age
and service requirements specified in the Plan Agreement, he will
begin to participate immediately upon becoming a member of an
eligible classification.
3.5 Benefits for Owner-Employees. If the Plan provides
contributions or benefits for one or more Owner-Employees who
control both the trade or business with respect to which the Plan
is established and one or more other trades or businesses, the
Plan and plans established with respect to such other trades or
businesses must, when looked at as a single plan, satisfy
Sections 401(a) and (d) of the Code with respect to the Employees
of this and all such other trades or businesses. 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 each such other trade or business must be included
in a plan which satisfies Sections 401(a) and (d) of the Code and
which provides contributions and benefits not less favorable
than those provided for such Owner-Employees under the Plan. If
an individual is covered as an Owner-Employee under the plans of
two or more trades or businesses which he does not control and
such individual controls a trade or business, then the
contributions or benefits of the Employees under the plan of the
trade or business which he does control must be as favorable as
those provided for him under the most favorable plan of the trade
or business which he does not control. For purposes of this
Section 3.5, an Owner-Employee, or two or more Owner-Employees,
shall be considered to control a trade or business if such
Owner-Employee, or such two or more Owner-Employees together:
(a) own the entire interest in an unincorporated trade or
business, or
(b) in the case of a partnership, own more than 50 percent of
either the capital interest or the profits interest in such
partnership.
For purposes of the preceding sentence, an Owner-Employee or two
or more Owner-Employees shall be treated as owning any interest
in a partnership which is owned, directly or indirectly, by a
partnership which such Owner-Employees are considered to control
within the meaning of the preceding sentence.
ARTICLE IV:
Contributions
4.1 Provisions Applicable to All Plans.
(a) Payment and Crediting of Employer Contributions. the
Employer shall pay to the order of the Trustee the aggregate
contribution to the Trust Fund (other than the premium payments
on any Policy) for each Plan Year. Each contribution shall be
accompanied by written instructions from the Employer, in the
manner prescribed by Putnam. Neither the Trustee nor Putnam
shall be under any duty to inquire into the correctness of the
amount or the timing of any contribution, or to collect any
amount if the Employer fails to make a contribution as provided
in the Plan.
(b) Responsibility for Premium Payments. Contributions to be
applied to the payment of the premiums on any Policy shall be
paid by the Employer directly to the insurer in cash. In
determining the amount of any premium due under any Policy with
respect to any Participant, the Employer and the Insurance
Trustee may rely conclusively upon information furnished by the
provider of the Policy. For purposes of Sections 4.2(a), 4.3(a)
and Article 5, all Employer contributions used to pay premiums on
Policies shall be treated as contributions made to the
appropriate Participant's Employer contribution Account. If the
Employer omits any premium payment or makes any mistake
concerning a premium payment, neither the Employer nor the
Insurance Trustee shall have any liability in excess of the
premium to be paid.
(c) Time for Payment. The aggregate of all contributions with
respect to a Plan Year shall be transferred in accordance with
paragraphs (a) and (b) no later than the due date (including
extensions) for filing the Employer's federal income tax return
for that Plan Year.
(d) Limitations on Allocations. All allocations shall be subject
to the limitations in Article 6.
(e) Establishments of Accounts. the employer will establish and
maintain (or cause to be established and maintained) for each
Participant individual accounts adequate to disclose his interest
in the Trust Fund, including such of the following separate
accounts as shall apply to the Participant: Deductible Employee
Contribution Account, Employer Contribution Account, Participant
Contribution Account, and rollover Account; and in a Plan with a
CODA, Elective Deferral Account, Qualified Nonelective Account,
Qualified Matching Account and Employer Matching Account. The
maintenance of such accounts shall be only for recordkeeping
purposes, and the assets of separate accounts shall not be
required to be segregated for purposes of investment.
(f) Restoration of Accounts (Variable Plans Only).
Notwithstanding any other provision of the Pan, for any Plan Year
in which it is necessary to restore any portion of a
Participant's Account pursuant to Section 8.3(b) or 9.5, to the
extent that the amount of Forfeitures available is insufficient
to accomplish such restoration, the Employer shall contribute the
amount necessary to eliminate the insufficiency, regardless or
whether the contribution is currently deductible by the Employer
under Section 404 of the Code. Forfeitures shall be considered
available for allocation pursuant to Sections 4.2, 4.3, and 5.8
in a Plan Year only after all necessary restoration of Accounts
has been accomplished.
4.2 Provisions Applicable Only to Profit Sharing Plans.
(a) Amount of Annual Contribution. The Employer will contribute
for each Plan Year an amount determined accordance with the
formula specified by the Employer in the Plan Agreement, less any
amount reapplied for the Plan Year under Section 6.1(d), not to
exceed the amount deductible under Section 404 of the Code. In a
Variable Plan, if the Employer so elects in the Plan Agreement,
the amount of Forfeitures occurring a Plan Year shall be applied
to reduce the Employer's contribution by a like amount, and such
Forfeitures shall be treated as a portion of the Employer
contribution for purposes of paragraphs (b) and (c).
(b) Allocation of Contributions: General Rule. As of the last
day of each Plan Year, the Employer's contribution (and any
amounts reapplied under Section 6.1(d) for the Plan Year shall be
allocated among the Employer Contribution Accounts of Qualified
Participants in proportion to their Earnings. This general rule
does not apply to a Plan that is integrated with Social Security
or to allocations in a CODA.
(c) Plans Integrated with Social Security. If the Employer
elects in the Plan Agreement an allocation formula integrated
with Social Security, Employer contributions (and any amounts
reapplied under Section 6.1(d)) shall be allocated as of the last
day of the Plan Year, as follows:
(1) Top-Heavy Integration Formula. If the Plan is required to
provide a minimum allocation for the Plan Year pursuant to the
Top-Heavy Plan rules of Article 15, or if the Employer has
specified in the Plan Agreement that this paragraph (1) will
apply whether or not the Plan is Top-Heavy, then:
(a) First, among the Employer Contribution Accounts of all
Qualified Participants, in the ratio that each Qualified
Participant's Earnings bears to all Qualified Participants'
Earnings. The total amount allocated in this manner shall be
equal to 3% of all Qualified Participants' Earnings (or, if less,
the entire amount to be allocated).
(b) Next, among the Employer Contribution Accounts of all
Qualified Participants who have Excess Earnings, in the ration
that each Qualified Participant's Excess Earnings bears to all
Qualified Participants' Excess Earnings (or, if less, the entire
amount remaining to be allocated).
(c) Next, among the Employer Contribution Accounts of all
Qualified Participants, in the ratio that the sum of each
Qualified Participant's Earnings and Excess Earnings bears to the
sum of all Qualified Participants; Earnings and Excess Earnings.
the total amount allocated in this manner shall not exceed the
lesser of (i) the sum of all Participants' Earnings and Excess
Earnings multiplied by the Top-Heavy Maximum Disparity Percentage
determined under subparagraph (1)(E), or (ii) the entire amount
remaining to be allocated.
(d) Finally, any mount remaining shall be allocated among he
Employer Contribution Accounts of all Qualified Participants in
the ratio that each Qualified Participant's Earnings bears to all
Qualified Participants' Earnings.
(e) The Top-Heavy Maximum Disparity Percentage shall be the
lesser of (i) 2.7% or (ii) the applicable percentage from Table A
on page 9.
If the Plan's Integration Level is equal to the Social Security
Wage Base, the Top-Heavy Maximum Disparity Percentage is 2.7%.
(2) Non-Top-Heavy Integration Formula. If the Plan is not
required to provide a minimum allocation for the Plan Year
pursuant to the Top-Heavy Plan rules of Article 15, and the
Employer has not specified in the Plan Agreement that paragraph
(1) will apply whether or not the Plan is Top-Heavy, then:
(a) An amount equal to (i) the Maximum Disparity Percentage
determined under subparagraph (2)(C) multiplied by the sum of all
Qualified Participants' Earnings and Excess Earnings, or (ii) if
less, the entire amount to be allocated, shall be allocated among
the Employer contribution Amounts of all Participants in the
ratio that the sum of each Qualified Participant's Earnings and
Excess Earnings bears to the sum of all Qualified Participants'
Earnings and Excess Earnings.
(b) Any amount remaining after the allocation in paragraph (2)(A)
shall be allocated among the Employer contribution Accounts of
all Qualified Participants in the ratio that each Qualified
Participant's Earnings bears to all Qualified Participants'
Earnings.
(c) the Maximum Disparity percentage shall be the lesser of (i)
5.7% or (ii) the applicable percentage from Table B on page 9.
If the Plan's Integration Level is equal to the Social Security
Wage Base, the Maximum Disparity Percentage is 5.7%.
(3) In this Section 4.2, Earnings means Earnings as defined in
Section 2.13.
(d) Allocation of Forfeitures. Forfeitures shall be allocated
among the Employer Contribution Amounts of all Qualified
Participants in accordance with paragraph (b) or (c), whichever
applies to Employer contributions. Forfeitures may b allocated
pursuant to paragraphs (c)(1)(B), (c)(1)(C) and (c)(2)(A) only to
the extent that the limitation described therein has not been
fully utilized by the allocation of Employer contributions and
amounts reapplied under Section 6.1(d).
(e) Participant Contributions. Except in the case of a Variable
Plan in which the Employer has provided in the Plan Agreement for
nondeductible Participant contributions, the Plan will accept no
such contributions for any Plan Year beginning after the Plan
Year in which the Employer adopts this Plan. Nevertheless, a
Participant Contribution Account shall be maintained in any Plan
which accepted nondeductible Participant contributions for any
Plan Year beginning after December 31, 1986, and such
contributions, together with any matching contributions (as
defined in Section 401(m)(4) of the Code), shall be limited so as
to meet the nondiscrimination test of Section 401(m) of the Code.
Rules applicable to Participant contributions to a Variable Plan
in Plan Years beginning after the adoption of this Plan are set
froth in Section 5.9. All Participant Contribution Accounts will
be fully vested at all times.
4.3 Provisions Applicable Only to Money Purchase Pension Plans.
(a) Amount of Annual Contributions. The Employer will contribute
for each Plan Year an amount described in paragraph (b) or (c)
below, whichever is applicable, less any amounts reapplied for
the Plan Year under Section 6.1(d), not to exceed the amount
deductible under Section 404(c) of the Code. In a Variable Plan,
if the Employer so elects in the Plan Agreement, the amount of
Forfeitures occurring in a Plan year shall be applied to reduce
the Employer's contribution by a like amount, and such
Forfeitures shall be treated as a portion of the Employer
contribution for purposes of paragraphs (b) and (c).
(b) Allocation of Contributions: General Rule. The Employer
shall contribute an amount equal to the product of the Earnings
of all Qualified Participants and the Base Contribution
Percentage, and the contribution shall be allocated as of the
last day of the Plan Year among the Employer Contribution
Accounts of all Qualified Participants in the ratio that the
Earnings of each Qualified Participant bears to the Earnings of
all Qualified Participants. This general rule does not apply to
a plan that is integrated with Social Security.
(c) Plans Integrated with Social Security. If the Employer has
elected in the Plan Agreement to integrate the Plan with Social
Security, the Employer shall contribute an amount equal to the
sum of the following amounts, and the contribution shall be
allocated as of the last day of the Plan Year as follows:
(1) To the Employer Contribution Account of each Qualified
Participant, an amount equal to the product of the Base
Contribution Percentage and his Earnings, and
(2) To the Employer Contribution Account of each Qualified
Participant who has Excess Earnings, the product of his Excess
Earnings, and the lesser of (i) the Base Contribution Percentage
or (ii) the Money Purchase Maximum Disparity Percentage
determined under paragraph (d).
(3) The Base Contribution Percentage shall be no less than three
percent in either of the following circumstances: (i) any Plan
Year of a Standard Plan for which the Plan Agreement does not
specify that the Employer will perform annual Top-Heavy testing,,
or (ii) any Plan Year in which the plan is required to provide a
minimum allocation for the Plan Year pursuant to the Top-Heavy
Plan rules of Article 15.
(d) The Money Purchase Maximum Disparity Percentage is equal to
the lesser of (i) 5.7% or (ii) the applicable percentage from
Table C on this page.
If the Plan's Integration level is equal to the Social Security
Wage Base, the Money Purchase Maximum Disparity Percentage is
5.7%.
(e) In this Section 4.3, Earnings means Earnings as defined in
Section 2.13.
(f) Separate Allocation of Forfeitures. If the Employer has not
elected in the Plan Agreement to use Forfeitures to reduce the
amount of its contributions, Forfeitures shall be allocated among
the Employer Contribution Accounts of all Qualified Participants
in proportion to their earnings.
4.4 Paired Plans. An Employer may adopt as paired pans Putnam
Standard Profit Sharing Plan (Plan Agreement #001) and Putnam
Standard Money Purchase Pension Plan (Plan Agreement #002). Only
one of the two paired plans may be integrated with Social
Security. In any Plan Year in which Putnam Standard paired plans
are top-heavy, each non-key employee who is eligible to
participate in both plans will have allocated to his Account in
the Putnam Standard Money Purchase Pension Plan a minimum
contribution that meets the requirements of Section 12.3.
4.5 Rollover Contributions. An Employee in an eligible class may
contribute at any time cash or other property (which is not a
collectible within the meaning of Section 408(m) of the Code)
acceptable to the Trustee representing qualified rollover amounts
under Sections 402,403, or 408 of the code. Amounts so
contributed shall be credited to a Rollover Account for the
Participant.
4.6 No Deductible Employee contributions. The Plan Administrator
shall not accept deductible employee contributions for a taxable
year beginning after December 31, 1986. In the event that the
Plan is adopted as an amendment of a plan which previously
accepted such contributions for any Participant, the Employer
will establish and maintain (or cause to be established and
maintained) a separate account in which shall be recorded the
amount of such contributions and the income, expenses, gains and
losses incurred thereon. Such an account shall be nonforfeitable
at all times and shall in no event be used to pay premiums on any
life insurance policy. Subject to Article 10, Joint and Survivor
Annuity Requirements, the Participant may withdraw any part of
such an account at any time upon written request to the Plan
Administrator.
Table A
If the Plan s Integration Level is more than:
$0
The greater of $10,000 or 20% of the Social Security Wage Base
80% of the Social Security Wage Base
But not more than:
The greater of $10,000 or 20% of the social Security Wage Base
80% of the social Security Wage Base
Less than the Social Security Wage Base
The applicable percentage is:
2.7%
1.3%
2.4%
Table B
If the Plan s Integration Level is more than:
$0
The greater of $10,000 or 20% of the Social Security Wage Base
80% of the Social Security Wage Base
But not more than:
The greater of $10,000 or 20% of the social Security Wage Base
80% of the social Security Wage Base
Less than the Social Security Wage Base
The applicable percentage is:
5.7%
4.3%
5.4%
Table C
If the Plan s Integration Level is more than:
$0
The greater of $10,000 or 20% of the Social Security Wage Base
80% of the Social Security Wage Base
But not more than:
The greater of $10,000 or 20% of the social Security Wage Base
80% of the social Security Wage Base
Less than the Social Security Wage Base
The applicable percentage is:
5.7%
4.3%
5.4%
ARTICLE V:
Cash or Deferred Arrangement under Section 401(k)(CODA)
5.1 Applicability; Allocations. this Article 5 applies to any
profit sharing plan for which the Employer has elected in the
Plan Agreement to include a CODA. The Employer may specify in
the Plan Agreement that contributions will be made to the Plan
only under the CODA, or that contributions may be made under
Section 4.2 as well as under the CODA. Allocations to
Participants' Accounts of contributions made pursuant to this
Article 5 shall be made as soon as administratively feasible
after their receipt by the Trustee, but in any case no later than
as of the last day of the Plan Year for which the contributions
were made.
5.2 CODA Participation. Each Employee who has met the
eligibility requirements of Article 3 may make Elective Deferrals
to the Plan by completing and returning to the Plan Administrator
a Deferral Agreement form which provides that the Participant's
cash compensation from the Employer will be reduced by the amount
indicated in the Deferral Agreement, and that the Employer will
contribute an equivalent amount to the Trust on behalf of the
Participant.. The following rules will govern Elective
Deferrals:
(a) Subject to the limits specified in the Plan Agreement and set
forth in Section 5.3, a Deferral Agreement may apply to any
amount or percentage of either or both of the Earnings payable to
a Participant in each regular payroll period of the Employer, or
one or more bonuses payable to a Participant from time to time as
specified by the Employer.
<PAGE>
(b) In accordance with such reasonable rules as the Plan
Administrator shall specify, a Deferral Agreement will become
effective as soon as is administratively feasible after the
Deferral Agreement is returned to the Plan Administrator, and
will remain effective until it is modified or terminated. no
Deferral Agreement may become effective retroactively.
(c) A Participant may modify his Deferral Agreement by competing
and returning to the Plan Administrator a new Deferral Agreement
form as of any of the dates specified in the Plan Agreement, and
any such modification will become effective as described in
paragraph (b).
(d) A Participant may terminate his Deferral Agreement at any
time upon advance written notice to the Plan Administrator, and
any such termination will become effective as described in
paragraph (b).
5.3 Annual Limit on Elective Deferrals. During any taxable year
of a Participant, his Elective Deferrals under the Plan and any
other qualified plan of an Affiliated Employer shall not exceed
the dollar limit contained in Section 402(g) of the Code in
effect at the beginning of the taxable year, a Participant's
Elective Deferrals for purposes of this Section 5.3 include all
Employer contributions made on his behalf pursuant to an election
to defer under any qualified CODA as described in Section 401(k)
of the Code, any simplified employee pension cash or deferred
arrangement (SARSEP) as described in Section 401(h)(1)(B) of the
Code, any plan described under Section 501(c)(18) of the Code,
and any Employer contributions made on behalf of the Participant
for the purchase of an annuity contract under Section 403(b) of
the Code pursuant to a salary reduction agreement. The amount of
Elective Deferrals of a Participant who receives a hardship
distribution pursuant to Section 5.14 shall be reduced, for the
taxable year next following the distribution, by the amount of
Elective Deferrals made in the taxable year of the hardship
distribution.
5.4 Distribution of Excess Elective Deferrals. "Excess Elective
Deferrals" means those Elective Deferrals described in Section
5.3 that are incredible in a Participant's gross income under
Section 402(g) of the Code, to the extent that the Participant's
aggregate elective deferrals for a taxable year exceed the dollar
limitation under that Code Section. Excess Elective Deferrals
shall be treated as Annual Additions under the Plan, whether or
not they are distributed under this Section 5.4 . A Participant
may designate to the Plan any Excess Elective Deferrals made
during his taxable year by notifying the Employer on or before
the following March 15 of the amount of the Excess Elective
Deferrals to be so designated. A Participant who has Excess
Elective Deferrals for a taxable year, taking into account only
his Elective Deferrals under the Plan and any other plans of the
Affiliated Employers, shall be deemed to have designated the
entire amount of such Excess Elective Deferrals.
Notwithstanding any other provision of the Plan, Excess Elective
Deferrals, plus any income and minus any loss allocable thereto,
shall be distributed no later than April 15 to any Participant to
whose Account Excess Elective Deferrals were designated or deemed
designated for the preceding year. The income or loss allocable
to Excess Elective Deferrals is the income or loss allocable to
the Participant's Elective Deferral Account for the taxable year
multiplied by a fraction, the numerator of which is the
Participant's Account balance attributable to Elective Deferrals
without regard to any income or loss occurring during the year.
To the extent that the return to a Participant of his Elective
Deferrals would reduce an Excess Amount (as defined in Section
6.5(f)), such Excess Deferrals shall be distributed to the
Participant in accordance with Article 6.
5.5 Satisfaction of ADP and ACP Tests. In each Plan Year, the
Plan must satisfy the ADP test described in Section 5.11. the
Employer may cause the Plan to satisfy the ADP or ACP test or
both test for a Plan Year by any of the following methods or by
any combination of them:
(a) By the distribution of Excess Contributions in accordance
with Section 5.7, or the distribution of Excess Aggregate
Contributions in accordance with Section 5.12, or both;
(b) In a Variable Plan that permits all Participants to make
Participant Contributions, by recharacterization of Excess
Contributions in accordance with Section 5.10; or
(c) If the Employer has so elected in the Plan Agreement, by
making Qualified Nonelective Contributions or Qualified Matching
Contributions or both, in accordance with the Plan Agreement and
this Section 5.5.
5.6 Actual Deferral Percentage Test Limit. The Actual Deferral
Percentage (hereinafter "ADP") for Participants who are Highly
Compensated Employees for each Plan Year and the ADP for
Participants who are Non-Highly Compensated Employees for the
same Plan Year must satisfy one of the following tests:
(a) The ADP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ADP for Participants who
are Non-Highly Compensated Employees for the same Plan Year
multiplied by 1.25; or
(b) The ADP for Participant who are Highly Compensated Employees
for the Plan Year shall not exceed the ADP for Participants who
are Non-Highly Compensated Employees for the same plan Year
multiplied by 2.0, provided that the ADP for Participants who are
Highly compensated Employees does not exceed the ADP for
Participants who are Non-Highly Compensated employees by more
than two percentage points.
The following special rules shall apply to the computation of the
ADP:
(c) Actual Deferral Percentage means, for a specified group of
Participants for a Plan Year, the average of the ratios
(calculated separately for each Participant in the group) of (1)
the amount of Employer contributions actually paid over to the
Trust on behalf of the Participant for the Plan Year to (2) the
Participant s Earnings for the Plan Year (or, provided that the
Employer applies this method to all Employees for a Plan Year the
Participant s Earnings for that portion of the Plan Year during
which he was eligible to participant in the Plan). Employer
contributions on behalf of any Participant shall include: (i) his
Elective Deferrals, including Excess Elective Deferrals, but
excluding Elective Deferrals that are taken into account in the
Average contribution Percentage test described in Section 5.11
(provided the ADP test is satisfied both with and without
exclusion of these Elective Deferrals), and excluding Elective
Deferrals returned to a Participant to reduce an Excess Amount as
defined in Section 6.5(f); and (ii) if the Employer has elected
to make Qualified Nonelective Contributions, such amount of
Qualified Nonelective Contributions, if any, as shall be
necessary to enable the Plan to satisfy the ADP test; and (iii)
if the Employer has elected to make Qualified Matching
Contributions, such amount of Qualified Matching Contributions,
if any, as shall be necessary to enable the Plan to satisfy the
ADP. For purposes of computing Actual Deferral Percentages, an
Employee who would be a Participant but for his failure to make
Elective Deferrals shall be treated as a Participant on whose
behalf no Elective Deferrals are made.
(d) In the event that the Plan satisfies the requirement 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 requirement s of such sections of the Code only
if aggregated with the Plan, then this Section 5.6 shall be
applied by determining the ACP 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.
(e) The ADP 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 these are treated as Elective
Deferrals for purposes of the ADP test) allocated to his Accounts
under two or more CODAs described in Section 401(k) of the Code
that are maintained by the Affiliated Employers 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 CODA. If a
Highly Compensated Employee participates in two or more CODAs
that have different Plan Years, all CODAs ending with or within
the same calendar year shall be treated as a single CODA.
(f) For purposes of determining the ADP of a Participant who is a
5-percent owner or one of the ten most highly-paid Highly
Compensated Employees, the Elective Deferrals (and Qualified
Nonelective Contributions or Qualified Matching Contributions, or
both, if these are treated as Elective Deferrals for purposes of
the ADP test) and the Compensation for the Plan Year of his
Family Members (as defined in section 414(q)(6) of the Code).
Family Members of such Highly Compensated Employees shall be
disregarded as separate employees in determining the ADP both for
Participants who are Non-Highly Compensated Employees and for
Participants who are Highly Compensated Employees.
(g) For purposes of the ADP test, Elective Deferrals , Qualified
Nonelective Contributions and Qualified Matching Contributions
must be made before the last day of the 12 moth period
immediately following the Plan Year to which those contributions
relate.
(h) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of Qualified
Nonelective Contributions and Qualified Matching Contributions,
or both, used in satisfying the test.
(i) The determination and treatment of the ADP amounts of any
Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
5.7 Distribution of Excess Contributions. "Excess Contributions"
means, with respect to any Plan Year, the excess of:
(a) The aggregate amount of employer contributions actually taken
into account in computing the ADP of Highly Compensated Employees
for the Plan Year, over
(b) The maximum amount of Employer contributions permitted by the
ADP test, determined by reducing contributions made on behalf of
Highly Compensated Employees in order of their ADPs, beginning
with the highest of such percentages.
Notwithstanding any other provision of the 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 Excess Contributions
were allocated for the preceding Plan Year; provided, however,
that in the case of a Variable Plan in which the Employer has
elected in the Plan agreement to re characterize Excess
contributions pursuant to Section 5.10, distribution shall be
made pursuant to this Section 5.7 to the extent that excess
contributions are not so recharacterized. If such excess amounts
are distributed more than two an one-half months after the last
day of the Plan Year in which the excess amounts arose, an excise
tax equal to ten percent of the excess amounts will be imposed on
the Employer maintaining the Plan. Such distributions shall be
made to Highly Compensated Employees on the basis of the
respective portions of the Excess Contributions attributable to
each of them. 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 under that Section. Excess Contributions
(including any amounts recharacterized in accordance with Section
5.10) shall be treated as Annual Additions under the Plan.
the income or loss allocable to Excess Contributions is the
income or loss allocable to the Participant s Elective Deferral
Account (and, if applicable, his Qualified Nonelective Account or
Qualified Matching Account or both) for the Plan Year multiplied
by a faction, the numerator of which is the Participant s Excess
Contributions for the year and the denominator of which is the
Participant s account balance attributable to Elective Deferrals
(and Qualified Nonelective contributions or Qualified Matching
Contributions, or both, if any of these are included in the ADP
test) without regard to any income or loss occurring during such
Plan Year.
Excess Contributions shall be distributed from the Participant's
Elective Deferral Account and Qualified Matching Account (if
applicable) in proportion to the Participant's Elective Deferrals
and Qualified Matching Contributions (to the extent used in the
ADP test) for the Plan Year. Excess Contributions shall be
distributed from the Participant's Qualified Nonelective Account
only to the extent that such Excess Contributions exceed the
balance in the Participant's Elective Deferral Account and
Qualified Matching Account.
5.8 Matching Contributions. If so specified in the Plan
Agreement, the Employer will make Matching Contributions to the
Plan in accordance with the Plan Agreement, but no Matching
Contribution shall be made with respect to an Elective Deferral
that is returned to a Participant because it represents an Excess
Elective Deferral, an Excess Contribution or an Excess Amount (as
defined in Section 6.5(f)); or with respect to a Participant
contribution that is returned to a Participant because it
represents an Excess Aggregate Contribution or an Excess Amount
(as defined in Section 6.5(f); and if a Matching Contribution has
nevertheless been made with respect to such an Elective Deferral
or Participant contribution, the Matching Contribution shall
become a Forfeiture as of the end of the Plan Year of which it
was contributed, notwithstanding any other provision of the Plan.
(a)Employer Matching Contribution (Variable Plans Only).
Matching Contributions will be allocated among the employer
Matching Accounts of Participants in proportion to their
Elective Deferrals or their Participant Contributions, as
specified by the Employer in the Plan Agreement. Employer
Matching Accounts shall become vested According to the vesting
schedule specified in the Plan Agreement, but regardless of that
schedule shall be fully vested upon the Participant s Retirement
(or, if earlier, his fulfillment of he requirements for early
retirement, if any, or attainment of the normal retirement age
specified in the Plan Agreement), his death during employment
with an Affiliated Employer, an in accordance with Section 19.3.
Forfeitures of Employer Matching Contributions, other than Excess
Aggregate Contributions, shall be made in accordance with Section
8.3. Forfeitures of Employer Matching Accounts for a Plan Year
shall be applied to reduce the total Employer Matching
Contribution for the Plan Year, or allocated among the Employer
Matching Accounts of Participants in addition to the Employer
Matching Contribution for the Plan Year, as elected by the
Employer in the Plan Agreement.
(b) Qualified Matching Contributions. Qualified Matching
Contributions will be allocated among the Qualified Matching
contribution Accounts of Participant as specified by the Employer
in the Plan Agreement. In a Standard Plan, a Qualified Matching
Contribution forfeited pursuant to the first sentence of this
Section 5.8 will be applied to reduce the aggregate Matching
Contributions otherwise required of the Employer.
5.9 Participant Contributions (Variable Plans Only). If so
specified in the Plan Agreement for a Variable Plan, a
Participant may make nondeductible Participant contributions to
the Plan in accordance with the Plan Agreement and subject to the
terms and conditions of this Article 5. Participant
Contributions will be allocated to the Participant Contributions
Account of the contributing Participant. All Participant
Contribution Accounts will be fully vested at all times.
5.10 Recharacterization of Excess Contributions (Variable Plans
Only). Provided that the Plan Agreement permits all Participants
to make Participant Contributions, the Employer may treat a
Participant's Excess Contributions to a Variable Plan as an
amount distributed to the Participant and then contributed by the
Participant to the Plan as a Participant Contribution.
Recharacterized amounts will remain nonforfeitable and subject to
the same distribution requirements as Elective Deferrals.
Amounts may not be recharacterized by a highly compensated
Employee to the extent that a recharacterized amount in
combination with other Participant contributions made by that
Employee would exceed any stated limit under the Plan on
Participant Contributions. Recharacterization must occur no
later than two and one-half months after the last day of the Plan
Year in which the Excess contributions arose, and is deemed to
occur no earlier than the date the last Highly Compensated
employee is informed in writing by the Employer of the amount
recharacterized and the consequences thereof. Recharacterized
amounts will be taxable to the Participant for his tax year in
which the Participant would have received them in cash.
5.11 Average Contribution Percentage Test Limit and Aggregate
Limit. the Average Contribution Percentage (hereinafter "ACP")
for Participants who are High Compensated Employees for each Plan
year and the ACP for Participants who are Non-Highly Compensated
Employees for the same Plan Year must satisfy one of the
following tests:
(a) The ACP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ACP for Participants who
are Non-Highly Compensated Employees for the same Plan Year
multiplied by 1.25; or
(b) The ACP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ACP for Participants who
are Non-Highly Compensated Employees for the same Plan year
multiplied by two(2), provided that the ACP for Participants who
are Highly compensated Employees does not exceed the ACP for
Participants who are Non-Highly Compensated Employees by more
than two percentage points.
The following rules shall apply to the computation of the ACP:
(c) Average Contribution Percentage means the average of the
Contribution Percentages of the Eligible Participants in a group.
(d) Contribution Percentage means the ratio (expressed as a
percentage) of a Participant's Contribution Percentage Amounts to
the Participant's Earnings for the Plan Year (or, provided that
the Employer applies this method to all Employees for a Plan
Year, the Participant's Earnings for that portion of the Plan
Year during which he was eligible to participate in the Plan).
(e) Contribution Percentage Amounts means the sum of the
Participant Contributions, Employer Matching Contributions, and
Qualified Matching Contributions (to the extent not taken into
account for purposes of the ADP 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 Employer Matching Contributions allocated to the
Participant's Account, taken into account in the year in which
the allocation is made. If the Employer has elected in the Plan
Agreement to make Qualified Nonelective Contributions, such
amount of Qualified Nonelective Contributions, if any, as shall
be necessary to enable the Plan to satisfy the ACP test shall be
included in the Contribution Percentage Amounts. Elective
Deferrals shall also be included in the contribution Percentage
Amounts to the extent, if any, needed to enable the Plan to
satisfy the ACP test, so long as the ADP test is met before the
Elective Deferrals are used in the ACP test, and continues to be
met following the exclusion of those Elective Deferrals that are
used to meet the ACP test.
(f) Eligible Participant means any Employee who is eligible to
make a Participant Contribution (or an Elective Deferral, if
Elective Deferrals are taken into account in the calculation of
the Contribution Percentage), or to receive an Employer Matching
Contribution (or a Forfeiture thereof) or a Qualified Matching
contribution. If a Participant Contribution is required as a
condition of participation in the Plan, any Employee who would be
a Participant in the Plan if he made such a contribution shall be
treated as an Eligible Participant on behalf of whom no
Participant Contributions are made.
(g) Aggregate Limit means the sum of (i) 125 percent of the
greater of the ADP of the Non-Highly Compensated Employees for
the Plan Year, or the ACP of Non-Highly Compensated Employees
under the Plan subject to Code Section 401(m) for the Plan Year
of the CODA, and (ii) the lesser of 200 percent of, or two plus,
the lesser of the ADP or ACP.
(h) If one or more Highly Compensated Employees participate in
both a CODA and a plan subject to the ACP test maintained by an
Affiliated Employer, and the sum of the ADP and ACP of those
Highly Compensated Employees subject to either or both test s
exceeds the Aggregate Limit, then the ACP of those Highly
Compensated Employees who also participate in a CODA will be
reduced (beginning with the Highly Compensated Employee whose
ACP is the highest) so that the Aggregate Limit is not exceeded.
The amount by which each Highly Compensated Employee's
Contribution Percentage Amounts is reduced shall be treated as an
Excess Aggregate contribution. In determining the Aggregate
Limit, the ADP and ACP of Highly Compensated Employees are
determined after any corrections required to meet the ADP and ACP
tests. The Aggregate Limit will be considered satisfied if both
the ADP and ACP of the Highly compensated Employees does not
exceed 1.25 multiplied by the ADP and ACP of the Non-Highly
Compensated Employees.
(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
account under two or more plans described in Section 401(k) of
the Code, that are maintained by an Affiliated 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 or more CODAs that have different
plan years, all CODAs ending with or within the same calendar
year shall be treated as a single CODA.
(j) In the event that the Plan satisfies the requirements of
Sections 401(m), 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 the Plan, then this Section 5.10 shall be
applied by determining the contribution 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(m) of the Code only if they have the
same Plan Year.
(k) For purposes of determining the Contribution Percentage of a
Participant who is a five-percent owner or one of the ten most
highly-paid Highly Compensated Employers, the Contribution
Percentage Amounts and Compensation of the 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 of such Highly Compensated
Employees shall be disregarded as separate employees in
determining the Contribution Percentage both for Participants who
are Non-Highly Compensated Employees and for Participants who are
Highly Compensated Employees.
(l) For purposes of the ACP test, Participant Contributions are
considered to have been made in the Plan Year in which they were
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 12-month period beginning on
the day after the close of the Plan Year.
(m) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Qualified
Nonelective Contributions or Qualified Matching Contributions, or
both, used in the ACP test.
(n) 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.
5.12 Distribution of Excess Aggregate Contributions.
Notwithstanding any other provision of the Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable
thereto, shall be forfeited if 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 Play Year. Excess
Aggregate Contributions shall be allocated to Participants whoa
re subject to the family member aggregation rules of Section
414(q)(6) of the Code in the manner prescribed by the
regulations. If excess amounts attributable to Excess Aggregate
Contributions are distributed more than two and on-half months
after the last day of the Plan Year in which such excess amounts
arose, an excise tax equal to ten percent of the excess amount
will be imposed on the Employer maintaining the Plan. j Excess
Aggregate Contributions shall be treated as Annual Additions
under the Plan.
The income or loss allocable to Excess Aggregate Contributions is
the income or loss allocable to the Participant's Participant
Contribution Account, Employer Matching Contribution Account (if
any, and if all amounts therein are not used in the ADP test),
and, if applicable, Qualified Nonelective Account and Elective
Deferral Account for the Plan Year, multiplied by a fraction, the
numerator of which is the Participant's Excess Aggregate
Contributions for the year and the denominator of which is the
Participant's account balance(s) attributable to Contribution
Percentage Amounts without regard to any income or loss occurring
during the Plan Year.
Forfeitures of Excess Aggregate Contributions shall either be
reallocated to the accounts of Non-Highly Compensated Employees
or applied to reduce Employer contributions, as elected by the
Employer in the Plan Agreement.
Excess Aggregate Contributions shall be forfeited if forfeitable,
or distributed on a prorata basis form the Participant's
Participant Contribution Account, Employer Matching Account, and
Qualified Matching Account (and, if applicable, the Participant's
Qualified Nonelective Account or Elective Deferral Account, or
both).
Excess Aggregate Contributions means, with respect to any Plan
Year, the Excess of:
(a) The aggregate Contribution Percentage Amounts taken into
account in computing the numerator of the Contribution Percentage
and actually mad on behalf of Highly Compensated Employees for
the Plan Year, over
(b) The maximum Contribution Percentage Amounts permitted by the
ACP test (determined by reducing contributions made on behalf of
Highly Compensated Employees in order of their Contribution
Percentages, beginning with the highest of such percentages).
Such determination shall be made after first detraining Excess
Elective Deferrals pursuant to Section 5.4, and then determining
Excess Contributions pursuant to Section 5.7.
5.13 Restriction on Distributions. No distribution may be made
from a Participant's Elective Deferral Account, Qualified
Nonelective Account or Qualified Matching Account until the
occurrence of one of the following events:
(a) The Participant's Disability, death or termination of
employment with the Affiliated Employer;
(b) Termination of the Plan without the establishment of another
defined contribution plan;
(c) If the Plan is a profit sharing plan, the Participant's
attainment of age 591/2 (if the Employer has elected in the Plan
Agreement t permit such distributions); or
<PAGE>
(d) In the case of an Employer that is a corporation, the
disposition by the Employer to an unrelated entity of (i)
substantially all of the assets (within the meaning of Section
409(d)(2) of the Code) used in a trade or business of the
Employer, if the Employer continues to maintain the Plan after
the disposition, but only with respect to Employees who continue
employment with the entity acquiring such assets; or (ii) the
Employer's interest in a subsidiary (within the meaning of
Section 409(d)(3) of the Code), if the Employer continues to
maintain the Plan after the disposition, but only with respect to
Employees who continue employment with such subsidiary.
In addition, if the Employer has elected in the Plan Agreement to
permit such distributions, a distribution may be made from a
Participant's Elective Deferral Account in the event of his
financial hardship as described in Section 5.14. All
distributions upon any of the events listed above are subject to
the conditions of Article 10, Joint and Survivor Annuity
Requirements.
5.14 Hardship Distributions. If the Employer has so elected in
the Plan Agreement, upon a Participant's written request the
Employer may permit a distribution from his Elective Deferral
Account (and, in a Variable Plan, from his Employer Matching
Account). The terms and conditions of Section 12.2 and the
special vesting rule contained in Section 8.4 shall apply to
hardship distributions from an Employer Contribution Account or
and Employer Matching Account. The further terms of this Section
5.14 shall apply to hardship distributions from an Elective
Deferral Account. No hardship distribution shall be made from a
Qualified Nonelective Account or Qualified Matching Account.
(a) The maximum amount that may be distributed on account of
hardship from an Elective Deferral Account after December 31,
1988, shall not exceed the sum of (1) the amount credited to the
Account as of December 31, 1988, and (2) the aggregate amount of
the Elective Deferrals made by the Participant after December 31,
1988, and before the hardship distribution.
(b) Hardship distributions shall be permitted only on account of
the following financial needs:
(1) Expenses for medical care described in section 213(d) of the
Code for the Participant, his spouse, children, and dependents,
or necessary for these persons to obtain such care;
(2) Purchase of the principal residence of the Participant
(excluding regular mortgage payments);
(3) Payment of tuition and related educational fees for the
upcoming 12 months of postsecondary education for the
Participant, his spouse, children, or dependents; or
(4) Payments necessary to prevent the Participant's eviction
from, or the foreclosure of a mortgage on, his principal
residence.
(c) Hardship distributions shall be subject to the spousal
consent requirements contained in Sections 401(a)(11) and 417 of
the Code, to the same extent that those requirements apply to a
Participant pursuant to Section 10.1.
(d) A hardship distribution will be made to a Participant only
upon satisfaction of the following conditions:
(1) The Participant has obtained all nontaxable loans and all
distributions other than hardship distributions available to him
form all plans maintained by the Affiliated Employers;
(2) The hardship distribution does not exceed the amount of the
Participant's financial need as described in paragraph (b) plus
any amounts necessary to pay federal, state, and local income
taxes and penalties reasonably anticipated to result from the
distribution;
(3) All plans maintained by the Affiliated Employers provide that
the Participant's Elective Deferrals and Participant
contributions will be suspended for a period of 12 months
following his receipt of a hardship distribution; and
(4) All plans maintained by the Affiliated Employers provide that
the amount of Elective Deferrals that the Participant may make in
his taxable year immediately following the year of a hardship
distribution will not exceed the applicable limit under Section
402(g) of the Code for the taxable year, reduced by the amount of
Elective Deferrals made by the Participant in the taxable year of
the hardship distribution.
5.15 Special Effective Dates. If the Plan is adopted as an
amendment of an existing plan, the provisions of Sections 5.3 and
Section 5.7 through 5.11 are effective as of the first day of the
first Plan Year beginning after December 31, 1986.
ARTICLE VI:
Limitations on Allocations
6.1 No Additional Plan. If the Participant doe 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),
or an individual medical account (as defined in Section 415(1)(2)
of the Code) which provides an Annual Addition as defined in
Section 6.5(a), maintained by an Affiliated Employer:
(a) The amount of Annual Additions which may be credited to the
Participant's accounts for any Limitation Year will to exceed the
lesser of the Maximum Annual Additions or any other limitation
contained in this Plan. If the Employer contribution that would
otherwise be contributed or allocated to the Participant Account
would cause the Annual Additions for the Limitation Year to
exceed the Maximum Annual Additions, the amount contributed or
allocated will be reduced so that the Annual Additions for the
Limitation Year will equal the Maximum Annual Additions.
(b) Before determining a Participant's actual Section 415
compensation for a Limitation Year, the Employer may determine
the Maximum Annual Additions for the Participant on the basis of
a reasonable estimation of the Participant's Section 415
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 Annual Additions for the Limitation
Year will be determined on the basis of the Participant's actual
Section 415 compensation for the Limitation Year.
(d) If pursuant to paragraph 6.1(c), or as a result of the
reallocation of Forfeitures, or as a result of a reasonable error
in determining the amount of Elective Deferrals that may be made
by a Participant, the Annual Additions exceed the Maximum Annual
Additions, the Excess Amount will be disposed of as follows:
(1) any nondeductible voluntary Participant Contributions and
Elective Deferrals, to the extent they would reduce the Excess
Amount, will be returned to the Participant.
(2) If after the application of (1) above 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
Accounts 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.
(3) If after the application of (1) above an Excess Amount still
exists, and the Participant is not covered by the Plan at the end
of a 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.
(4) If a suspense account is in existence at any time during a
Limitation Year pursuant to this Section 6.1(d), it will
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.
6.2 Additional Master or Prototype Plan. If in addition to this
Plan a Participant is covered under another qualified Master or
Prototype defined contribution plan or a welfare benefit fund (as
defined in Section 419(e) of the Code), or an individual medical
account (as defined in Section 415(1)(2) of the Code) which
provides and Annual Addition as defined in Section 6.5(a),
maintained by an Affiliated Employer during any Limitation Year:
(a) the annual Additions which may be credited to a Participant's
Accounts under this Plan for any such Limitation Year will not
exceed the Maximum Annual Additions reduced by the Annual
Additions credited to a Participant's accounts 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 an Affiliated Employer are less than the Maximum Annual
Additions, an the Employer contribution that would otherwise be
contributed or allocated to the Participant's Accounts 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 an
funds for the Plan Year will equal the Maximum Annual Additions.
If the Annual Additions with respect to the Participant under
such other defined contribution plans and welfare benefit fund in
the aggregate are equal to or greater than the Maximum Annual
Additions, no amount will be contributed or allocated to the
Participant's Accounts under this Plan for the Limitation Year.
(b) Before determining a Participant's actual Section 415
Compensation for a Limitation Year, the Employer may determine
the Maximum Annual Additions for the Participant in the manner
described in Section 6.1(b).
(c) As soon as is administratively feasible after the end of the
Plan Year, the Maximum Annual Additions for the Plan Year will b
determined on the basis of the Participant's actual Section 415
Compensation for the Plan Year.
(d) If, pursuant to Section 6.2(c) or as a result of the
allocation of Forfeitures, or as a result of a reasonable error
in determining the amount of Elective Deferrals that may be made
by a Participant, 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 under any qualified Master or
Prototype defined contribution plan, except that Annual Additions
to any 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 X and Y, where (X) is the total Excess
Amount allocated as of such date, and (Y) is 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 the is and all the other qualified Master or
Prototype defined contribution plans.
(f) Any Excess Amount attributed to this Plan will be disposed of
in the manner described in Section 6.1(d).
6.3 Additional Non-Master or Non-Prototype Plan. If the
Participant is covered under another qualified defined
contribution plan maintained by an Affiliated employer which is
not a Master or Prototype plan, Annual Additions which may be
credited to the Participant's Accounts 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 Plan Agreement.
6.4 Additional Defined Benefit Plan. If an Affiliated 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 Plan Fraction will not exceed 1.0
in any Limitation Year. The Annual Additions which may be
credited to the Participant's Accounts under this Plan for any
Limitation Year will be limited in accordance with the Plan
Agreement.
6.5 Definitions
(a) Annual Additions means the sum of the following amounts
credited to a Participant's Accounts for the Limitation Year:
(1) Employer contributions;
(2) For any Limitation Year beginning after December 31, 1986,
after-tax Employee contributions;
(3) Forfeitures;
(4) Amounts allocated after March 31, 1984, to any individual
medical account, as defined in Section 415(1)(2) of the Code,
which is part of a pension or annuity plan maintained by an
Affiliated Employer;
(5) Amounts derived from contributions paid or accrued after
December 31, 1985, in taxable years ending after such date, which
are attributable to past-retirement medical benefits allocated to
the separate account of a key Employee, as defined in Section
419(d)(3) of the Code, under a welfare benefit fund as defined in
Section 419(e) of the Code, maintained by an Affiliated Employer;
and
(6) In a Plan that includes a CODA, Excess Elective Deferrals,
Excess Contributions (including recharacterized Elective
Deferrals) and Excess Aggregate Contributions.
For this purpose, any Excess Amount applied under Sections 6.1(d)
or 6.2(e) in the Limitation Year to reduce Employer
contributions will be considered Annual Additions for such
Limitation Year. any rollover contribution will not be
considered an Annual Addition.
(b) Section 415 Compensation means, for a self-employed person,
his Earned Income; and for any other Participant, his "Form W-2
earnings" as defined in Section 2.8, if the Employer has elected
in item 4 of the Plan Agreement a definition of compensation
based on "Form W-2 earning"; or if the Employer has not so
elected, his 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 o the basis of a
percentage of profits, commissions on insurance premiums, tips,
and bonuses), and excluding the following:
(1) Employer contributions to a plan of deferred compensation
which are not includible in the Participant's gross income for
the taxable year in which contributed, or Employer contributions
under a simplified Employee pension plan t the extent such
contributions are deductible by the Employee, or any
distributions from a plan of deferred compensations;
(2) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the
Participant either becomes freely transferable or is not longer
subject to a substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option; and
(4) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary
reduction agreement) toward 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 Participant).
For purposes of applying the limitations of this Article 6,
Section 415 Compensation for a Limitation year is the Section 415
compensation actually paid or includible in gross income during
such Limitation Year.
(c) Defined Benefit Fraction means a fraction, the numerator of
which is the sum of the Participant's Projected Annual Benefits
under al the defined benefit plans (whether or not terminated)
maintained by the Affiliated Employers, and the denominator of
which is the lesser of 125 percent of the dollar limitation in
effect for the Limitation Year under Sections 415(b) and (d) of
the Code, or 140 percent of the Participant's Highest Average
Compensation including any adjustments under Section 415(b) of
the Code. Notwithstanding the foregoing, 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 an Affiliated Employer which were in
existence on May 6, 1986, the denominator of this fraction will
not be less than 125 percent 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 change 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 means $30,000 or if
greater, one-fourth 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 Faction means a fraction, the numerator
of which is the sum of the Annual Additions to the Participant's
accounts under all the defined contribution plans (whether or not
terminated) maintained by Affiliated Employers for the current
and all prior Limitation Years (including the Annual Additions
attributable to the Participant's nondeductible Employee
contributions to all defined benefit plans, whether or not
terminated, maintained by the Affiliated Employers, 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(1)(2) of the Code), and the
denominator of which is the sum of the Maximum Annual Additions
for the current and all prior Limitation Years of service with
the Affiliated Employers (regardless of whether a defined
contribution plans was maintained by any Affiliated employer).
The Maximum Annual Additions in any Plan Year is the lesser of
125 percent of the dollar limitation determined under Section
415(b) and (d) of the Code in effect under Section 415(c)(1)(A)
of the Code, or 35 percent of the Participant's Section 415
Compensation for such year. If the Employee 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 an Affiliated 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 the excess of the sum of the fractions over 1.0, multiplied by
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 by 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 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 100% of nondeductible Employee contributions as Annual
Additions.
(f) Excess Amount means, with respect to any Participant, the
amount by which Annual Additions exceed the Maximum Annual
Additions.
(g) Highest Average Compensation means the average compensation
for the three consecutive Years of Service with the Employer that
produces the highest average. A Year of Service with the
Employer is the period of 12 consecutive months specified as the
Limitation Year in the Plan Agreement.
(h) Limitation Year means the period of 12 consecutive months
specified in the Plan Agreement. All qualified plans maintained
by the Employer must use the same Limitation Year. If the
Limitation Year is amended to a different period of 12
consecutive months, the new Limitation year must begin on a date
within the Limitation Year in which the amendment is made.
(i) Master or Prototype Plan means a plan the form of which is
the subject of a favorable opinion letter from the Internal
Revenue Service.
(j) Maximum Annual Additions, which is the maximum annual
addition that my be contributed or allocated to a Participant's
account under the plan for any Limitation year, means an amount
not exceeding the lesser of (a) the Defined Contribution Dollar
Limitation or (b) 25 percent of the Participant's Section 415
Compensation for the Limitation Year. The compensation
limitation referred to in (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 (1)(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 period of 12
consecutive months, the Maximum Annual Additions will not exceed
the Defined contribution Dollar Limitation multiplied by the
following fraction:
number of months in the short Limitation Year
12
(k) Projected Annual Benefit means 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:
(1) the Participant will continue employment until normal
retirement age under the Plan (or current age, if later), and
(2) The Participant's Section 415 Compensation for the current
Limitation year and all other relevant factors used to determine
benefits under the plan will remain constant for al future
Limitation Years.
ARTICLE VII:
Eligibility for Distribution of Benefits
7.1 Retirement. After his Retirement, the amount credited to a
Participant's Accounts will be distributed to him in accordance
with Article 9. The termination of a Participant's employment
with the Affiliated Employers after he has (i) attained the
normal retirement age specified in the Plan Agreement, (ii) in a
Variable Plan, fulfilled the requirement for early retirement (if
any) specified in the Plan Agreement, or (iii) become Disabled,
will constitute his Retirement. In a Variable Plan, upon a
Participant's Retirement (or, if earlier, his attainment of the
normal retirement age specified in the Plan Agreement or
fulfillment of the requirements for early retirement, if any,
specified in the Plan Agreement the participant's Accounts shall
become fully vested, regardless of the vesting schedule specified
by the Employer in the Plan Agreement. In a Variable Plan, a
Participant who separates from service with any vested balance in
his Accounts, after satisfying the service requirements for early
retirement (if any) is specified in the Plan Agreement) but
before satisfying the age requirement (if any is specified in the
Plan Agreement), shall be entitled to a fully vested early
retirement benefit upon his satisfaction of such age requirement.
7.2 Death. If a Participant dies before the distribution of his
Accounts has bee complete, his Beneficiary will be entitled to
distribution of benefits in accordance with Article 9. In a
Variable Plan, a Participant's Accounts will become fully vested
upon his death before termination of his employment with the
Affiliated Employers, regardless of the vesting schedule
specified by the Employer in the Plan Agreement.
A Participant may designate a Beneficiary by completing and
returning to the Plan Administrator a form provided for this
purpose. The form most recently complete and returned to the
Plan Administrator before the Participant's death shall supersede
any earlier form. If a Participant has not designated any
Beneficiary before his death, or if no Beneficiary so designated
survives the Participant, his Beneficiary shall be his surviving
spouse, or if there is no surviving spouse, his estate. A
married Participant in a profit sharing plan may designate a
Beneficiary other an his spouse only if his spouse consents in
writing to the designation, and the spouse's consent acknowledges
the effect of the consent and is witnessed by a notary public or
a representative of the Plan. The beneficiary or beneficiaries
named in the designation to which the spouse has so consented may
not be change without further written spousal consent unless the
terms of the spouse's original written consent expressly permit
such a change, and acknowledge that the spouse voluntarily
relinquish the consent to a specific beneficiary. the marriage
of a Participant shall nullify any designation of a beneficiary
previously executed by the Participant. If it is established to
the satisfaction of the Plan Administrator that the Participant
has no spouse or that the spouse cannot be located, the
requirement of spousal consent shall not apply. Any spousal
consent, or establishment that spousal consent cannot be
obtained, shall apply only to the particular spouse involved.
7.3 Other Termination of Employment. A Participant whose
employment terminates for any reason other than his Retirement or
death will be entitled to distribution, in accordance with
Article 9, of benefits equal to the amount of the vested balance
of his Accounts as determined under Article 8.
ARTICLE VIII:
Vesting
8.1 Vested Balance. The vested balance of a Participant's
Accounts will be determined as follows:
(a) General Rule. A Participant's Deductible Employee
Contribution Account, Participant Contribution Account and
Rollover Account, and in a Standard Plan, all of his Accounts,
shall be fully vested at all times. The vested portion of his
Employer Contribution Account in a Variable plan shall be equal
to the percentage that corresponds, in the vesting schedule
specified in the Plan Agreement (or, if the Plan has become
top-heavy, the vesting schedule determined under Section 15.5),
to the number of Years of Service credited to the Participant as
of the end of the Plan Year in which his employment terminates.
(b)Special Rules for CODA. In a Plan that includes a CODA, a
Participant's Elective Deferral Account, Qualified Nonelective
Account, and Qualified Matching Account shall be fully vested at
all times. The vested portion of his Employer Matching Account
in a Variable Plan shall be equal to the percentage that
corresponds, in the vesting schedule specified in the Plan
Agreement (or, if the Plan has become top-heavy, the vesting
schedule determined under Section 15.5), to the number of Years
of Service credited to the Participant as of the end of the Plan
Year in which his employment terminates.
(c) Retirement. In a Variable Plan, all of a Participant's
Accounts shall become fully vested upon his Retirement or his
earlier attainment of early retirement age (if any) or the normal
retirement age elected by the Employer in the Plan Agreement.
For so long as a former Employee does not receive a distribution
(or a deemed distribution) of the vested portion of his accounts,
the undistributed portion shall be held in a separate account
which shall be invested pursuant to Section 13.3 and shall share
in earning and losses of the Trust Fund pursuant to Section 13.4
in the same manner as the Accounts of active Participants.
8.2 Vesting of Accounts of Returned Former Employees (Variable
Plans Only). the following rules apply in determining the vested
portion of the Accounts of a Participant who incurs one or more
consecutive One-Year Vesting Breaks and then returns to
employment with an Affiliated Employer:
(a) If the Participant incurred fewer than five consecutive
One-Year Vesting Breaks, then all of his Years of Service will be
taken into account in determining the vested portion of his
Accounts, as soon as he has competed one Year of Service
following his return to employment.
(b) If the Participant incurred five or more consecutive One-Year
Vesting Breaks, the:
(1) No Year of Service competed after his return to employment
will be taken into account in determining the vested portion of
his Accounts as of any time before he incurred the first One-Year
Vesting Break;
(2) Years of Service completed before he incurred the first
One-Year Vesting Break will not be taken into account in
determining the vested portion of his Accounts as of any time
after his return to employment (i) unless some portion of his
Employer Contribution Account or Employer Matching Account had
become vested before he incurred the first One-Year Vesting
break, and (ii) until he has completed one Year of Service
following his return to employment; and
(3) Separate sub-accounts will be maintained for the
Participant's pre-break and post-break Employer Contribution
Account and Employer Matching Account, until both sub-accounts
become fully vested. Both sub-accounts will share in the
earnings and losses of the Trust Fund.
8.3 Forfeiture of Non-Vested Amounts (Variable Plans Only). The
portion of a former Employee's Accounts that has not become
vested under Section 8.1 shall become a Forfeiture in accordance
wit the following rules, and shall be reallocated in accordance
with Section 4.2 or 4.3 or Article 5 (whichever applies) no later
than the end of the Plan Year in which it becomes a Forfeiture.
(a) If Distribution Is Made. If any or all of the vested portion
of a Participant's Accounts is distributed in accordance with
Section 9.1 or 9.2 before the Participant incurs five consecutive
One-Year Vesting Breaks, the nonvested portion of his Accounts
shall become a Forfeiture in the Plan Year in which the
distribution occurs. For purposes of the Section 8.3, if the
value of the vested portion of a Participant's Accounts is zero,
he shall be deemed to have received a distribution of the entire
vested balance of his Accounts on the day his employment
terminates. If the Participant elects to have distributed less
than the entire vested portion of his Employer contribution
Account or Employer Matching Accounts, the part of the nonvested
portion that will become a Forfeiture is the total nonvested
portion multiplied by a fraction, the numerator of which is the
amount of the distribution and the denominator of which is the
total value of the entire vested portion of such Accounts.
(b) Right of Payment. If a Participant who receives a
distribution pursuant to paragraph (a) returns to employment with
an Affiliated Employer, the balance of his Employer Contribution
Account and Employer Matching Account will be restored tot he
amount of such balance on the date of distribution, if he repays
to the Plan the full amount of the distribution, before the
earlier of (i) the fifth anniversary of his return to employment
or (ii) the date he incurs five consecutive One-Year Vesting
Breaks following the date of distribution. If an Employee is
deemed to receive a distribution pursuant to this Section 8.3,
and he resumes employment covered under this Plan before the date
he incurs 5 consecutive One-Year Vesting Breaks, upon his
reemployment the Employer-derived account balance of the Employee
will be restored to the amount on the date of such deemed
distribution . Such restoration will be made, first, from the
amount of any Forfeitures available for reallocation as the last
day of the Plan Year in which repayment is made, to the extent
thereof; and to the extent that Forfeitures are not available or
are insufficient to restore the balance, from contributions made
by the Employer pursuant to Section 4.1(f).
(c) If No Distribution Is Made. If no distribution (or deemed
distribution) is made to a Participant before he incurs five
consecutive One-year Vesting Breaks, the nonvested portion of his
Accounts shall become a Forfeiture in the Plan Year that
constitutes his fifth consecutive One-year Vesting Break.
(d) Adjustment of Accounts. Before a Forfeiture is incurred, a
Participant's Accounts shall share in earning s and losses of
the Trust Fund pursuant tot Section 13.4 in the same manner as
the Accounts of active Participants.
(e) Accumulated Deductible Contribution. For Plan Years
beginning before January 1, 1989, a Participant's vested Account
balance shall not include accumulated deductible contributions
within the meaning of Section 72(o)(5)(BB) of the Code.
8.4 Special Rule in the Event of a Withdrawal (Variable Plans
Only). If a withdrawal pursuant to Section 12.2 or 12.3 is made
from a participant's Employer contribution Account or Employer
Matching Account before the Account is fully vested, and the
Participant may increase the vested percentage in the Account,
then a separate account will be established at the time of the
withdrawal, and at any relevant time after the withdrawal the
vested portion of the separate account will be equal to the
amount "X" determined by the following formula:
X = P(AB + D) - D
For purposes of the formula, P is the Participant's vested
percentage at the relevant time, AB is the account balance at the
relevant time, and D is the amount of the withdrawal.
8.5 Vesting Election. If the Plan is amended to change any
vesting schedule, or is amended in any way that directly or
indirectly affects he computation of a Participant's vested
percentage, or is deemed amended by an automatic change to a
top-heavy vesting schedule pursuant to Article 15, each
Participant who has competed not less than three Years of Service
may elect, within a reasonable period after the adoption of the
amendment or change, in a writing files with the Employer to have
his vested percentage computed under the Plan without regard to
such amendment. For a Participant who is not credited with at
least one Hours of Service in a Plan Year beginning after
December 31, 1988, the preceding sentence shall be applied by
substituting "five Years of Service " for "three years of
Service." 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 (a) 60 days after the
amendment is adopted; (b) 60 days after the amendment becomes
effective; or (c) 60 days after the Participant is issued written
notice of the amendment by the Employer.
ARTICLE IX:
Payment of Benefits
9.1 Distribution of Accounts. A Participant or Beneficiary who
has become eligible for a distribution of benefits pursuant to
Article 7 may elect to receive such benefits at any time, subject
to the terms and conditions of this Article 9, Article 10 and
Article 11. Unless a Participant or Beneficiary elects
otherwise, distribution of benefits will begin no later than the
60th day after the end of the Plan Year in which the latest of
the following events occurs:
(a) The Participant attains age 65 (or if earlier, the normal
retirement age specified by the Employer in the Plan Agreement);
or
(b) The tenth anniversary of the year in which the Participant
commenced participation in the Plan; or
(c)The Participant's employment wit the Affiliated Employers
terminates.
A Beneficiary who is the surviving spouse of a Participant may
elect to have distribution of benefits begin within the 90-day
period following the Participant's death.
For purposes of this Section 9.1, the failure of a Participant
(and his spouse, if spousal consent is required pursuant to
Article 10) to consent to a Distribution while a benefit is
"immediately distributable" within the meaning of Section 9.2
shall be considered an election to defer commencement of payment.
In a Variable Plan, if the Employer has so specified in the Plan
Agreement, the vested portion of a Participant's Accounts will be
distributed in a lump sum in cash no later than 60 days after the
end of the plan Year in which his employment terminates, if at
the time the Participant first became entitled to a distribution
the value of such vested portion, derived from Employer and
Employee contributions, does not exceed $3,500. Commencement of
distributions in any case shall be subject to Section 9.4.
9.2 Restriction on Immediate Distributions. A Participant's
account balance is considered "immediately distributable" if any
part of the account balance could be distributed to the
Participant (or his surviving spouse) before the Participant
attains, or would have attained if not deceased, the later of the
normal retirement age specified in the Plan Agreement or age 62.
(a) If a distribution is one to which sections 401(a)(11) and 417
of the Internal Revenue Code do not apply, such distribution may
commence less than 30 days after the notice required under
section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that (1) the Plan Administrator clearly informs the
Participant that the Participant has a right to a period of at
least 30 days after receiving the notice to consider the decision
of whether or not to elect a distribution (and, if applicable, a
particular distribution option), and (2) the Participant, after
receiving the notice, affirmatively elects a distribution.
(b) Notwithstanding paragraph (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 10.1 (b) 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 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 the Plan, if the Plan does not offer an annuity
option (purchased from a commercial provider), a Participant';s
account balance may 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) maintained by an Affiliated Employer, without the
Participant's consent. 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.
9.3 Optional Forms of Distribution. If at the time a Participant
first becomes entitled t a distribution the value of his vested
Account balance derived from Employer and Employee contributions
does not exceed $3,500, distribution shall be made in a lump sum
in cash. Subject to the preceding sentence and to the rule of
Article 10 concerning joint and survivor annuities, a Participant
or Beneficiary may elect to receive benefits in any of the
following optional forms:
(a) A lump sum payment in cash or in kind or in a combination of
both;
(b) A series of installments over a period certain that meets the
requirements of Article 11; or
(c) A nontransferable annuity contract, purchased for a
commercial provider, with terms complying with the requirements
of Article 11; provided, however, that an annuity for the life of
any person shall be available as an optional form of distribution
in a Profit Sharing Plan only if the Employer has so elected in
the Plan Agreement.
(d) In the event that the Plan is adopted as an amendment to an
existing plan, each optional form of distribute available under
the existing plan shall be made available under the Plan through
the purchase of an appropriate annuity contract in accordance
with paragraph (c).
9.4 Distribution Procedure. The Trustee shall make or commence
distributions to or for the benefit of Participants only on
receipt of a written order from the Employer certifying that a
distribution of a Participant's benefits is payable pursuant to
the Plan, and specifying the time and manner of payment. The
amount to be distributed shall be determined as of the Valuation
Date coincident with or next following the Employer's written
order. The Trustee shall be fully protected in acting upon the
written directions of the Employer in making benefit
distributions, and shall have not duty to determine the rights or
benefits of any person under the Plan or to inquire in to the
right or power of the Employer to direct any such distribution.
The Trustee shall be entitled to assume conclusively that any
determination by the Employer with respect to a distribution
meets the requirements of the Plan. The Trustee shall not be
required to make any payment hereunder in excess of the net
realizable value of the assets of the Account in question at the
time of such payment, nor to make any payment in cash unless the
Employer has furnished written instructions as to the assets to
be converted to cash for the purposes of making payment.
9.5 Lost Distributee. In the event that the Plan Administrator
is unable with reasonable effort to locate a person entitled to
distribution under the Plan, the Accounts distributable to such a
person shall become a Forfeiture at the end of the third Plan
Year after the Plan Administrator's efforts to locate such person
began; provided, however, that the amount of the Forfeiture shall
be restored in the event that such person thereafter submits a
claim for benefits under the Plan. such restoration will be
made, first, from the Amman of Forfeitures available for
reallocation as of the last day of the Plan Year in which the
claim is made, to the extent thereof; and to the extent that
Forfeitures are not available or are insufficient to restore the
balance, from contributions made by the Employer pursuant to
Section 4.1(f). In a Standard Plan, a Forfeiture occurring under
this Section 9.5 shall be reallocated as though it were an
Employer contribution.
9.6 Direct Rollovers. This Section 9.6 applies to distributions
made on or after January 1, 1993. Notwithstanding any provision
of the Plan to the contrary that would otherwise limit a
distributee's election under this Section, 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. For purposes
of this Section 9.6, the following definitions shall apply:
(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
on e 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 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 includible 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 410(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 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.
ARTICLE X:
Joint and Survivor Annuity Requirements
10.1 Applicability.
(a) Generally. The provisions of Sections 10.2 thorough 10.5
shall generally apply to a Participant who is credited with at
least one Hour of Service on or after August 23, 1984, and such
other Participants as provided in Section 10.6.
(b) Exception for Certain Profit Sharing Plans. The provisions
of Sections 10.2 through 10.5 shall not apply to a Participant in
a profit sharing plan if: (i) the Participant does not or cannot
elect payment of benefits in the form of a life annuity, and (ii)
on the death of the Participant, his Vested Account Balance will
be paid to his surviving spouse (unless there is not surviving
spouse, or the surviving spouse has consented to the designation
of another Beneficiary in a manner conforming to a Qualified
Election) and the surviving spouse may elect to have distribution
of the Vested account Balance (adjusted in accordance with
Section 13.4 for gains or losses occurring after the
Participant's death) commence within the 90-day period following
the date of the Participant's death. The Participant may waive
the spousal death benefit described in this paragraph (b) at any
time, provided that no such waiver shall be effective unless it
satisfies the conditions applicable under Section 10.4(c) to a
Participant's waiver of a Qualified Preretirement Survivor
Annuity. The exception in this paragraph (b) shall not be
operative with respect to a Participant in a profit sharing plan
if the Plan:
(1) Is a direct or indirect transferee of a defined benefit plan,
money purchase pension plan, target benefit plan, stock bonus
plan, or profit sharing plan which is subject to the survivor
annuity requirement of Sections 401(a)(11) and 417 of the Code;
or
(2) Is adopted as an amendment of a plan that did not qualify for
the exception in this paragraph (b) before the amendment was
adopted.
For purposes of this paragraph (b), Vested Account Balance shall
have the meaning provided in Section 10.4(f). The provisions of
Sections 10.2 through 10.6 set forth the survivor annuity
requirements of Sections 401(a)(11) and 417 of the Code.
(c) Exception for Certain Amounts. The provisions of Sections
10.2 through 10.5 shall not apply to any distribution mad 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 or a
target benefit plan, provided that the exceptions applicable to
certain profit sharing plans under paragraph (b) are applicable
with respect to the separate account (for this purpose, Vested
Account Balance means 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).
10.2 Qualified Joint and Survivor Annuity. Unless an optional
form of benefit is selected pursuant to a Qualified election
within the 90-day period ending on the Annuity Staring 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
life annuity. In either case, the Participant may elect to have
such an annuity distributed upon his attainment of the Earliest
Retirement Age under the Plan.
10.3 Qualified Preretirement Survivor Annuity. Unless an
optional form of benefit has been selected within the Election
Period pursuant to a Qualified Election, the Vested Account
Balance of a Participant who dies before the Annuity Staring Date
shall be applied toward the purchase of an annuity for the life
of his surviving spouse (a "Qualified Preretirement Survivor
annuity"). The surviving spouse may elect to have such an
annuity distributed within a reasonable period after the
Participant's death. For purposes of this Article 10, the term
"spouse" means the current spouse or surviving spouse of a
Participant, except 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(p0 of the Code.
10.4 Definitions. The following definitions apply:
(a) Election Period means the period beginning on the first day
of the Plan Year in which a Participant attains age 35 and ending
on the date of the Participant's death. If a Participant
separates from service before the first of the Plan Year in which
he reaches age 35, the Election Period with respect to his
account balance as of the date of separation shall begin on the
date of separation. A Participant who will not attain age 35 as
of the end of a 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 35. Such an 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 10.5. Qualified
Preretirement Survivor Annuity coverage will be automatically
reinstated as of the first day of the Plan Year in which the
Participant attains age 35. any new waiver on or after that date
shall be subject to the full requirements of this article.
(b) Earliest Retirement Age means the earliest date on which the
Participant could elect to receive Retirement benefits under the
Plan.
(c) Qualified Election means a waiver of a Qualified Joint and
survivor Annuity or a Qualified Preretirement Survivor Annuity.
any such waiver shall not be effective unless: (1) the
Participant's spouse consents in writing to the waiver; (2) the
waiver designates a specific Beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be
changed without spousal consent (unless the spouse's consent
expressly permits designations by the Participant without any
further spousal consent); (3) the spouse's consent acknowledges
the effect of the waiver; and (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 waiver
designates a form of benefit payment which may not be change d
without spousal consent (unless the spouse's consent 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 souse or that the spouse
cannot be located, a waiver will be deemed a Qualified Election.
Any consent by a spouse obtained under these provisions (and any
establishment that the consent of a spouse may not be obtained)
shall be effective only with respect to the particular spouse
involved. A consent that permits designations by the Participant
without any requirement of further consent by the spouse must
acknowledge that the spouse has the right to limit the consent to
a specific Beneficiary and a specific form o f Benefit where
applicable, and that the spouse voluntarily elects to relinquish
either or both of those rights. a revocation of a prior waiver
may be made by a Participant without the consent of the spouse at
anytime 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 10.5.
(d) Qualified Joint and Survivor Annuity means an immediate
annuity for the life of a Participant, with a survivor annuity
for the life of the spouse which is not less than 50 percent and
not more than 100 percent 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 that can be purchased with the
Participant's Vested Account Balance. The percentage of the
survivor annuity under the Plan shall be 50 percent.
(e) Annuity Starting Date means he first day of the first period
for which an amount is paid as an annuity (or any other form).
(f) Vested Account Balance means the aggregate value of the
Participant's vested account balance derived from Employer and
Employee contributions (including rollover), whether vested
before or upon death, including the proceeds of insurance
contracts, if any on the Participant's life. The provisions of
this Article 10 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.
10.5 Notice Requirements. In the case of a Qualified Joint and
Survivor annuity, no less than 30 days and no more than 90 days
before a Participant's Annuity Starting Date the Plan
Administrator shall provide to him a written explanation of (i)
the terms and conditions of a Qualified and Joint 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 the 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.
In the case of a Qualified Preretirement survivor Annuity, within
the applicable period for a Participant the Plan Administrator
provide to him a written explanation of the Qualified
Preretirement Survivor Annuity, in terms and manner comparable to
the requirements applicable to the explanation of a Qualified
Joint and Survivor annuity as described in the preceding
paragraph. 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 32 and ending with the close of the Plan Year preceding the
Plan Year in which the Participant attains age 35; (ii) a
reasonable period ending after an individual becomes a
Participant; (iii) a reasonable period ending after this Article
10 first applies to the Participant. Notwithstanding the
foregoing, in the case of a Participant who separates from
service before attaining age 35, notice must be provided within a
reasonable period ending after his separation from service.
For purposes of applying the preceding paragraph, a reasonable
period ending after the enumerated events described in (ii) and
(ii) is the end of the two-year period beginning one year before
the date the applicable event occurs, and ending one year after
that date. In the case of a Participant who separates from
service before the Plan Year in which he reaches age 35, notice
shall be provided within the two-year period beginning one year
before the separation and ending one year after the separation .
If such a Participant thereafter returns to employment with the
Employer, the applicable period for the Participant shall be
redetermined.
10.6 Transitional Rules.
(a) Any living Participant not receiving benefits on August 23,
1984, who would otherwise not receive the benefits prescribed by
the preceding sections of this Article 10, must be given the
opportunity to elect to have those sections apply if the
Participant is credited with at least one Hour of Service under
the Plan or a predecessor plan in a Plan Year beginning on or
after January 1, 1976, and the Participant had at least ten 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 Hour of Service under
the 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 benefits paid in accordance with
paragraph (d) of this section 10.6.
(c0 The respective opportunities to elect (as described in
paragraphs (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 be paid
to those Participants.
(d) Any Participant who has so elected pursuant to paragraph (b)
of this Section 10.6, an any Participant who does not elect under
paragraph (a), or who meets the requirements of paragraph (a)
except that he does not have at least ten years of vesting
service when he separates from service, shall have his benefits
distributed in accordance with all of the following requirements,
if his benefits would otherwise have been payable in the form of
a life annuity:
(1) Automatic joint and survivor annuity. If benefits in the
form of a life annuity become payable to a married Participant
who:
(i) begins to receive payments under the Plan on or after normal
retirement age; or
(ii) dies on or after normal retirement age while still working
for the Employer; or
(iii) begins to receive payments on or after the qualified early
retirement age; or
(iv) separates from service on or after attaining normal
retirement age (or the qualified early retirement age) and after
satisfying the eligibility requirement for the payment of
benefits under the Plan and thereafter dies before beginning to
receive such benefits;
then such benefits will be received under the Plan in the form of
a Qualified Joint and Survivor Annuity, unless they Participant
has elected otherwise during the election period, which must
begin at least six months before the Participant attains
qualified early retirement age and end not more than 90 days
before the commencement of benefits. Any election hereunder will
be in writing and may be changed by the Participant at any time.
(2) 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 death. Any
election under this provision will be in writing and may be
changed by the Participant at any time. The election period
begins o the later of (i) the 90th day before the Participant
attains the qualified early retirement age, or (ii) the date on
which participation begins, and ends on the date the Participant
terminates employment.
(3) For purposes of this Section 10.6, qualified early retirement
age is the latest of the earliest date under the Plan on which
the Participant may elect to receive Retirement benefits, the
first day of the 120th month not beginning before the Participant
reaches normal retirement age, or the date the Participant begins
participation.
ARTICLE XI:
Minimum Distribution Requirements
11.1 General Rules. Subject to Article 10, Joint and Survivor
Annuity Requirements, the requirements of this Article 11 shall
apply to any distribution of a Participant's interest and will
take precedence over any inconsistent provisions of the Plan.
Unless otherwise specified, the provisions of this Article 11
apply to calendar years beginning after December 31, 1984. All
distributions required under this Article 11 shall be determined
and made in accordance with the Income Tax Regulations issued
under Section 401(a)(9) of the Code (including proposed
regulations, until the adoption of final regulations), 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, determined
as follows.
(a) 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 70 1/2.
(b) Transitional Rules. The required beginning date of a
Participant who attains age 70 /2 before January 1, 1988, shall
be determined in accordance with (1) or (2) below:
(1) Non-5-percent Owners. The required beginning date of a
Participant who is not a 5-percent owner is the first day of
April of the calendar year following the calendar year in which
the later of his Retirement or his attainment of age 70 1/2
occurs.
(2) 5-percent Owners. The required beginning date of a
Participant who is a 5-percent owner during any year beginning
after December 31, 1979, is the first day of April following the
later of:
(i) the calendar year in which the Participant attains age 70
1/2, or
(ii) the earlier of the calendar year with or within which ends
the Plan Year in which the Participant becomes a 5-percent owner,
or the calendar year in which the Participant retires.
The required beginning date of a Participant who is not a
5-percent owner, who attains age 70 1/2 during 1988 and who has
not retired as of January 1, 1989, is April 1, 1990.
(c) Rules for 5-percent Owners. A Participant is treated as a
5-percent owner for purposes of this Section 11.2 if he is a
5-percent 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 nay time during the Plan Year
ending with or within the calendar year in which he attains age
66 1/2, or any subsequent Plan Year. Once distributions have
begun to a 5-percent owner under this Section 11.2, they must
continue, even if the Participant ceases to be a 5-percent owner
in a subsequent year.
11.3 Limits on Distribution Periods. As of the first
Distribution Calendar Year, distributions not made in a single
sum may be made only over one or a combination of the following
periods:
(a) the life of the Participant,
(b) the life of the Participant and his 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 his Designated
Beneficiary.
Designated Beneficiary means the individual who is designated as
the Beneficiary under the Plan in accordance with Section
401(a)(9) of the Code and the regulations issued thereunder
(including proposed regulations, until the adoption of final
regulations) and Section 7.2.
Distribution Calendar Year means a calendar year for which a
minimum distribution is required under Section 401(a)(9) of the
Code and this Section 11.3. 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.
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. Unless
otherwise elected by the Participant (or his spouse, in the case
of distributions described in Section 11.5(b)) by the time
distributions are required to begin, Life Expectancies shall be
recalculated annually. Any such election shall be irrevocable as
to the Participant (or spouse) and shall apply to all subsequent
years. The Life Expectancy of a nonspouse beneficiary may not be
recalculated.
11.4 Determination of Amount To Be Distributed Each Year. If the
Participant's interest is to be distributed in other than a
single sum, the following minimum distribution rules shall apply
on or after the required beginning date. Paragraphs (a) through
(d) apply to distributions in forms other than the purchase of an
annuity contract.
(a) 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 his 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 Year, must at least equal the quotient
obtained by dividing the Participant's Benefit by the Applicable
Life Expectancy.
(b) 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 50
percent of the present value of the amount available for
distribution is paid within the Life Expectancy of the
Participant.
(c) 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 Income Tax Regulations.
Distributions after the death of the Participant shall be
distributed using the Applicable Life Expectancy in paragraph (a)
above as the relevant divisor, without regard to Proposed
Regulations Section 1.401(a)(9)-2.
(d) 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.
(e) If the Participant's Benefit is distributed in the form of an
annuity contract 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 regulations
issued thereunder (including proposed regulations, until the
adoption of final regulations).
Applicable Life Expectancy means 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 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, the Applicable Life Expectancy shall be the Life
Expectancy as so recalculated. the applicable calendar year
shall be the first Distribution Calendar Year, an if Life
Expectancy is being recalculated such succeeding calendar year.
If annuity payments commence in accordance with Section 11.4(e)
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 in the Plan, the
applicable calendar year is the year of purchase.
Participant's Benefit means 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 date in the valuation calendar year
after the valuation date and decreased by distributions made in
the valuation calendar year after the valuation date. For
purposes of the preceding sentence, if any portion of the minimum
distribution for the first Distribute 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 hall be treated as if it
had been made in the immediately preceding Distribute Calendar
Year.
1.5 Death Distribution Provisions.
(a) Distribution Beginning before Death. If the Participant dies
after distribution of his interest has begun, the remaining
portion of his interest will continue to be distributed at least
as rapidly as under the method of distribution being used before
the participant' death.
(b) Distribution Beginning after Death. If the Participant dies
before distribution of his interest begins, distribution of his
entire interest shall be completed by December 31 of the calendar
year containing the fifth anniversary of the Participant's death,
except to he extent that an election is made to receive
distributions in accordance with (1) or (2) below:
(1) If any portion of he Participant's interest is payable to a
Designated Beneficiary, distributions may be mad over the
Designated Beneficiary's 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; or
(2) If the Designated Beneficiary is the Participant's surviving
spouse, the date distributions are required to begin in
accordance with (1) above shall not be earlier than the later of
(i) December 31 of the calendar year immediately following the
calendar year in which the Participant died, and (ii) December 31
of the calendar year in which the Participant would have attained
age 70 1/2.
If the Participant has not made an election pursuant to this
Section 11.5 by the time of this death, the Participant's
Designated Beneficiary must elect the method of distribution no
later than the earlier of (i) December 31 of the calendar year in
which distributions would be required to begin under this Section
11.5 or (ii) 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 to 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.
(c) For purposes of paragraph (b), if the surviving spouse dies
after the Participant, but before payments to the souse begin ,
the provisions of paragraph (b), with the exception of
subparagraph (2) therein, shall be applied as if the surviving
spouse were the Participant.
(d) For purposes of this Section 11.5, any amount paid to a child
of the Participant will be treated as if it had been paid to the
surviving spouse of the Participant if the amount becomes payable
to the surviving spouse when the child reaches the age of
majority.
(e) For the purposes of this Section 11.5, distribution of a
Participant's interest is considered to begin on the
Participant's required beginning date (or, if paragraph (c) above
is applicable the date distribution is required to begin to the
surviving spouse pursuant to paragraph(b) above). If
distribution in the form of an annuity contract described in
Section 11.4(e) 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 Transitional Rule. Notwithstanding the other requirements
of this Article 11, and subject to the requirements of Article
10, Joint and Survivor Annuity Requirement, distribution on
behalf of any Participant, including a 5-percent owner, may be
made in accordance with al of the following requirements
(regardless of when such distribution commences):
(a) The distribution is one which would not have disqualified the
Trust under Section 401(a)(9) of the Internal Revenue code of
1954 as in effect before its amendment by the Deficit Reduction
Act of 1984.
(b) The distribution is in accordance with a method of
distribution designated by the Employee whose interest in the
Trust is being distributed of, if the Employee is deceased, by a
Beneficiary of the Employee.
(c) The designation specified in paragraph (b) was in writing,
was signed by the Employee or the Beneficiary, and as made before
January 1, 1984.
(d) The Employee had accrued a benefit under the plan as of
December 31, 1983.
(e) The method of distribution designated by the Employee or the
Beneficiary specifies the time at which distributor will
commence, the period over which distributions will be made, an
din the case of any distribution upon the Employee's death, the
Beneficiaries of the Employee listed in order of priority.
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. 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 distribute under which
the distribution is being made if the method of distribution was
specified in writing and the distribution satisfies the
requirements in paragraphs (a) and (e).
If a designation is revoked, any subsequent distribution must
satisfy the requirements of Section 401(a)(9) of the Code and the
regulations thereunder. If a designation is revoked after 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 designation described in
paragraphs (b) through (e). 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 Income Tax Regulations. Any
changes in the designation generally will be considered to be a
revocation of the designation, but the mere substitution or
addition of another beneficiary (one not name in the designation)
under the designation will not be considered to be a revocation
of the designation, so long as the substation or addition does
not alter the peered over which distributions are to be made
under the designation, directly or indirectly (for example, by
altering the relevant measuring life). In the case of an amount
transferred or rolled over from one plan to another plan, the
rules in Q&AJ-2 and Q&AJ-3 of Section 1.401(a)(9)-1 of the
Proposed Income Tax Regulations.
ARTICLE XII:
Withdrawals and Loans
12.1 Withdrawals from Participant Contribution Accounts. Subject
to the requirements of Article 10, a Participant may upon written
notice to the Employer withdraw any amount from his Participant
Contribution Account. A withdrawn amount may not be repaid to
the Plan. No forfeiture will occur solely as a result of an
Employee's withdrawal of Participant contributions.
12.2 Withdrawals on Account of Hardship (Profit Sharing Plans
Only). If the employer has so elected in the Plan Agreement for
a profit sharing plan, upon a Participant's written request the
Plan Administrator may permit a withdrawal fro the vested portion
of the Participant's Accounts on account of the Participant's
financial hardship, which must be demonstrated to the
satisfaction of the Plan Administrator. In considering such
requests, the Plan Administrator shall apply uniform standards
that do not discriminate in favor of Highly Compensated
Employees. In a Standard Plan with a Code, if hardship
withdrawals are permitted from both the Employer Contribution
Account and the Elective Deferral Account, they shall be made
first from a participant's Employer Contribution Account and
thereafter from a Participant's Elective Deferral Account,
subject to the additional requirements set forth in Section 5.14.
In a Standard Plan, the requirements of Section 5.14(b), (c),
(d)(1) and (d)(2) shall also apply to hardship distributions from
a Participant's Employer contribution Account. In a Variable
Plan with a CODA, if hardship withdrawals are permitted from more
than one of the Elective Deferral Account, Employer Matching
Account, and Employer contribution Account , they shall be made
first from a Participant's Employer contribution Account, and
thereafter from the Employer Matching Account, and finally from
the Elective Deferral Account, subject to the additional
requirement of Section 5.14. A withdrawn amount may not be
repaid to the Plan.
12.3 Withdrawals after Reaching Age 59 1/2 (Profit Sharing Plans
Only). If so specified by the Employer in the Plan Agreement, a
Participant who has reached age 59 1/2 may upon written request
to the Employer withdraw during his employment any amount not
exceeding the vested balance of his Accounts. A withdrawn amount
may not be repaid to the Plan.
12.4 Loans (Variable Plans Only). If the Employer has so elected
in the Plan Agreement, the Employer may direct the Trustee to
make a loan to a Participant or Beneficiary from the vested
portion of his Accounts, subject to the following terms and
conditions:
(a) The Plan Administrator shall administer the loan program
subject to the terms and conditions of this Section 12.4 and to
such reasonable additional rules and regulations as the Plan
Administrator may establish for the orderly operation of the
program.
(b) A Participant's or Beneficiary's request for a loan shall be
submitted to the Plan Administrator by means of a written
application on a form supplied by the Plan Administrator.
Applications shall be approved or denied by the Plan
Administrator on the basis of its assessment of the borrower's
ability to collateralize and repay the loan, as revealed in the
loan application.
(c) Loans shall be made to all Participants and Beneficiaries on
a reasonable equivalent basis. Loans shall not be made available
to highly compensated Employees (as defined in Section 414(q) of
the Code) in amount greater than the amount made available to
other employees (relative to the borrower s Account balance).
(d) Loans must be adequately secured by assignment of fifty
percent (50%) of the Participant s entire right, title, and
interest in and to the Trust fund, evidenced by the Participant s
collateral promissory not for the amount of the loan payable to
the order of the Trustee.
(e) Loans must bear a reasonable interest rate comparable tot he
rate charged by commercial lenders in the geographical area for
similar loans. The Plan Administrator shall not discriminate
among Participants in the matter of interest rates, but loans may
bear different interest rates if, in the opinion of the Plan
Administrator, the difference in rates is justified by conditions
that would customarily be taken into account by a commercial
lender in the Employer s geographical area.
(f) The period for repayment for any loan shall not exceed five
years, except in the case of a loan used to acquire a dwelling
unit which within a reasonable time is to be used as the
principal residence of the Participant, in which case the
repayment period shall not exceed ten years. The terms of a loan
shall require that it be repaid in level payments of principal
and interest not less frequently then quarterly throughout the
repayment period, except that alternative arrangements for
repayment may apply in the event that the borrower is on unpaid
leave of absence for a period not to exceed one year.
(g) To the extent that t Participant would be required under
Article 10 to obtain the consent of his spouse to a distribution
of an immediately distributable benefit other than a Qualified
Joint and Survivor Annuity, the consent of the Participant s
spouse shall be required for the u se of the Account as security
for a loan. The spouse s consent must be obtained no earlier
than the beginning of the 90-day period that ends on the date on
which the loan is to be so secured, and obtained in accordance
with the requirements of Section 10.4(c) for a Qualified
Election. Any such consent shall thereafter be binding on the
consenting spouse and any subsequent spouse of the Participant.
a new consent shall be required for use of the Account as
security for any extension, renewal, renegotiation or revision of
the original loan.
(h) If valid spousal consent has been obtained in accordance with
Section 12.4(g), then notwithstanding any other provision of the
Plan the portions of the Participant s 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 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 fist 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.
(i) In the event of default on a loan by a Participant who is an
active Employee, foreclosure on the Participant s Account as
security will not occur until the Employer has reported to the
Trustee the occurrence of an event permitting distribution from
the Plan in accordance with Article 9 or Section 5.13.
(j) No loan shall be made to an Owner-Employee or a
Shareholder-Employee.
(k) No loan to any Participant or Beneficiary can be made tot he
extend that the amount of the loan, when added to the outstanding
balance of all other loans to the Participant or Beneficiary,
would exceed the lesser of (a) $50,000 reduced by the excess (if
any) of the highest outstanding balance of loans during the one
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 the value of the vested account balance
of the Participant. For the purpose of the above limitation, all
loans from all qualified plans of the Affiliated Employers are
aggregated.
(l) Loans shall be considered investments directed by a
Participant pursuant to Section 13.3. The amount loaned shall be
charged solely against the Accounts of the Participant, and
repaid amounts and interest shall be credited solely thereto.
12.5 Procedure; Amount Available.
Withdrawals and loans shall be made subject to the terms and
condition applicable to distributions pursuant to Section 9.4,
except that the amount of any withdrawal or loan shall be
determined by reference to the vested balance of the
Participant s Account as of the most recent Valuation Date
preceding the withdrawal or loan, and shall not exceed the amount
of the vested account balance.
ARTICLE XIII:
Trust Fund and Investments
13.1 Establishment of Trust Fund. The Employer and the Trustee
hereby agree to the establishment of a Trust Fund consisting of
all amounts as shall be contributed or transferred from time to
time to the Trustee pursuant to the Plan, and all earnings
thereon. The Trustee shall hold the assets of the Trust Fund for
the exclusive purpose of providing benefits to Participant and
Beneficiaries and defraying the reasonable expenses of
administering the Plan and no such assets shall ever revert to
the Employer, except that:
(a) contributions made by the Employer by mistake of fact may be
returned to the Employer within one (1) year of the date of
payment.
(b) contributions that are conditioned on their deductibility
under the Code may be returned to the Employer within one (1)
year of the disallowance of the deduction,
(c) contributions that are conditioned on the initial
qualification of the Plan under the Code may be returned to the
Employer within one (1) year after such qualification is denied
by determination of the Internal Revenue Service, but only if an
application for determination of such qualification is made
within the time prescribed by law for filing the Employer s
federal income tax return for its taxable year in which the Plan
is adopted, or such later date as the Secretary of the Treasury
may prescribe, and
(d) amounts held in a suspense account may be returned to the
Employer on termination of the Plan, to the extent that they may
not then be allocated to any Participant s Account in accordance
with Article 6.
All Employer contributions under the Plan other than those made
pursuant to Section 4.1(f) are hereby expressly conditioned on
the initial qualification of the Plan and their deductibility
under the Code.
13.2 Management of Trust Fund. Except to the extent of any
investment in Policies pursuant to Article 14, the assets of the
Trust Fund shall be held in trust by the Trustee and accounted
for in accordance with this Article 13, and shall be invested in
accordance with Section 13.3 in the Investment Products specified
by the Employer in the Plan Agreement and from time to time
thereafter in writing. The Employer shall have the exclusive
authority and discretion to select the Investment Products
available under the Plan. In making that selection, the Employer
shall use the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in a
like capacity and familiar with such matter would use in the
conduct of an enterprise of like character and with like aims.
The Employer shall cause the available Investment Products be
diversified sufficiently to minimize the risk of large losses,
unless under the circumstances it is clearly prudent not to do
so. It is especially intended that the Trustee shall have no
discretionary authority to determine the investment of Trust
assets.
13.3 Investment Instructions. Except as Article 14 may apply,
all amounts held in the Trust Fund under the Plan shall be
invested in Investment Products. If the Employer has elected in
the Plan Agreement to make investment decisions for the Plan,
investment instructions as to the Employer Contribution Accounts,
Employer Matching Accounts, Qualified Matching Accounts, and
Qualified Nonelective Contribution Accounts shall be the
fiduciary responsibility of the Employer, and each of such
Accounts shall have a pro rata interest in all assets of the
Trust (other than life insurance policies under Article 14) to
which the Employer s instructions apply. If the Employer has not
elected to make investment decisions for the Plan, then assets of
the Trust shall be invested solely in accordance with the
instructions of the Participant w to whose Accounts they are
allocable, as delivered by the Employer to Putnam in accordance
with its service agreement with the Employer, if any.
Instructions shall apply to future contributions, past
accumulations, or both, according to their terms, and shall be
communicated by the Employer to Putnam in accordance with
procedures prescribed in the service agreement, if any, between
the Employer and Putnam. Instructions shall be effective
prospectively, coincident with or within a reasonable time after
their receipt in good order by Putnam. An instruction once
received shall remain in effect until it is changed by the
provision of a new instruction. New instructions shall be
accepted by Putnam at any Valuation Date. To the extent the
assets of the Trust are to be invested solely in accordance with
the instructions of the Participants, the Plan is intended to
constitute a plan described in section 404 (cc) of ERISA and
Title 29 of the Code of Federal Regulations section 2550.404c-1.
In such case, the Employer shall be responsible for providing the
Participant with all information required to be given pursuant to
ERISA section 404(c) and Title 29 of the Code of Federal
Regulations section 2550.404c-1.
In the event that the Employer adopts a Putnam prototype plan as
an amendment to or restatement of an existing plan, the Employer
shall specify one or more Investment Products to serve as the
sole investments for all Participants Accounts during the period
in which existing records of the Plan are transferred to the
Recordkeeper. During that period, new investment, instructions
as to existing assets of the Plan cannot be carried out, not can
distributions be made from the Plan except to the extent
permitted under the terms of the service agreement between the
Employer and Putnam. The Employer and the Recordkeeper shall use
their best efforts to minimize the duration of the period to
which the preceding sentence applies.
Neither the Employer nor the Trustee nor Putnam shall be
responsible for questioning any instructions of a Participant or
for reviewing the investments selected therein, or for any loss
resulting from instructions of a Participant or from the failure
of a Participant to provide or to change instructions. Neither
Putnam nor the Trustee shall have any duty to question any
instructions received from the Employer or a Participant or to
review the investments thus selected, nor shall Putnam or the
Trustee be responsible for any loss resulting from instructions
received from the Employer or a Participant or from the failure
of the Employer or a Participant to provide or change
instructions. In the event that Putnam or the Trustee receives a
contribution under the Plan as to which no instructions are
delivered, or such instructions as are delivered are unclear to
Putnam or the Trustee, such contributions shall be invested until
clear instructions are received in the default option set forth
in the service agreement between the Employer an Putnam or if no
such option is so set forth, in Putnam Daily Dividend Trust.
neither Putnam nor the Trustee shall have any discretionary
authority or responsibility in the investment of the assets of
the Trust Fund.
13.4 Valuation of the Trust Fund. As of each Valuation Date, the
Trustee shall determine the fair market value of the Trust Fund,
and the net earnings or losses and expenses of the Trust Fund for
the period elapsed since the most recent previous Valuation Date
shall be allocated amount the Accounts of Participants.
Earnings, losses and expenses which pertain to investments which
are specifically held for a given Participant s Account shall be
allocated solely to that Account. In the event that an
investment is not specifically held for a given Participant s
Account, the earnings, losses and expenses pertaining o that
investment shall be allocated among all Participants Accounts in
the ratio that each such Account bears to the total of all
Accounts of all Participants. Each Participant s Accounts shall
be adjusted pursuant to this Section 13.4 until such time as they
are either fully distributed or forfeited, regardless of whether
the Participant continues to be an Employee.
13.5 Distributions on Investment Company Shares. Subject to
Section 9.3, all dividends and capital gains or other
distributions received on any Investment company Shares credited
to Participant s Account will (unless received in additional
Investment Company Shares) be reinvested in full and fractional
shares of the same Investment Company at the price determined as
provided in the then current prospectus of the Investment
Company. The shares so received or purchased upon such
reinvestment will be credited to such accounts. If any dividends
or capital gain or other distributions may be received on such
Investment Company Shares at the elections of the shareholder in
additional share or in cash or other property, the Trustee will
elect to receive such dividends or distributions in additional
Investment Company Shares.
13.6 Registration and Voting of Investment Company Shares. All
Investment Company Shares shall be registered in the name of the
Trustee or its nominee. Subject to any requirements of applicable
law, the Trustee will transmit to Participants in a Standard
Plan, and to the Employer in a Variable Plan, copies of any
notices of shareholders meetings, proxies and proxy-soliciting
material, prospectuses and the annual or other reports to
shareholders, with respect to Investment Company Shares held in
the Trust Fund. the Trustee shall act in accordance with
directions received fro such Participants or Employer, as the
case may be, with respect to matters to be voted upon by the
shareholders of the Investment Company. Such directions must be
in writing on a form approved by the Trustee, signed by the
addressee and delivered to the Trustee within the time prescribed
by it. The Trustee will not vote Investment Company Shares as to
which it receives no written directions.
13.7 Investment Manager (Variable Plans Only). The Employer,
with the consent of Putnam, may appoint an investment manager, as
defined in Section 3(38) of the Employee Retirement Income
Security Act of 1974, with respect to all or a portion of the
assets of the Trust Fund. The Trustee shall have no liability in
connection with any action or nonaction pursuant to directions of
such an investment manager.
ARTICLE XIV:
Insurance Policies
14.1 Purchase of Insurance Products. At the time of
establishment of the Plan, the Employer shall purchase for each
Participant such Policy or Policies, if any, as a Participant
shall request and annually thereafter such additional Policies as
a Participant shall request, subject to the limitations of
Section 14.2. All Policies shall have the same day and month of
issue, insofar as reasonably possible. The premiums on all
Policies shall be paid at the same intervals (for example,
annually, semi-annually, quarterly or monthly) but the interval
may be changed with respect to all Policies from time to time.
14.2 Limitation on Premiums. the premiums paid for Policies in
respect of any Participants shall be limited so that premiums
paid on any ordinary insurance Policies (that is, Policies with
both nonincreasing premiums and nondecreasing death benefits) on
the life of the Participant shall be 49 percent or less of the
Employer s total contributions for the Participant (and
Forfeitures allocated and amounts reapplied to his Employer
Contribution Account), and premiums paid on term insurance
Policies on the life of the Participant shall be less than 25
percent of such amount; provided that if both ordinary life
insurance Policies and term Policies are purchased for any
Participant, the total premiums on term Policies plus one-half
the premiums on ordinary life Policies shall be less than 25
percent of such amount. If at any time the total premiums to be
paid by the Employer for a Participant shall equal or exceed the
above limitations, then the life insurance coverage of that
Participant shall be reduced so that the total premiums shall not
equal or exceed the limitations. The required reduction shall be
made by changing all or a portion of the life insurance on the
Participant to paid-up life insurance or by canceling all or a
portion of any term life insurance.
14.3 Policy Options. At the election of the Participant covered
hereunder, a Policy may contain a waiver of premium disability
benefit provision or a provision for additional indemnity in the
event of accidental death, or both, if available on the type of
Policy selected and if permitted by the insurer.
14.4 Insurability. If any Participant who has elected that a
Policy be purchased is found by the insurer not to be insurable
at standard rates, the Employer shall, if permitted by the rules
of the insurer, purchase a similar Policy which provides a lesser
death benefit and which can be purchased for the same premium.
14.5 Dividends on Policies. Dividends payable on any Policy
shall be applied tot he purchase of additional benefits under the
Policy unless the Participant requests that they be applied in
reduction of premiums.
14.6 Trustee of Policy. The Insurance Trustee shall apply for an
be the owner of each Policy purchased under the terms of the
Plan. Each Policy must provide that proceeds will be payable to
the Insurance Trustee; however, the Insurance Trustee shall be
required t pay over all such proceeds to the Participant s
Designated Beneficiary in accordance with the distribution
provisions of the Plan including, without limitation, Section
10.3. Under no circumstances shall the Trust retain any part of
the proceeds. In the event of any conflict between the terms of
the Plan and the terms of any Policy purchased hereunder, the
Plan provisions shall control.
14.7 Obligations with Respect to Policies. Except as may be
otherwise provided in any conditional or dinging receipt issued
by an insurer, there shall be no coverage and no death benefit
payable under any Policy to be purchased from such insurer until
such Policy shall have been delivered and the premium therefor
shall have been paid. The Employer and the Insurance Trustee
shall not have any responsibility as to the effectiveness of any
Policy purchased from an insurer, nor shall either of them have
any liability or obligation to pay any amount to any Participant
or his beneficiary by reason of any failure or refusal by the
insurer to make such payment.
14.8 Distribution of Proceeds on Participant s Death. In the
event of the death of a Participant before the conversion
provided for in Section 14.9, there shall be payable to the
beneficiary named in any Policy on his life the benefits provided
by the terms of such Policy.
14.9 conversion of Policies. Except as provided in Section 19.3,
if any Policies of a Participant ( other than retirement income,
endowment or annuity Policies) are held for his benefit at the
time distribution is to commence, the Policies may be converted
by the Insurance Trustee into cash, paid to the Trustee, credited
to the Employer contribution Account of the Participant, invested
in accordance whit the written instructions of the Employer ( and
if no such instructions have been given or if such instructions
are not clear, invested in Investment Company Shares in the same
proportion as the most recent contributions to the Participant s
Accounts) and distributed pursuant to Article 9, subject to the
terms and conditions of Article 10. Retirement income, endowment
or annuity Policies will be distributed directly to the
Participant at the time distribution is to commence.
14.10 Conflict with Policies. In the event of any conflict
between the terms of the Plan and the terms of any Policies
hereunder, the Plan provisions shall control.
14.11 Insurance Loans to Owner-Employees. If an Owner-Employee
or Shareholder-Employee receives, either directly or indirectly,
any amount from an Insurer as a loan under a Policy, the amount
so received shall be considered a distribution under the Plan.
Any assignment or pledge (or agreement to assign or pledge) by an
Owner-Employee or Shareholder-Employee of any interest in the
Plan shall be considered a distributions of such interest.
ARTICLE XV:
Top-Heavy Plans
15.1 Superseding Effect. For any Plan Year beginning after
December 31, 1983, in which Plan is determined to be a Top-Heavy
Plan under Section 15.2(b), the provisions of this Article 15
will supersede any conflicting provisions in the Plan or the Plan
Agreement. These provisions will be deemed applicable to a
Standard Plan at all times, unless the Employer has affirmatively
elected in the Plan Agreement to perform top-heavy testing
annually.
15.2 Definitions. For purposes of this Article 13, the terms
below shall be defined as follows:
(a) key Employee means any Employee or former Employee (and the
Beneficiaries of such Employee) who at any time during the
determination period was: (1) an officer of the Employer having
annual compensation greater than 50 percent of the amount in
effect under Section 415(b)(1)(A) of the Code; (2) an owner (or
considered an owner under Section 318 of the Code) of one of the
ten largest interests in the Employer having annual compensation
of more than $150,000. 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 Section 125, Section 402(a)(8), Section 402(h) or Section
403(b) of the Code. The determination period is the Plan Year
containing the Determination Date, and the four preceding Plan
Years. The determination of who is a key Employee will be made
in accordance with Section 416(i)(1) of the code and the
Regulations thereunder.
(b) Top-Heavy: The Plan is Top-Heavy for a Plan Year beginning
after December 31, 1983, if any of the following conditions
exists:
(1) If the Top-Heavy Ratio for this Plan exceeds 60 percent and
this Plan is not part of any Required Aggregation Group or
Permissive Aggregation Group of plans.
(2) If this Plan is a part of a Required Aggregation Group of
plans but not part of a Permissive Aggregation Group and the
Top-Heavy Ratio for the group of plans exceeds 60 percent.
(3) If his Plan is part of a Required Aggregation Group and part
of a Permissive Aggregation Group of plans and the Top-Heavy
Ratio for the Permissive Aggregation group exceeds 60 percent.
(c) Top-Heavy Ratio means the following:
(1) If the Employer maintains one or more qualified defined
contribution plans (or any simplified employee pension plan) and
the Employer has not maintained any qualified defined benefit
plan which during the 5-year period ending on the Determination
Date(s) has or has had accrued benefits, the Top-Heavy Ratio for
the Plan alone or for the Required or Permissive Aggregation
Group as appropriate is a fraction, the numerator of which is the
sum of the account balances of all Key Employees as of the
Determination Date(s) (including any part of any account
distributed in the 5-year period ending on the Determination
Date(s)), and the denominator of which is the sum of all account
balances (including any part of any account balance distributed
in the 5-year period ending on the Determination Date(s)), both
computed in accordance with Section 416 of the Code and the
regulations thereunder. Both the numerator and denominator of
the Top-Heavy Ratio are increased to reflect any contribution not
actually made as of the Determination Date, but which is required
to be taken into account on that date under Section 416 of the
Code and the regulations thereunder.
(2) If the Employer maintains one or more qualified defined
contribution plans (or any simplified employee pension plan) and
the Employer maintains or has maintained one or more qualified
defined benefit plans which during the 5-year period ending on
the Determination Date(s) has or has had any accrued benefits,
the Top-Heavy Ratio for any Required or Permissive Aggregation
Group as appropriate is a fraction, the numerator of which is the
sum of account balance under the aggregated qualified defined
contribution plan or plans for all Key Employees, determined in
accordance with (1) above, and the Present Value of accrued
benefits under the aggregated qualified defined benefit plan or
plans for all Key Employees, as of the Determination Date(s), and
the denominator of which is the sum of the account balances under
the aggregated qualified defined contributions plan or plans for
all Participants, determined in accordance with (1) above, and
the Present Value of accrued benefits under the qualified defined
benefit plan or plans for all Participants as of the
Determination Date(s), all determined in accordance with Section
416 of the Code and the regulations thereunder. The accrued
benefits under a defined benefit plan in both the numerator an
denominator of the Top-Heavy Ratio are increased for any
distribution of an accrued benefit made in the 5-year period
ending on the Determination Date.
(3) For purposes of (1) and (2) above, the value of account
balances and the Present Value of accrued benefits will be
determined as of the most recent Valuation Date that falls within
or ends with the 12-month period ending on the Determination
Date; except as provided in Section 416 of the Code and the
regulations thereunder for the first and second Plan Years of a
defined benefit plan. The account balances and accrued benefits
of a Participant(a) who is a not a Key Employee but who was a Key
Employee in a prior Plan Year, or (b) who has not been credited
with at least one Hour of Service for the Employer during the
5-year period ending on the Determination date, will be
disregarded. The calculation of the Top-Heavy Ratio, and the
extent to which distributions, rollovers and transfers are taken
into account will be made in accordance with Section 416 of the
Code and the regulations thereunder. Deductible Employee
contributions will not be taken into account for purposes of
computing the Top-Heavy Ratio. when aggregating plans, the value
of account balances and accrued benefits will be calculated whit
reference to the Determination Dates that fall within the same
calendar year.
The accrued benefit of a participant other than a Key Employee
shall be determined under (a) the method, if any, that uniformly
applies for accrual purposes under all defined benefit plans
maintained by the Employer or (b) if there is no such method, as
if such benefit accrued not more rapidly than the slowest accrual
rate permitted under the fractional rule of Section 411(b)(1)(C)
of the Code.
(d) Permissive Aggregation Group means the Required Aggregation
Group of plans plus any other qualified plan or plans (or
simplified employee pension plan) of the Employer which, when
considered as a group with the Required Aggregation Group, would
continue to satisfy the requirements of Sections 401(a)(4) and
410 of the Code.
(e) Required Aggregation Group means: (i) each qualified plan of
the Employer in which at least one Key Employee participates or
participated at any time during the determination period
(regardless of whether the Plan has terminated) and (ii) any
other qualified plan of the Employer which enables a plan
described in (i) to meet the requirements of Section 401(a)(4) or
410 of the Code.
(f) Determination Date means, for 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 Determination Date is the last
day of that Plan Year.
(g) Valuation Date means the last day of the Plan Year.
(h) Present Value means present value based only on the interest
and mortality rates specified in any defined benefit plan
maintained by the Employer and set forth in the Plan Agreement.
15.3 Minimum Allocation.
(a) Except as otherwise provided in paragraphs (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 of such Participant s Earnings, or in
the case here the Employer has not 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 $200,000 of the Key Employee s
Earnings, 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 of the Employer s contributions and
Forfeitures for the Plan Year because of (1) the Participant s
failure to be credited with at least 1,000 Hours of Service, or
(2) the Participant s failure to make mandatory Employee
contributions to the Plan, or (3) the Participant s receiving
Earnings less than a stated amount. Neither Elective Deferrals,
Employer Matching Contributions nor Qualified Matching
Contributions for non-key employees shall be taken into account
for purpose of satisfying the requirement of this Section
15.3(a).
(b) For purposes of computing the minimum allocation. Earnings
will mean Earnings as defined in Section 2.13 of the Plan.
(c) The provision in paragraph (a) above shall not apply to any
Participant who was to employed by the Employer on the last day
of the Plan Year.
(d) The provision in paragraph (a) above shall not apply to any
Participant to the extent he is covered under any other plan or
plans of the Employer, and the Employer has provided in the Plan
Agreement that the minimum allocation requirement applicable to
Top-Heavy Plans will be met in the other plan or plans.
(e) The minimum allocation required (to the extend required to be
nonforfeitable under Section 416(b) of the Code) may not be
forfeited under Sections 411(a)(3)(B) or (D) of the Code.
15.4 Earnings Limitation. For any Plan Year in which the Plan is
Top-Heavy, only the first $200,000 (or such larger amount as may
be prescribed by the Secretary of the Treasury or his delegate)
of a Participant s annual Earnings shall be taken into account
for purposes of determining Employer contributions under the
Plan.
15.5 Minimum Vesting Schedules (Variable Plans Only). For any
Plan Year in which this Plan is Top-Heavy and any subsequent Plan
Year, a minimum vesting schedule will automatically apply to the
Plan, as follows:
(a) If the Employer has selected in the Plan Agreement as the
Plan s regular vesting schedule the Tree Year Cliff, Five Year
Graded or Six Year Graded schedule, then the schedule selected in
the Plan Agreement shall continue to apply for any Plan Year to
which this Section 15.5 applies.
(b) If the Employer has selected in the Plan Agreement as the
Plans regular vesting schedule the Five Year Cliff schedule,
then the Three Year Cliff schedule shall apply in any Plan Year
to which this Section 15.5 applies.
(c) If the Employer has selected in the Plan Agreement as the
Plan s regular vesting schedule the Seven Year Graded schedule,
then the Six Year Graded schedule shall apply in any Plan Year to
which this Section 15.5 applies.
(d) If the Employer has selected in the Plan Agreement as the
Plan s regular vesting schedule a schedule other than those
described in paragraphs (a), (b) and (c), then the schedule
specified by the Employer in the Plan Agreement for this purpose
shall apply in any Plan Year to which this Section 15.5 applies.
The minimum vesting schedule applies to all benefits within the
meaning of Section 411(a)(7) of the Code except those
attributable to Employee contributions, including benefits
accrued before the effective date of Section 416 of the Code and
benefits accrued before the Plan became Top-Heavy. Further, to
reduction in a Participant s nonforfeitable percentage may occur
in the event the Plan s status as Top-Heavy changes for any Plan
Year. However, the vested portion of the Employer Contribution
Account of any Employee who does not have an Hour of Service
after the Plan has initially become Top-Heavy will be determined
without regard to this Section 15.5.
15.6 Adjustment of Fractions. For any Plan Year in which the
Plan is Top-Heavy, the Defined Benefit Fraction and the Defined
Contribution Fraction in Article 6 shall each be computed using
100 percent of the dollar limitations specified in Sections
415(b)(1)(A) and 415(c)(1)(A) instead of 125 percent. In a
Variable Plan, the foregoing requirement shall not apply if the
Top-Heavy Ratio does not exceed 90 percent and the Employer has
elected in the Plan Agreement to provide increased minimum
allocations or benefits satisfying Section 416(h)(2) of the Code.
ARTICLE XVI:
Administration of the Plan
16.1 Plan Administrator. The Plan shall be administered by the
Employer, as Plan Administrator and Named Fiduciary within the
meaning of ERISA, under rules of uniform application; provided,
however, that the Plan Administrator s duties and
responsibilities may be delegated to a person appointed by the
Employer or a committee established for that purpose, in which
case the committee shall be the Plan Administrator and Named
Fiduciary. The members of such a committee shall act by majority
vote, and may by majority vote authorize any one or ones of their
number to act for the committee. The person or committee (if
any) initially appointed by the Employer may be named in the Plan
Agreement, but the Employer may remove any such person or
committee member by written notice to him, and any such person or
committee may resign by written notice to the Employer, without
the necessity of amending the Plan Agreement. To the extent
permitted under applicable law, the Plan Administrator shall
have the sole authority to enforce the terms hereof on behalf of
any and all persons having or claiming any interest under the
Plan, and shall be responsible for he operations of the Plan in
accordance with its terms. The Pan Administrator shall have
discretionary authority to determine all questions arising out of
the administration, interpretation and application of the Plan,
all of which determinations shall be conclusive and binding on
all persons. The Plan Administrator in carrying out its
responsibilities under the Plan , may rely upon the written
opinions of its counsel and on certificates of physicians.
Subject to the provisions of the Plan and applicable law, the
Plan Administrator shall have no liability to any person as a
result of any action taken or omitted hereunder by the Plan
Administrator.
16.2 Claims Procedure. Claims for participation in or
distribution under the Plan shall be made in writing to the Plan
Administrator, or an agent designated by the Plan Administrator
whose name shall have been communicated t all Participants and
other persons as required by law. If any claim so made is denied
in whole or in part, the claimant shall be furnished promptly by
the Plan Administrator with a written notice:
(a) setting forth the reason for the denial,
(b) making reference to pertinent Plan provisions.
(c) describing any additional material or information from the
claimant which is necessary and why, and
(d) explaining the claim review procedure set forth herein.
Within 60 days after denial of any claim for participation or
distribution under the Plan, the claimant may request in writing
a review of the denial by the Plan Administrator. Any claimant
seeking review hereunder shall be entitled to examine all
pertinent documents and to submit issues and comments in writing.
The Plan Administrator shall render a decision on review
hereunder; provided, that if the Plan Administrator determines
that a hearing would be appropriate, its decision on review shall
be rendered within 120 days after receipt of the request for
review. The decision on review shall be in writing and shall
state the reason for the decision, referring to the Plan
provisions upon which it is based.
16.3 Employer s Responsibilities. The Employer shall be
responsible for:
(a) Keeping record of employment and other matters containing all
relevant data pertaining to any person affected hereby and his
eligibility to participate, allocations to his Accounts, and his
other rights under the Plan;
(b) Periodic, timely filing of all statements, reports and
returns required to be filed by ERISA;
(c) Timely preparation and distribution of disclosure materials
required by ERISA;
(d) Providing notice to interested parties as required by Section
7476 of the Code;
(e) Retention of records for periods required by law; and
(f) Seeing that all persons required to be bonded on account of
handling assets of the Plan are bonded.
16.4 Recordkeeper. The Recordkeeper is hereby designated as
agent of the Employer under the Plan to perform directly or
through agents certain ministerial duties in connection with the
Plan, in particular:
(a) To keep and regularly furnish to the Employer a detailed
statement of each Participant s Accounts, showing contributions
thereto by the Employer and the Participant, Investment Products
purchased therewith, earnings thereon and Investment Products
purchased therewith, and each redemption or distribution made for
any reason, including fees or benefits; and
(b) To the extent agreed between the Employer and the
Recordkeeper, to prepare for the Employer or to assist the
Employer to prepare such returns, reports or forms as the
Employer shall be required to furnish to Participants and
Beneficiaries or other interested persons and to the Internal
Revenue Service or the Department of Labor;
all as may be more fully set forth in a service agreement
executed by the Employer and the Recordkeeper. If the Employer
does not appoint another person or entity as Recordkeeper, the
Employer itself shall be the Recordkeeper.
16.5 Prototype Plan. Putnam is the sponsor of the Putnam Basic
Plan Document, a prototype plan approved as to form by the
Internal Revenue Service. Provided that an Employer s adoption
of the Plan is made known to and accepted by Putnam in accordance
with the Plan Agreement, Putnam will inform the Employer of
amendments to the prototype plan and provide such other services
in connection with the Plan as may be agreed between Putnam and
the Employer. Putnam may impose for its services as sponsor of
the prototype plan such fees as it may establish from time to
time in a fee schedule addressed to the Employer. Such fees
shall, unless paid by the Employer, be paid from the Trust Fund,
and shall in that case be charged pro rata against the Accounts
of all Participants. The Trustee is expressly authorized to
cause Investment Products to be sold or redeemed for the purpose
of paying such fees.
ARTICLE XVII:
Trustee and Insurance Trustee
17.1 Powers and Duties of the Trustee. The Trustee shall have
the authority, in addition to any authority given by law, to
exercise the following powers in the administration of the Trust:
(a) To invest all or a part of the Trust Fund in Investment
Products in accordance with the investment instructions delivered
by the Employer pursuant to Section 13.3, without restriction to
investments authorized for fiduciaries, including without
limitation any common, collective or commingled trust fund
maintained by the Trustee (or any other such fund, acceptable to
Putnam and the Trustee, that qualifies for exemption from federal
income tax pursuant to Revenue Ruling 81-100). Any investment
in, and any terms and conditions of, any such common, collective
or commingled trust fund available only to employee trusts which
meet the requirements of the Code, or corresponding provisions of
subsequent income tax laws of the United States, shall constitute
an integral part of this Agreement;
(b) If this is a Variable Plan and Putnam and the Trustee have
consented thereto in writing, to invest without limit in stock of
the Employer or any affiliated company;
(c) To dispose of all or part of the investments, securities or
other property which may from time to time or at any time
constitute the Trust Fund in accordance with the written
directions furnished by the Employer for the investment of
Participants separate Accounts or the payment of benefits or
expenses of the Plan, and to make, execute and deliver to the
purchasers thereof good and sufficient deeds of conveyance
therefore, and all assignments, transfers and other legal
instruments, either necessary or convenient for passing the title
and ownership thereto, free and discharged of all trust and
without liability on the part of such purchasers to see to the
application of the purchase money;
(d) To hold cash uninvested to the extent necessary to pay
benefits or expenses of the Plan;
(e) To follow the directions of an investment manager appointed
pursuant to Section 13.7;
(f) To cause any investment of the Trust Fund to be registered in
the name of the Trustee or the name of its nominee or nominees or
to retain such investment unregistered or in a form permitting
transfer by delivery; provided that the books and records of the
Trustee shall at all times show that all such investments are
part of the Trust Fund:
(g) Upon the written direction of or through the Employer, to
vote in person or by proxy (in accordance with Section 13.6 and,
in the case of stock of the Employer, at the direction of the
Employer) with respect to all securities that are part of the
Trust Fund;
(h) To consult and employ any suitable agent to act on behalf of
the Trustee and to contract for legal, accounting, clerical and
other services deemed necessary by the Trustee to manage and
administer the Trust Fund according to the terms of the Plan;
(i) Upon the written direction of the Employer, to make loans
from the Trust Fund to Participants in amounts and on terms
approved by the Plan Administrator in accordance with the
provisions of the Plan; provided that the Employer shall have the
sole responsibility for computing and collecting all loan
repayments required to be made under the Plan; and
(j) To pay from the Trust Fund all taxes imposed or levied with
respect to the Trust Fund or any part thereof under existing or
future laws, and to contest the validity or amount of any tax
assessment, claim or demand respecting the Trust Fund or nay part
thereof.
17.2 Limitation of Responsibilities. Except as may otherwise be
required under applicable law, neither the Trustee nor the
Insurance Trustee nor any of their respective agents shall have
any responsibility for:
(a) Determining the correctness of the amount of any contribution
for the sole collection or payment of contributions, which shall
be the sole responsibility of the Employer;
(b) Loss or breach caused by any Participant s exercise of
control over his Accounts, which shall be the sole responsibility
of the Participant;
(c) Loss or breach caused by the Employer s exercise of control
over Accounts pursuant to Section 13.3, which shall be the sole
responsibility of the Employer;
(d) Sums paid to an insurer or the validity of any Policy or the
accuracy of information provided by an insurer, which shall be
the sole responsibility of the insurer;
(e) Performance of any other responsibilities not specifically
allocated to them under the Plan.
17.3 Fees and Expenses. The Trustee s fees for performing its
duties hereunder shall be such reasonable amounts as shall be
established by the Trustee from time to time in a fee schedule
addressed to the Employer. Such fees, any taxes of any kind
which may be levied or assessed upon or in respect of the Trust
Fund and any and all expenses reasonably incurred by the Trustee
shall, unless paid by the Employer, be paid from the Trust Fund
and shall, unless allocable to the Accounts of specific
Participants, be charged pro rata against the Accounts of all
Participants. The Trustee is expressly authorized to cause
Investment Products to be sold or redeemed for the purpose of
paying such amounts. Charges and expenses incurred in connection
with a specific Investment Product, unless allocable to the
Accounts of specific Participants, shall be charged pro rata
against the Accounts of all Participants for whose benefit
amounts have been invested in the specific Investment Product.
17.4 Reliance on Employer. The Trustee and its agents (and the
Insurance Trustee, if any) shall rely upon any decision of the
Employer, or of any person authorized by the Employer, purporting
to be made pursuant to he terms of the Plan, and upon any
information or statements submitted by the Employer or such
person (including those relating to the entitlement of any
Participant to benefits under the Plan), and shall to inquire as
to the basis of any such decision or information or statements,
and shall incur no obligation or liability for any action taken
or omitted in reliance thereon. The Trustee and its agents shall
be entitled to rely on the latest written instruction received
from the Employer as to the person or persons authorized to act
for the Employer hereunder, and to sign on behalf of the Employer
any directions or instructions, until receipt from the Employer
of written notice that such authority has been revoked.
17.5 Action Without Instructions. If the Trustee receives no
instructions from the Employer in response to communications sent
by registered or certified mail to the Employer at its last known
address as shown on the books of the Trustee, then the Trustee
may make such determinations with respect to administrative
matters arising under the Plan as it considers reasonable,
notwithstanding any prior instructions or directions given by or
on behalf of the Employer, but subject to any instruction or
direction given by or on behalf of the Participants. To the
extent permitted by applicable law, any determination so made
will be binding on all persons having or claiming any interest
under the Plan or Trust, and the Trustee will incur no obligation
or responsibility for any such determination made in good faith
or for any action taken pursuant thereto. I making any such
determination the Trustee may require that it be furnished with
such relevant documents as it reasonably considers necessary.
17.6 Advice of Counsel. The Trustee and the Insurance Trustee
may each consult with legal counsel (who may, but need not be,
counsel for the Employer) concerning any questions which may
arise with respect to their respective rights and duties under
the Plan, and the opinion of such counsel shall be full and
complete protection to the extent permitted by applicable law in
the respect of any action taken or omitted by the Trustee or the
Insurance Trustee, as the case may be, hereunder in accordance
with the opinion of such counsel.
17.7 Accounts. The Trustee shall keep full accounts of all
receipts and disbursement which pertain to investments in
Investment Products, and the Trustee and the Insurance Trustee
shall each keep accounts of such other transactions as it is
required to perform hereunder. Within a reasonable time
following the close of each Plan Year, or upon its removal or
resignation or upon termination of the Trust and at such other
times as may be appropriate, each shall render to the Employer
and any other persons as may be required by law an account of its
administration of the Plan and Trust during the period since the
last previous such accounting, including such information as may
be required by law. The written approval of any account by the
Employer and all other persons to whom an account is rendered
shall be final and binding as to all matters and transactions
stated or shown therein, upon the Employer and Participants and
all persons who then are or thereafter become interested in the
Trust. The failure of the Employer or any other person to whom
an account is rendered to notify the party rendering the account
within 60 days after the receipt of any account of his or its
objection to the account shall be the equivalent of written
approval. If the Employer or any other person to whom an account
is rendered files any objections within such 60-day period with
respect to any matters or transactions stated or shown in the
account and the Employer or such other person and the party
rendering the account and the Employer or such person shall have
the right to have such questions settled by judicial proceedings,
although the Employer or such other person to whom an account is
rendered shall have, to the extent permitted by applicable law,
only 60 days from filing of written objection t the account to
commence legal proceedings. Nothing herein contained shall be
construed so as to deprive the Trustee or the Insurance Trustee
of the right to have a judicial settlement of its accounts. In
any proceeding for a judicial settlement of any account or for
instructions, the only necessary parties shall be the Trustee,
the Insurance Trustee, the Employer and persons to whom an
account is required by law to be rendered.
17.8 Access to Records. The Trustee and the Insurance Trustee
shall give access to their respective records with respect to the
Plan at reasonable times and on reasonable notice to any persona
required by law to have access to such records.
17.9 successors. any corporation into which the Trustee may
merge or with which it may consolidate or any corporation
resulting from any such merger or consolidation shall be the
successor of the Trustee without the execution or filing of any
additional instrument or the performance of any further act.
17.10 Persons Dealing With Trustee or Insurance Trustee. No
person dealing with the Trustee or the Insurance Trustee shall be
bound to see to the application of any money or property paid or
delivered to such party or to inquire into the validity or
propriety of any transactions.
17.11 Resignation and Removal; Procedure. The Trustee or the
Insurance trustee may resign at any time by giving 60 days
written notice to the Employer and to Putnam. The Employer may
remove the Trustee or the Insurance Trustee at any time by giving
60 days written notice to the party removed and to Putnam. In
any case of resignation or removal hereunder, the period of
notice may be reduced to such shorter period as is satisfactory
to the Trustee, the Insurance Trustee and the Employer.
Notwithstanding anything to the contrary herein, any resignation
hereunder shall take effect at the time notice hereof is given if
the Employer may no longer participate in the prototype Plan and
is deemed to have an individually designed plan at the time
notice is given.
17.12 Action of Trustee Following Resignation or Removal. When
the resignation or removal of the Trustee becomes effective, the
Trustee shall perform all acts necessary to transfer the Trust
Fund to its successor. However, the Trustee may reserve such
portion of the Trust Fund as it may reasonably determine to be
necessary for payment of its fees and any taxes and expenses, and
any balance of such reserve remaining after payment of such fees,
taxes and expenses shall be paid over to its successor. The
Trustee shall have no responsibility for acts or omissions
occurring after its resignation becomes effective.
17.13 Action of Insurance Trustee Following Resignation or
Removal. when the Insurance Trustee s resignation or removal
becomes effective, the Insurance Trustee shall perform all acts
necessary to transfer ownership of the Policies to its successor.
If no successor has accepted appointment, the Policies shall be
held and owned by the Employer acting as Insurance Trustee until
a successor is appointed.
17.14 Effect of Resignation or Removal. Resignation or removal
of the Trustee or the Insurance Trustee shall to terminate the
Trust. In the event of any vacancy in the position of Trustee
(or, in a Plan having amounts invested in Policies, the position
of Insurance Trustee), whether the vacancy occurs because of the
resignation or removal of the Trustee (or the Insurance Trustee)
the Employer shall appoint a successor to fill the vacant
position. If the Employer does not appoint such a successor who
accepts appointment by the later of 60 days after notice of
resignation or removal is given or by such later date as the
Trustee or the Insurance Trustee, as the case may be, and
Employer may agree in writing to postpone the effective date of
the Trustee or the Insurance Trustee s resignation or removal,
the Trustee or Insurance Trustee may apply t a court of competent
jurisdiction for such appointment of cause the Trust to be
terminated, effective as of the date specified by the Trustee or
Insurance Trustee, as the case may be, in writing delivered to
the Employer. Each successor trustee so appointed and accepting
a trusteeship hereunder shall have all of the rights and powers
and all of the duties and obligations of the original Trustee or
Insurance Trustee, as the case may be, under the provisions
hereof, but shall have no responsibility for acts or omissions
before he becomes a Trustee or Insurance Trustee.
17.15 Fiscal Year of Trust. The fiscal year of the Trust will
coincide with the Plan Year.
17.16 Limitation of Liability. Except as may otherwise be
required by law and other provisions of the Plan, no fiduciary of
the Plan, within the meaning of Section 3(21) of ERISA, shall be
liable for any losses incurred with respect to the management of
this Plan nor shall he or it be liable for any acts or omissions
except those caused by his or its own negligence or bad faith in
failing to carry out his or its duties under the terms contained
the Plan.
17.17 Indemnification. Subject to the limitations of applicable
law, the Employer agrees to indemnify and hold harmless (i) all
fiduciaries, within the meaning of ERISA Sections 3(21) and 404,
and (ii) Putnam, for all liability occasioned by any act, of such
party or omission to act, in good faith and without gross
negligence, and for all expenses incurred by any such party in
determining its duty or liability under ERISA with respect to any
questions arising under the Plan.
ARTICLE XVIII:
Amendment
18.1 General. The Employer reserves the power at any time or
times to amend the provisions of the Plan and the Plan Agreement
to any extent and in any manner that it may deem advisable. If,
however, the Employer makes any amendment (including an amendment
occasioned by a waiver of the minimum funding requirement under
Section 412 (d) of the Code) other than
(a) a change in an election made in the Plan Agreement,
(b) amendments stated in the Plan Agreement which allow the Plan
to satisfy Section 415 and to avoid duplication of minimums
under Section 416 of the Code because of the required aggregation
of multiple plans, or
(c) model amendments published by the Internal Revenue Service
which specifically provide that their adoption will not cause the
Plan to be treated a individually designed, the Employer shall
cease to participate in this prototype Plan and will be
considered to have an individually designed plan. In that event,
Putnam shall have no further responsibility to provide to the
Employer any amendments or other material incident to the
prototype plan, and Putnam may resign immediately as Trustee and
as Recordkeeper. Any amendment shall be made by delivery to the
Trustee (and the Recordkeeper, if any) of a written instrument
executed by the Employer providing for such amendment. Upon the
delivery of such instrument to the Trustee, such instrument shall
become effective in accordance with its terms as to all
Participants and all person having or claiming any interest
hereunder, provided, that the Employer shall not have the power:
(1) To amend the Plan in such a manner as would cause or permit
any part of the assets of the Trust to be diverted to purposes
other than the exclusive benefit of Participants or their
Beneficiaries, or as would cause or permit any portion of such
assets to revert to or become the property of the Employer.
(2) To amend the Plan retroactively in such a manner as would
have the effect of decreasing a Participant s accrued benefit,
except that Participant s Account balance may be reduced to the
extent permitted under Section 412(c)(80 of the Code. For
purposes of this paragraph (2), an amendment shall be treated as
reducing a Participant s accrued benefit if it has the effect of
reducing his Account balance, or of electing an optional form of
benefit with respect to amount attributable to contributions made
performed before the adoption of the amendment; or
(3) To amend the Plan so as to decrease the portion of a
Participant s Account balance that has become vested, as compared
to the portion that was vested, under the terms of the Plan
without regard to the amendment, as of the later of the date the
amendment is adopted or the date it becomes effective.
(4) To amend the Plan in such a manner as would increase the
duties or liabilities of the Trustee or the Recordkeeper unless
the Trustee or the Recordkeeper consents thereto in writing.
18.2 Delegation of Amendment Power. The Employer and all
sponsoring organizations of the Putnam Basic Plan Document
delegate to Putnam Financial Services, Inc., the power to amend
the Plan (including the power to amend this Section 18.2 to name
a successor to which such power of amendment shall be delegated),
for he purpose of adopting amendments which are certified to
Putnam Financial Services, Inc., by counsel satisfactory to it,
as necessary or appropriate under applicable law, including any
regulation or ruling issued by the United States Treasury
Department or any other federal or state department or agency;
provided that Putnam Financial Services, Inc., or such successor
may amend the Plan only if it has mailed a copy of the proposed
amendment to the Employer at its last known address as shown on
its books by the date on which it delivers a written instrument
providing for such amendment, and only if the same amendment is
made on said date to all plans in this form as to which Putnam
Financial Services, Inc., or such successor has a similar power
of amendment. If a sponsoring organization does not adopt any
amendment mad by Putnam Financial Services, Inc., such sponsoring
organization shall cease to participate in this prototype Plan
and will be considered to have an individually designed plan.
ARTICLE XIX:
Termination of the Plan and Trust
19.1 General. The Employer has established the Plan and the
Trust with the bona fide intention and expectation that
contributions will be continued indefinitely, but the Employer
shall have not obligation or liability whatsoever to maintain the
Plan for any given length of time and may discontinue
contributions under the Plan or terminate the Plan at any time by
written notice delivered to the Trustee and Insurance Trustee,
without any liability whatsoever for any such discontinuance or
termination.
19.2 Events of Termination. The Plan will terminate upon the
happening of any of the following events:
(a) Death of the Employer, if a sole proprietor, or dissolution
or termination of the Employer, unless within 60 days thereafter
provision is made by the successor to the business with respect
to which the Plan was established for the continuation of the
Plan, and such continuation is approved by the Trustee;
(b) Merger, consolidation or reorganization of the Employer into
one or more corporations or organizations, unless the surviving
corporations or organizations adopt the Plan by an instrument in
writing delivered to the Trustee within 60 days after such a
merger, consolidation and reorganization;
(c) Sale of all or substantially all of the assets of the
Employer, unless the purchaser adopts the Plan by an instrument
in writing delivered to the Trustee within 60 days after the
sale;
(d) the institution of bankruptcy proceedings by or against the
Employer, or a general assignment by the Employer to or for the
benefit of its creditors; or
(e) Delivery of notice as provided in Section 19.1.
19.3 Effect of Termination. Notwithstanding any other provisions
of this Plan, other than Section 19.4, upon termination of the
Plan or complete discontinuance of contributions thereunder, each
Participant s Accounts will become fully vested and
nonforfeitable, and upon partial termination of the Plan, the
Accounts of each Participant affected by the partial termination
will become fully vested and nonforfeitable. The Employer shall
notify the Trustee and the Insurance Trustee in writing of such
termination, partial termination or complete discontinuance of
contributions. In the events of the complete termination of the
Plan or discontinuance of contributions, the Trustee will, after
payment of all expenses of the Trust Fund, make distribution of
the Trust assets to the Participants or other persons entitled
thereto, in such form as the Employer may direct pursuant to
Article 10 or, in the absence of such direction, in a single
payment in cash or in kind. Upon completion of such
distributions under this Article, the Trust will terminate, the
Trustee and the Insurance Trustee will be relieved from their
obligations under the Trust, and no Participant or other person
will have any further claim thereunder.
19.4 Approval of Plan. Notwithstanding any other provision of
the Plan, if the Employer fails to obtain or to retain the
approval by the Internal Revenue Service of the Plan as a
qualified plan under Section 401(a) of the Code, then (i) the
Employer shall promptly notify the Trustee, and (ii) the Employer
may no longer participate in the Putnam prototype plan, but will
be deemed to have an individually designed plan. If it is
determined by the Internal Revenue Service that the Plan upon its
initial adoption does not qualify under Section 401(a) of the
Code, all assets then held under the Plan will be returned within
one year of the denial of initial qualification to the
Participants and the Employer to the extent attributable to their
respective contributions and any income earned thereon, but only
if the application for qualification is made by the time
prescribed by law for filing the Employer s federal income tax
return for the taxable year in which the Plan is adopted, or such
later date as the Secretary of the Treasury may prescribe. Upon
such distribution, the Plan will be considered to be rescinded
and to be of no force or effect.
ARTICLE XX:
Transfers from Other Qualified Plans; Mergers
20.1 General. Notwithstanding any other provision hereof,
subject to he approval of the Trustee there may be transferred to
the Trustee all or any of the assets held (whether by a trustee,
custodian or otherwise) in respect of any other plan which
satisfies the applicable requirements of Section 401(a) of the
Code and which is maintained for the benefit of any Employee
(provided, however, that the Employee is not a member of a class
of Employees excluded from eligibility to participate in the
Plan) except that insurance policies held in respect of such
other plan shall be transferred tot he Insurance Trustee as
trustee if the Employer so determines. Any such assets so
transferred shall be accompanied by written instructions from the
Employer naming the persons for whose benefit such assets have
been transferred and showing separately the respective
contributions made by the Employer and by the Participants and
the current value of the assets attributable thereto.
20.2 Amounts Transferred. The Employer shall credit any assets
transferred pursuant to Section 201. to the appropriate Accounts
of the persons for whose benefit such assets have been
transferred. Any amounts credited as contributions previously
made by an employer or by such persons under such other plan
shall e treated as contributions previously made under the Plan
by the Employer or by such persons, as the case may be.
20.3 Merger or Consolidation. The Plan shall not be merged or
consolidated with any other plan, nor shall any assets or
liabilities of the Trust Fund be transferred to any other plan,
unless each Participant would receive a benefit immediately after
the transaction, if the Plan then terminated, which is equal to
or greater than the benefit he would have been entitled to
receive immediately before the transaction if the Plan had then
terminated.
ARTICLE XXI:
Miscellaneous
21.1 Notice of Plan. The Plan shall be communicated to all
Participants by the Employer on or before the last day on which
such communication may be made under applicable law.
21.2 No Employment Rights. Neither the establishment of the Plan
and the Trust, nor any amendment thereof, nor the creation of any
fund or account, nor the purchase of Policies, nor the payment of
any benefits shall be construed as giving to any Participant or
any other person any legal or equitable right against the
Employer, the Trustee, or the Insurance Trustee, or the Insurance
Trustee, except as provided herein or by ERISA; and in no event
shall the terms of employment or service of any Participant be
modified or in any way be affected hereby.
21.3 Distributions Exclusively From Plan. Participants and
Beneficiaries shall look solely to the assets held in the trust
and any Policies purchased pursuant to the Plan for the payment
of any benefits under the Plan.
21.4 No Alienation. The benefits provided hereunder shall not be
subject to alienation, assignment, garnishment, attachment,
execution or levy of any kind, and any attempt to cause such
benefits to be so subjected shall not be recognized, except as
provided in Section 12.4 or in accordance with a Qualified
domestic relations order within the meaning of Section 414(p) of
the Code. The Plan Administrator shall determine whether a
domestic relations order is qualified in accordance with written
procedures adopted by the Plan Administrator.
21.5 Provision of Information. The Employer, Trustee and
Insurance Trustee shall furnish to each other such information
relating to the Plan and Trust as may be required under the Code
or ERISA and any regulations issued or forms adopted by the
Treasury Department or the Labor Department or otherwise
thereunder.
21.6 no Prohibited Transactions. The Employer, Trustee, and
Insurance Trustee shall, to the extent of their respective powers
and authority under the Plan, prevent the Plan from engaging in
any transaction known by that person to constitute a transaction
prohibited by Section 4975 of the Code and any rules or
regulations with respect thereto.
21.7 Governing Law. The Plan shall be construed, administered,
regulated and governed in all respects under and by the laws of
the United States, and to the extent permitted by such laws, by
the laws of the Commonwealth of Massachusetts.
21.8 Gender. Whenever used herein, a pronoun in the masculine
gender includes the feminine gender unless the context clearly
indicates otherwise.
<PAGE>
II. IRS Opinion Letters
II. IRS Opinion Letters
Putnam Standard Profit Sharing and 401(k) Plan
Opinion Letter 38
Putnam Standard Money Purchase Pension Plan
Opinion Letter 39
Putnam Variable Profit Sharing and 401(k) Plan
Opinion Letter 40
Putnam Variable Money Purchase Pension Plan
Opinion Letter 41
Putnam
Retirement
Plans:
Plan Agreements
for the Simplified
Retirement Plans
Putnam Profit Sharing Plan (Keogh)
Putnam Money Purchase Pension Plan (Keogh)
Putnam Profit Sharing and 401(k) Plan
Boston*London*Tokyo
<PAGE>
Contents
Part I: Summary of Plan Services
Summary of Plan Services 2
Part II: Adopting a Simplified Putnam Retirement Plan
Step-by-Step Guide to Establishing a
Putnam Profit Sharing Plan (Keogh) 4
Step-by-Step Guide to Establishing a
Putnam Money Purchase Pension
Plan (Keogh) 5
Step-by-Step Guide to Establishing a
Putnam Profit Sharing and 401(k) Plan 6
Suggested Form of Board Resolution
for a New Plan 7
Putnam Plan Agreement #001 9
Putnam Plan Agreement #002 19
Instructions for Completing and Distributing
Notice to Interested Parties 27
Notice to Interested Parties 29
Plan Investment Form 33
Part III: Questions and Answers about the
Simplified Putnam Retirement Plans
General Comments 39
Key Definitions 40
Contributions 41
Plan Investments 45
Plan Distributions 45
Top-Heavy Testing 46
Plan Administration 47
Glossary of Terms 49
<PAGE>
Part I: Summary of Plan Services
Summary of Plan Services 2
Summary of Plan Services
Putnam will provide the following administrative services listed
below for each of the Simplified Putnam Retirement Plans.
A. Plan Installation/Maintenance:
1 Putnam will provide the initial SUMMARY PLAN DESCRIPTION to the
Employer for the Employer s completion, review, approval and
submission to the Department of Labor and distribution to the
Plan Participants and Beneficiaries.
2 Putnam will provide the NOTICE TO INTERESTED PARTIES (page 29
of this booklet) for the Employer s completion, review, approval
and distribution to the Plan Participants.
3 Putnam will provide the Employer any PLAN AMENDMENTS necessary
to comply with changes required by law.
B. Employer and Employee Reports
1 Putnam will process Employer authorization for hardship
withdrawals, if applicable, benefit payments, and investment
change elections pursuant to Employer instructions in accordance
with the Plan.
2 Putnam will allocate contributions to Participant accounts
pursuant to Employer instructions in accordance with the Plan.
3 Putnam will provide Consolidated Quarterly Statements and
confirmations of each fund transaction to Participants.
4 Putnam will provide the Employer with assistance with the
preparation of a Summary Annual Report for distribution to Plan
Participants.
5 Putnam will provide the Employer with a 401(k) Plan Group
Investment Report, if applicable.
6 Putnam will provide the Employer with sample administrative
forms.
7 Putnam will provide the Employer with a Form 5500 kit with
instructions to assist the Employer with preparation of the
applicable Form 5500 for filing with the IRS.
<PAGE>
8 Putnam will provide the Employer with an information kit to
assist the Employer in performing an annual TEFRA Top-Heavy Test,
if applicable.*
9 Putnam will provide the Employer with an informational kit to
assist the Employer in performing a Plan Year-end 401(k) Actual
Deferral Percentage Test, if applicable.*
10 Putnam will process Plan distributions, including preparation
and mailing of IRS Forms 1099-R. Plan distributions include all
payments to Participants and Beneficiaries, and payments to the
Employer or its designee.
*Putnam will not be responsible for providing information
necessary for aggregating tests with other plans maintained by
the Employer or plans maintained by other companies under the
same controlled group of companies or affiliated service group.
Part II: Adopting a Simplified Putnam Retirement Plan
Step-by-Step Guide to Establishing a
Putnam Profit Sharing Plan (Keogh) 4
Step-by-Step Guide to Establishing a
Putnam Money Purchase Pension
Plan (Keogh) 5
Step-by-Step Guide to Establishing a
Putnam Profit Sharing and 401(k) Plan 6
Suggested Form of Board Resolution
for a New Plan 7
Putnam Plan Agreement #001 9
Putnam Plan Agreement #002 19
Notice to Interested Parties 29
Plan Investment Form 33
<PAGE>
Step-by-Step Guide to Establishing a Putnam Profit Sharing Plan
(Keogh)
1 Contact Putnam or your investment dealer to order Employee
Enrollment Kits and the appropriate fund prospectuses for each of
your employees. If you already have a retirement plan and will
be transferring assets to Putnam, please request the Plan
Transfer Booklet.
2 Before adopting the Putnam Plan, corporate employers must pass
a Board Resolution. A suggested Form of Board Resolution for New
Plan is on page 7. (If you are transferring from your current
plan, please see the Suggested Form of Board Resolution provided
in the Plan Transfer Booklet.)
3 Complete Plan Agreement #001 on pages 9-18. (You do not need
to complete Item 12 of Plan Agreement #001 when adopting a Putnam
Profit Sharing Plan.) If you wish to adopt a Paired Putnam
Profit Sharing and Money Purchase Pension Plan, you must also
complete Plan Agreement #002.
4 Complete and post the Notice to Interested Parties on page 29.
5 Enroll your employees. Each eligible employee must receive an
employee enrollment kit and Buyer s Guides (prospectuses) for the
Putnam funds that are being offered through your plan. All
eligible employees should return a signed enrollment form to you.
6 Complete the Plan Investment Form on pages 33-37 using the
employee enrollment forms.
7 Send the following items to Putnam Investor Services, ATTN:
Investment Processing, P.O. Box 2701, Boston, MA 02208:
* Board Resolution
* Plan Agreement #001
* Employee Enrollment Forms
* Plan Investment Form
* Check payable to Putnam Fiduciary Trust Company for initial
contribution and annual participant fee
Be sure to keep copies of these forms for your files.
8 Putnam will review your Plan Agreement for acceptance. (Putnam
must accept this Agreement in order for you to receive future
amendments to the plan.) Putnam will provide you with a Summary
Plan Description and Your Putnam Retirement Plan Kit. This kit
contains the administrative forms associated with the operation
of a Putnam plan.
Step-by-Step Guide to Establishing a Putnam Money Purchase
Pension Plan (Keogh)
1 Contact Putnam or your investment dealer to order Employee
Enrollment Kits and the appropriate fund prospectuses for each of
your employees. If you already have a retirement plan and will
be transferring assets to Putnam, please request the Plan
Transfer Booklet.
2 Before adopting the Putnam Plan, corporate employers must pass
a Board Resolution. A suggested Form of Board Resolution for New
Plan is on page 7. (If you are transferring from your current
plan, please see the Suggested Form of Board Resolution provided
in the Plan Transfer Booklet.)
3 Complete Plan Agreement #002 on pages 19-26. (If you wish to
adopt a Paired Putnam Profit Sharing and Money Purchase Pension
Plan, you must also complete Plan Agreement #001.
4 Complete and post the Notice to Interested Parties on page 29.
5 Enroll your employees. Each eligible employee must receive an
employee enrollment kit and Buyers Guides (prospectuses) for the
Putnam funds that are being offered through your plan. All
eligible employees should return a signed enrollment form to you.
6 Complete the Plan Investment Form on pages 33-37 using the
employee enrollment forms.
7 Send the following items to Putnam Investor Services, ATTN:
Investment Processing, P.O. Box 2701, Boston, MA 02208:
* Board Resolution
* Plan Agreement #002
* Employee Enrollment Forms
* Plan Investment Form
* Check payable to Putnam Fiduciary Trust Company for initial
contribution and annual participant fee
Be sure to keep copies of these forms for your files.
8 Putnam will review your Plan Agreement for acceptance. (Putnam
must accept this Agreement in order for you to receive future
amendments to the plan.) Putnam will provide you with a Summary
Plan Description and Your Putnam Retirement Plan Kit. This kit
contains the administrative forms associated with the operation
of a Putnam plan.
<PAGE>
Step-by-Step Guide to Establishing a Putnam Profit Sharing and
401(k) Plan
1 Contact Putnam or your investment dealer to order Employee
Enrollment Kits and the appropriate fund prospectuses for each of
your employees. If you already have a retirement plan and will
be transferring assets to Putnam, please request the Plan
Transfer Booklet.
2 Before adopting the Putnam Plan, corporate employers must pass
a Board Resolution. A Suggested Form of Board Resolution for New
Plan is on page 7. (If you are transferring from your current
plan, please see the Suggested Form of Board Resolution provided
in the Plan Transfer Booklet.)
3 Complete Plan Agreement #001 on pages 9-18.
4 Complete and post the Notice to Interested Parties on page 29.
5 Enroll your employees. Each eligible employee must receive an
employee enrollment kit and Buyers Guides (prospectuses) for the
Putnam funds that are being offered through your plan. All
eligible employees should return a signed enrollment form to you.
6 Based on the information provided in your employee s Salary
Reduction Agreements, perform the preliminary 401(k) Actual
Deferral Percentage Test which is described on page 43 of this
booklet. Once you are sure that your plan meets the Actual
Deferral Percentage Test, begin payroll deduction procedures.
7 Complete the Plan Investment Form on pages 33-37 using the
employee enrollment forms.
8 Send the following items to Putnam Investor Services, ATTN:
Investment Processing, P.O. Box 2701, Boston, MA 02208:
* Board Resolution
* Plan Agreement #001
* Employee Enrollment Forms
* Plan Investment Form
* Check payable to Putnam Fiduciary Trust Company for initial
contribution and annual participant fee
Be sure to keep copies of these forms for your files.
9 Putnam will review your Plan Agreement for acceptance. (Putnam
must accept this Agreement in order for you to receive future
amendments to the plan.) Putnam will provide you with a Summary
Plan Description and Your Putnam Retirement Plan Kit. This kit
contains the administrative forms associated with the operation
of a Putnam plan.
<PAGE>
For Corporate Employers Only
Suggested Form of Board Resolution for New Plan
THE UNDERSIGNED certifies that he/she is Secretary of ,
a corporation organized and existing under the laws of the State
of
,
and that the following resolutions were adopted at a meeting of
the Board of Directors of the Corporations called and held on the
day of _______ , 19_______, and that the same have not been
amended or rescinded and are in full force and effect:
RESOLVED, that this Board authorizes and directs the proper
officers of this Corporation in the name an on behalf of this
Corporation to execute and deliver a Plan Agreement in the form
now before this meeting, adopting, effective as of ______, 19____
, the Putnam _________________ Plan (insert type of plan);
FURTHER RESOLVED, that this Board authorizes and directs the
proper officers of this Corporation to do all such acts and
things as they, in their discretion and with advice of counsel,
find necessary or desirable to carry out the Plan, including
making contributions out of funds of the Corporation in
accordance with the Plan Agreement;
FURTHER RESOLVED, that ______________ is appointed as Trustee to
serve in accordance with the terms and conditions of the Plan,
commencing on the effective date as designated in the foregoing
resolution:
FURTHER RESOLVED, that this Board authorizes and empowers any one
of the following officers of this Corporation (insert designated
officers): ___________________________________________
to represent this Corporation in all transactions with the
Trustee under the terms and conditions of the Plan, and in the
name of and on behalf of this Corporation to give all notices and
instructions to the Trustee which are necessary or desirable to
carry out the Plan, and to receive all communications for the
Trustee pursuant thereto;
FURTHER RESOLVED, that the President of this Corporation is
authorized and directed to submit an application to the Internal
Revenue Service for a determination that the Plan qualifies under
the provisions of Section 401 of the Internal Revenue Code of
1986, as amended.
(Note: IRS filing will not be necessary for most adopters of the
Putnam Standard Plans.)
THE UNDERSIGNED further certifies that the following are the
names and authentic signatures of the officers of the Corporation
referred to in the foregoing resolution. (Insert designated
officers.)
<PAGE>
Title Name Signature
____________________ ________________________
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
and the corporate seal of the Corporation this ____________ day
of___________, 19__________.
Secretary
_______________________________________
(Corporate Seal)
<PAGE>
Plan Agreement #001
Putnam Standard Profit Sharing and 401(k) Plan
This is the Plan Agreement for a Putnam prototype profit sharing
plan with optional Section 401(k) provisions. Please consult a
tax or legal advisor and review the entire form before you sign
it. If you fail to fill out this Putnam Plan Agreement properly,
the Plan may be disqualified. You can get further information to
help you complete the Plan Agreement from your investment dealer,
or from Putnam at:
Putnam Retirement Plan Services
P.O. Box 2701
Boston, Ma 02208
Phone: 1-800-662-0019
By executing this Plan Agreement, the Employer establishes a
profit sharing plan and trust upon the terms and conditions of
Putnam Basic Plan document #01, as supplemented and modified by
the provisions elected by the Employer in this Plan Agreement.
This Plan Agreement must be accepted by Putnam in order for the
Employer to receive future amendments to the Putnam Standard
Profit Sharing and 401(k) Plan.
All Employers complete items 1-11 below. Employers who wish to
adopt Section 401(k) provisions also complete item 12.
1. Business Information
A. Business Name
B. Business Address
Street City/State Zip Code
Phone SIC Code
Person for Putnam to Contact
C. Federal Tax Identification Number
D. Form of Organization (check one):
_____Sole Proprietorship _____Corporation
_____Partnership _____SCorporation
E. Taxable Year of Business:
_____Calendar Year _____Fiscal year ending on_____
1
Provide the Information requested about the Employer.
2. Plan Information
A. Plan Year The Plan Year of your Plan will be the same as the
Taxable Year of your Business shown in 1.E. above. If you change
the Taxable Year of your Business, the Plan Year will change
accordingly. The Plan Year will also be your Plan s Limitation
Year for purposes of the contribution limitation rules in Article
6 of the Plan.
B. Effective Date of Adoption of Plan.
Are you adopting this Plan to replace an existing plan?
_____Yes _____No
If you answered Yes in 2.B. above, the Effective Date of your
adoption of this Plan will be the first day of the current Plan
Year. Please complete the following:
Name of the plan you are replacing
Original Effective Date of the plan you are replacing
If you answered No in 2.B. above, the Effective Date of your
adoption of this Plan will be the later of the first day of the
current Plan Year, or the first day your Business began.
The Effective Date is (month/day/year)
2B
Complete this section only if the adoption of this plan is an
amendment to an existing plan. When signed, this document
becomes the official plan agreement, superseding any previously
signed plan agreements.
NOTE: If you are adopting this Plan to replace an existing plan,
certain retroactive dates shall apply to comply with the Tax
Reform Act of 1986, provided that you adopt this Plan before the
end of the 1994 Plan year.
3. Eligibility for Plan Participation (Plan Section 3.1)
NOTE: Refer to the Affiliated Employer Determination section in
the Putnam Retirement Planning, Easy-to-Follow Instructions
Booklet.
Employees will be eligible to participate in the Plan when they
complete the requirements you select in A, B and C below.
A. Classes of Eligible Employees The Plan requires coverage of
all classes of employees of the Employer and any Affiliated
Employer, except for union employees and nonresident aliens
without U.S.source income. The general rules of the Plan exclude
employees in those two groups, but if you want employees in one
or both categories to be eligible for your Plan, check the
appropriate space below.
The following employees will be eligible to participate in the
Plan:
_____Members of the following collective bargaining unit(s) (give
names of unions)
_____Nonresident aliens with no U.S. source income
B. Age Requirement (check one)
_____No minimum age required for participation
_____Employees must reach age_______(not over 21)to participate
3B
Complete 3B to establish the age required (if any) before an
employee can become a Plan Participant.
C. Service Requirements
1. To become eligible, an employee must complete (check one)
_____No minimum service requirement. Skip the rest of this part
C if you select this rule.
_____One Eligibility Period
_____Two Eligibility Periods (may not be chosen if you adopt
Section 401(k) provisions under item 12)
An Eligibility Period is the 12 month period beginning on an
employee s first day of work, and anniversaries of that day.
2. To receive credit for an Eligibility Period, an employee must
complete during that period at least (check one)
_____1,000 Hours of Service
_____Hours of Service (may not exceed 1,000)
3C
Complete 3C1 and 3C2 to establish the service required (if any)
before an employee can become a Plan Participant.
NOTE: A plan may not condition eligibility to participate in the
plan on more than two years of service, and may require two years
of eligibility service only if the plan provides for full and
immediate vesting after two years of service.
3. Hours of Service will be credited to employees by the
following method (check one)
_____Actual hours for which an employee is paid
_____Any employee who has one actual paid hour in the following
period will be credited with the number of Hours of Service
indicated (check one):
_____Day(10 Hours of Service) _____Week(45 Hours of Service)
_____Semi-monthly payroll period (95 Hours of Service)
_____Month (190 Hours of Service)
<PAGE>
Complete 3C3 to indicate how Hours of Service will be measured.
NOTE: An employee begins participation as of the first day of the
month in which he first fulfills the eligibility requirements you
have selected. If you are adopting this Plan to replace an
existing plan, employees will be credited under this Plan with
all service credited to them under the plan you are replacing.
4. Compensation (Plan Section 2.8)
Compensation for purposes of the Plan will be the amount of the
following that is actually paid by your Business to an employee
during the Plan Year (check one)
_____Form W-2 earnings as descried in Section 2.8 of the Plan
_____Form W-2 earnings as described in Section 2.8 of the Plan
plus any amounts withheld from the employee under a 401(k) plan,
cafeteria plan, SARSEP, tax-sheltered 403(b) arrangement, Section
457 deferred compensation plan or contributions described in
Section 414(h)(2) that are picked up by a governmental
employer.
_____All compensation included in the definition of Section 415
Compensation in Section 6.5(b) of the Plan
_____All compensation included in the definition in Section
6.5(b) of the Plan, plus any amounts withheld from the employee
under a 401(k) plan, cafeteria plan, SARSEP, tax-sheltered 403(b)
arrangement, Section 457 deferred compensation plan or
contributions described in Section 414(h)(2) that are picked up
by a governmental employer.
4
Complete this section to define plan compensation for employees
other than owner-employees or self-employed individuals. For
owner-employees and self-employed individuals, compensation is
earned income as defined in Section 2.12 of the Basic Plan
Document.
5. Contributions (Plan Sections 4.1 and 4.2)
A. Profit Limitation Will your contributions to the Plan be
limited to the current and accumulated profits of your Business?
(check one)
_____Yes _____NO
5
NOTE: Refer to the Contribution Limits Worksheet contained in a
separate booklet for a detailed explanation of contribution
limits.
You may limit Plan contributions to the profits of your business,
but you are not required to do so. Employer Contributions under
this plan include profit sharing contributions, Elective
Deferrals, Qualified Nonelective Contributions and Qualified
Matching Contributions.
If you will make contributions only under the Section 401(k)
provisions in item 12 of this Plan Agreement, skip the rest of
this part 5.
B. Amount The Employer will contribute to the Plan for each Plan
Year (check one)
_____An amount chosen by the Employer from year to year
_____% (not more than 15%) of the Earnings of all Qualified
Participants for the Plan Year
Any Employee who has met the eligibility requirements in item 3
of this Plan Agreement is a Qualified Participant unless his
employment terminates before the last day of the Plan Year for
reasons other than his death or Retirement, and he is not
credited with more than 500 Hours of Service in the Plan Year.
C. Allocation to Qualified Participants Contributions under
paragraph B will be shared by Qualified Participants in
proportion to their Earnings, unless you check the following
space to indicate that your Plan will be integrated with Social
Security, as explained on page 41. You must choose the Top-Heavy
Integration Formula unless you elect to perform annual top-heavy
testing for your Plan.
_____Contributions will be shared according to the Top-Heavy
Integration Formula in Section 4.2(c)(1) of the Basic Plan
Document in every Plan Year, whether or not the Plan is
top-heavy.
_____Contributions will be shared according to the Top-Heavy
Integration Formula in Section 4.2(c)(1) of the Basic Plan
Document only in Plan Years in which the Plan is top-heavy. In
all other Plan Years, contributions will be shared according to
the Non-Top-Heavy Integration Formula in Section 4.2(c)(2) of the
Basic Plan Document.
Complete 5B and 5C only if you wish to increase the amount of
contributions allocated to Participants who earn more than the
stated amount, by integrating your plan with Social Security.
See page 41 for more information.
NOTE: If you maintain any other qualified plan in addition to
this Plan, only one plan may be integrated with Social Security.
If you integrate this Plan with Social Security, see also the
top-heavy provisions in item 10.
D. Integration Level The Integration Level will be (check one)
_____The Social Security Wage Base in effect at the beginning of
the Plan Year.
_____% (not more than 100%) of the Social Security Wage Base in
effect at the beginning of the Plan Year.
_____$_____(not more than the Social Security Wage Base).
5D
Complete 5D only if you have elected in 5C to integrate your plan
with Social Security. See page 41 for more information.
6. Investments (Plan Sections 13.2 and 13.3)
The Employer selects in part A below the Investment Products that
will be available under the Plan (in addition to life insurance
policies selected under Plan Article 14, if any). All Investment
Products must be sponsored, underwritten or managed by Putnam.
From the group of available Investment Products selected by the
Employer, each Participant chooses the investments for his own
Accounts, unless the Employer elects differently in part B below.
Investment instructions may be changed on any business day.
A. Available Investment Products (Plan Section 13.2) The
following investments will be available under the Plan (check
one)
_____Any Putnam funds _____Other Investment Products
In the event that there is any amount in the Trust Fund for which
no instructions or unclear instructions are delivered, it will be
invested in Putnam Daily Dividend Trust until instructions are
received in good order, and the Employer will be deemed to have
selected Putnam Daily Dividend Trust as an available Investment
Product for that purpose.
6A
If you wish to offer Putnam Capital Manager a variable annuity
issued by Hartford with underlying funds managed by
Putnam through your plan, please call Putnam for more
information, 1-800-662-0019.
B. Instructions (Plan Section 13.3) Investment instructions for
amounts held under the Plan generally will be given by each
Participant for his own Accounts and delivered to Putnam by the
Employer. Check below only if the Employer will make investment
decisions under the Plan.
_____The Employer will make investment decisions.
<PAGE>
6B
Place a check mark in the blank if the Employer will direct the
investment of Employer Contributions. If you do not check the
blank, the Plan provides that each Participant will direct the
investment of Employer Contributions allocated to the Employee s
account.
7. Distributions and Withdrawals.
A. Retirement Distributions.
1. Retirement Age (Plan Section 7.1) Normal retirement age will
be _____ (not over the lesser of 65 or any mandatory retirement
age enforced by the Employer).
2. Annuities (Plan Section 9.3) Will your Plan permit a
Participant to select a life annuity form of distribution? You
must check Yes if this Plan replaces an existing Plan that
permits distributions in life annuity form. (check one)
_____Yes _____No
7A
Enter the age (no later than 65) when an Employee may retire from
the service of the Employer.
B. Hardship Distributions (Plan Section 12.2) Will your Plan
permit hardship distributions from Employer Contribution
Accounts? You must check Yes if this Plan replaces an existing
Plan that permits hardship distributions. (check one)
_____Yes _____No
C. Withdrawals after Age 59 1/2 (Plan Section 12.3) Will your
Plan permit employees over age 59 1/2 to withdraw amounts upon
request? You must check Yes if this Plan replaces an existing
Plan that permits withdrawals after age 59 1/2. (check one)
_____Yes _____No
8. Other Plans
You must complete this section if you maintain or ever maintained
another qualified plan (other than a Putnam Money Purchase
Pension Plan under Plan Agreement #002) in which any Participant
in this Plan is (or was) a participant or could become a
participant, or if you maintain a welfare benefit fund (as
defined in section 419(e) of the Code) or an individual medical
account (as defined in section 415(1)(2) of the Code) under which
amount are treated as annual additions with respect to any
Participant in this Plan.
8
Skip this item 8 if the Plan is the only qualified plan your
Business has ever had.
The Plan and your other plan(s) combined will meet the
contribution limitation rules in Article 6 of the Plan as you
specify below:
A. If a Participant in the Plan is covered under another
qualified defined contribution plan maintained by your Business,
other than a master or prototype plan (check one)
_____The provisions of Section 6.2 of the Plan will apply as if
the other plan were a master or prototype plan.
_____The plans will limit total annual additions to the maximum
permissible amount, and will properly reduce any excess amounts,
in the manner you describe below.
_____
_____
B. If a Participant in the Plan is or has ever been a participant
in a defined benefit plan maintained by your Business, the plans
will meet the limits of Article 6 in the manner you describe
below:
_____
_____
If your Business has ever maintained a defined benefit plan,
state below the interest rate and mortality table to be used in
establishing the present value of any benefit under the defined
benefit plan, for purposes of computing the top-heavy ratio:
Interest rate:_____%
Mortality table
8A and 8B
Complete 8A only if the Employer maintains or ever maintained any
other defined contribution plan (other than a master or prototype
plan) or any other defined benefit plan.
Complete 8B only if the Employer maintains or ever maintained a
defined benefit plan.
If any of these factual situations exist, the Employer should
consult with an attorney or actuary. Failure to complete this
section when applicable may adversely affect the tax-qualified
status of the Plan.
NOTE: Your description under A or B above must not leave the
selection of a method to your discretion from year to year.
9. Vesting
All Accounts are fully vested at all times.
10. Top-Heavy Provisions (Plan Section 15.3)
Federal tax laws require certain plans, called top-heavy plans,
to provide a minimum contribution for every non-key employee
covered by the plan. Whether a plan is top-heavy is determined
by an annual test, explained on page 46. If the plan s regular
contribution provisions already meet or exceed the top-heavy
minimum contribution, no additional action is required when the
plan is top-heavy, so there is no need to perform annual testing.
If the plan s regular contribution provisions do not already meet
or exceed the top-heavy minimum contribution, annual testing must
be performed, and, if the plan proves to be top-heavy, an
additional contribution must be made.
Your Plan s regular contribution provisions will meet or exceed
the top-heavy minimum, and you will not need to perform annual
testing, if any of the following applies:
(a) You will make contributions only under item 5 of this Plan
Agreement (no Section 401(k)), and your Plan is not integrated
with Social Security; or
(b) Your Plan is integrated with Social Security and you have
specified the Top-Heavy Integration Formula in item 5.C; or
(c) You will make contributions under item 12 (Section 401(k)),
and you have specified in item 12.C. a Qualified Nonelective
Contribution of at least 3% on behalf of all Participants; or
(d) You will make contributions under item 5 and item 12 (Section
401(k)), and you have specified in item 5.B a contribution of at
least 3% of Earnings that will not be integrated with Social
Security; or
(e) You maintain paired Putnam plans, or you maintain any other
qualified plan that automatically provides a minimum top-heavy
contribution or benefit for every non-key employee covered by
this Plan.
NOTE: If you maintain a defined benefit plan in additions to this
Plan, you cannot rely on categories (a) through (d).
If you fit into any of the above categories, STOP HERE. You do
not need to perform annual top-heavy testing.
If you do not fit into any of the above categories, then unless
you check this item 10 to indicate that you will perform annual
top-heavy testing for your Plan, the requirement of a minimum
contribution for each non-key employee, contained in Plan Section
15.3, will apply to your Plan at all times. If you check this
item 10, Section 15.3 will apply only in Plan Years when you Plan
fails the top-heavy test.
_____The Employer will perform annual top-heavy testing for the
Plan.
<PAGE>
11. Plan Administrator (Plan Section 16.1)
You may appoint a person or a committee to serve as Plan
Administrator. You may remove and replace anyone you have
appointed, and anyone you have appointed may resign, without the
need to amend this Plan Agreement, provided that you notify
Participants in writing of any such change. If you do not
appoint a Plan Administrator, the Plan provides that the Employer
will be the Plan Administrator.
The initial Plan Administrator will be (check one)
_____This person:
_____A committee composed of these people:
__________
__________
__________
12. Section 401(k) Plan Provisions (Plan Article 5)
12
Complete item 12 below if your Plan will allow employees to elect
pre-tax contributions under Section 401(k) of the Code. If you
will make contributions to the Plan only under item 12, see also
the top-heavy provisions in item 10.
A. Elective Deferrals (Plan Section 5.2)
1. A Participant may make Elective Deferrals in an amount not to
exceed (check one)
_____% of his Earnings (not more than 15%)
_____$_____(specify a dollar amount in each payroll period)
12A1
Complete section 12 only if you are adopting a Putnam Profit
Sharing and 401(k) Plan. If you are adopting a Putnam Profit
Sharing Plan (Keogh), go to section 13.
By the option selected in 12A1, the Employee s Elective Deferral
will be limited to a stated percentage of annual pay, or a stated
amount for each pay period. You must state a percentage or an
amount, as applicable.
NOTE: Elective Deferrals may not exceed the annual dollar limit
under Section 402(g) of the Internal Revenue Code.
2. A Participant may begin to make Elective Deferrals, or change
the amount of his Elective Deferrals, as of the following dates
(check one):
_____First business day of each month (monthly).
_____First business day of the first, fourth, seventh and tenth
months of the Plan Year (quarterly).
<PAGE>
_____First business day of the first and sixth months of the Plan
Year (semiannually).
_____First business day of the Plan Year only (annually).
12A2
Complete this section by designating the periods during which
employee elections to make Elective Deferral contributions will
be permitted, the date such an election will become effective,
the periods during which modifications can be made to employees
Elective Deferral elections and the date such a modification will
take effect.
3. May Participants make Elective Deferrals of bonuses?
_____Yes _____No
12A3
If this option is checked, Employees will be entitled to
contribute as Elective Deferrals to the Plan a percentage of (or
an amount from) bonuses that would otherwise be paid in cash.
B. Qualified Matching Contributions (Plan Section 2.60)
12B
Skip this part B if you will not make Qualified Matching
Contributions.
1. Qualified Matching contributions will be made with respect to
(check one)
_____Elective Deferrals by all Participants
_____Elective Deferrals only by Non-Highly Compensated
Participants
12B1
If this section is checked, the Employer will make Qualified
Matching contributions (i.e., contributions that match employee
Elective Deferrals and that can be used to assist in satisfying
the special 401(k) non-discrimination test). These contributions
must be fully vested at all times and must be subject to the
distribution restrictions described in Section 5.13 of the Basic
Plan Document. You must designate the class of employees on
whose behalf Qualified Matching Contributions will be made.
2. The amount of Qualified Matching Contributions made with
respect to a Participant will be:
(Check the provision desired and fill in the % blank(s) in the
provision you check. If you wish to determine the amount of
Qualified Matching Contributions from year to year instead of
specifying a fixed percentage, write V for variable in the %
blank at the beginning of each provision you check.)
_____% of his Elective Deferrals
_____% of his Elective Deferrals that do not exceed _____% of his
Compensation.
12B2
By completing this section, the Employer determines the degree to
which Qualified Matching Contributions will match the
Employees Elective Deferrals. Check one blank and provide the
appropriate information for the sentence following the one that
you check.
C. Qualified Nonelective Contributions (Plan Section 2.62)
12C
Skip this part C if you will not make Qualified Nonelective
Contributions.
If this section is checked, the Employer will be entitled to make
Qualified Nonelective Contributions to the Plan, as described
in Section 2.62 of the Basic Plan Document. These contributions
can assist the Employer in meeting the special 401(k)
non-discrimination test. If you complete 1, you must also check
2 (and provide percentage limits where appropriate), to determine
the amount of Qualified Nonelective Contributions to be made.
See page 42 for more information.
Note: If you wish to avoid annual testing to determine whether
your Plan is top-heavy, you may need to select a Qualified
Nonelective Contribution of at least 3% for all Participants,
because Elective Deferrals and Qualified Matching Contributions
for non-key employees do not count toward the top-heavy minimum
contribution requirement. See item 10 for more information.
1. Qualified Nonelective Contributions will be made on behalf of
(check one):
_____All Participants
_____Only Participants who are not Highly Compensated Employees
2. The amount of Qualified Nonelective Contributions for a Plan
Year will be (check one):
_____% (not over 15%) of the Earnings of Participants on whose
behalf Qualified Nonelective Contributions are made
_____An amount determined by the Employer, to be shared in
proportion to Compensation by Participants on whose behalf
Qualified Nonelective Contributions are made
D. Hardship Distributions from 401(k) Accounts (Plan Sections
12.2 and 5.14) Will your Plan permit hardship distributions from
Elective Deferral Accounts? (check one)
_____Yes _____No
13. Reliance on Opinion Letter
You may rely on the opinion letter issued by the National Office
of the Internal Revenue Service for this Plan, and avoid filing
an application for an IRS determination letter, only if you never
maintain or maintained at any time any other plan, except a
Putnam Standard Money Purchase Pension Plan under Plan Agreement
#002.
If you even maintained or you later adopt any plan (including a
welfare benefit fund, as defined in Section 419(e) of the Code,
which provides post-retirement medical benefits allocated to
separate account for key employees, as defined in section
419A(d)(3) of the Code; or an individual medical account, as
defined in section 415(1)(2) of the Code) in addition to this
plan (other than a Putnam Standard Money Purchase Pension Plan
under Plan Agreement #002), you may not rely on the opinion
letter issued by the National Office of the Internal Revenue
Service as evidence that your Plan is qualified under Section 401
of the Internal Revenue Code. If you adopt or maintain multiple
plans and you wish to obtain reliance that your plan(s) are
qualified, you should apply to the appropriate Key District
Director of Internal Revenue for a determination letter.
Putnam will inform you of all amendments it makes to the
prototype plan. If Putnam ever discontinues or abandons the
prototype plan, Putnam will inform you. This Plan Agreement #001
may be used only in conjunction with Putnam s basic plan document
#01.
13
Employers should review this section carefully. The adoption of
the Putnam Standard Profit Sharing Plan should be reviewed with
your legal counsel and tax advisor.
<PAGE>
Employers Adoption of Putnam Standard Profit Sharing Plan
The Employer named below hereby adopts a PUTNAM STANDARD PROFIT
SHARING PLAN, and appoints ___________ to serve as Trustee of the
Plan. The Employer agrees to pay the fees as determined by
completing the Plan Investment Form, in accordance with the terms
of the Plan. The Employer acknowledges that it has received
copies of the current prospectus for each Investment Product
available under the Plan, and represents that it will deliver
copies of the then-current prospectus for each such Investment
Product to each Participant before each occasion on which the
Participant makes an investment instruction as to his Account.
The Employer further acknowledges that the Plan will be a Putnam
Standard Profit Sharing Plan upon Putnam s acceptance of this
Plan Agreement.
Employer signature(s) to adopt Plan:
_____
Date of signature:
Provide a signature form an authorized representative of the
Employer
Please print name(s) of authorized person(s) signing above:
_________ Phone:
Phone:
A new Plan must be signed by the last day of the Employer s
Taxable Year in which the Plan is to be effective.
Dealer Information (to be completed by investment dealer)
Name of Investment Dealer
Name and No. of Investment Dealer/Representative
Name and No of Branch Office
Signature of Investment Dealer/Representative
Authorized Dealer Signature
Representative Phone Number
Acceptance of Trustee
The Trustee accepts appointment in accordance with the terms and
conditions of the Plan, effective as of the date of execution by
the Employer set forth above.
A. Putnam Fiduciary Trust Company, Trustee
By _______________________________
B. Other Trustee
By _________________________ Trustees Tax I.D. Number __
(Trustee)
Address of Trustee ______________________________________
Person for Putnam to Contact ____ Phone ____________________
Complete Part B only if you have appointed a Trustee other than
Putnam Fiduciary Trust Company.
NOTE: Putnam may impose an annual maintenance fee as a condition
of its acceptance of this plan as a Putnam Standard Profit
Sharing Plan.
C. Appointment and Acceptance of Insurance Trustee
1. Appointment to:
Name of Insurance Trustee ________________________________
You are hereby designated as Insurance Trustee for Policies to be
held in accordance with the terms and conditions of this Plan and
Trust.
Employer signature to appoint Insurance Trustee:
By ___________________________________________________
(Authorized Signature)
2. Acceptance as Insurance Trustee is agreed to in accordance
with the terms and conditions of the Plan, effective as of the
date of execution by the Employer as set forth above.
By _________________________ Trustee s Tax I.D. Number _____
Address of Insurance Trustee ______________________________
Person for Putnam to Contact ____ Phone ____________________
Complete Part C only if insurance Policies will be purchased
under Article 14 of the Plan (in addition to Putnam investment
Products).
Acceptance by Putnam
Putnam hereby accepts this Employer s Plan as a prototype
established under the Putnam Defined Contribution Retirement Plan
and Trust Agreement.
Putnam Mutual Funds Corp.
By ___________________________________________________
<PAGE>
Plan Agreement #002
Putnam Standard Money Purchase Pension Plan
This is the Plan Agreement for a Putnam prototype money purchase
pension plan. Please consult a tax or legal advisor and review
the entire form before you sign it. If you fail to fill out this
Putnam Plan Agreement properly, the Plan may be disqualified.
You can get further information to help you complete the Plan
Agreement from your investment dealer, or from Putnam at:
Putnam Retirement Plan Services
P.O. Box 2701
Boston, MA 02208
Phone: 1-800-662-0019
By executing this Plan Agreement, the Employer establishes a
money purchase pension plan and trust upon the terms and
conditions of Putnam Basic Plan Document #01, as supplemented and
modified by the provisions elected by the Employer in this Plan
Agreement. This Plan Agreement must be accepted by Putnam in
order for the Employer to receive future amendments to the Putnam
Standard Money Purchase Pension Plan.
1. Business Information
A. Business Name
B. Business Address
Street City/State Zip Code
Phone SIC Code
Person for Putnam to Contact
C. Federal Tax Identification Number
D. Form of Organization (check one):
_____Sole proprietorship _____Corporation
_____Partnership _____S Corporation
E. Taxable Year of Business:
_____Calendar Year _____Fiscal year ending on:_____
1
Provide the information requested about the Employer.
2. Plan Information
Plan Year The Plan Year of your Plan will be the same as the
Taxable Year of your Business shown in 1.E. above. If you change
the Taxable Year of your Business, the Plan Year will change
accordingly. The Plan Year will also be your Plan s Limitation
Year for purposes of the contribution limitation rules in Article
6 of the Plan.
<PAGE>
A. Effective Date of Adoption of Plan.
Are you adopting this Plan to replace an existing plan?
_____Yes _____No
If you answered Yes in 2.A. above, the Effective Date of your
adoption of this Plan will be the first day of the current Plan
Year. Please complete the following:
Name of the plan you are replacing:
Original Effective Date of the plan you are replacing:
If you answered No in 2.A. above, the Effective Date of your
adoption of this Plan will be the later of the first day of the
current Plan Year, or the first day your Business began.
The Effective Date is (month/day/year)
2A
Complete this section only if the adoption of this plan is an
amendment to an existing Plan. When signed, this document
becomes the official plan agreement, superseding any previously
signed plan agreements.
NOTE: If you are adopting this Plan to replace an existing Plan,
certain retroactive dates shall apply to comply with the Tax
Reform Act of 1986, provided that you adopt this Plan before the
end of the 1994 Plan year.
3. Eligibility for Plan Participation (Plan Section 3.1)
Employees will be eligible to participate in the Plan when they
complete the requirements you select in A, B and C below.
A. Classes of Eligible Employees The Plan requires coverage of
all classes of employees of the Employer and any Affiliated
Employer, except for union employees and nonresident aliens
without U.S. source income. The general rules of the Plan
exclude employees in those two groups, but if you want employees
in one or both categories to be eligible for your Plan, check the
appropriate space below.
The following employees will be eligible to participate in the
Plan:
_____Members of the following collective bargaining unit(s) (give
names of unions)
_____Nonresident aliens with no U.S. source income
<PAGE>
NOTE: Refer to the Affiliated Employer Determination section in
the Putnam Retirement Planning, Easy-to-Follow Instructions
booklet.
B. Age Requirement (check one)
_____No minimum age required for participation
_____Employees must reach age_______(not over 21) to participate
3B
Complete 3B to establish the age required (if any) before an
employee can become a Plan Participant.
C. Service Requirements
1. To become eligible, an employee must complete (check one)
_____No minimum service requirement. Skip the rest of this part
C if you select this rule.
_____One Eligibility Period
_____Two Eligibility Periods
An Eligibility Period is the 12 months beginning on an employees
first day of work, and anniversaries of that day.
2. To receive credit for an Eligibility Period, an employee must
complete during that period at least (check one)
_____1,000 Hours of Service
_____Hours of Service (may not exceed 1,000)
3C1 and 3C2
Complete 3C1 and 3C2 to establish the service required (if any)
before an Employee can become a Plan Participant.
NOTE: A plan may not condition eligibility to participate in the
plan on more than two years of service and may require two years
of eligibility service only if the plan provides for full and
immediate vesting after two years of service.
3. Hours of Service will be credited to employees by the
following method (check one)
_____Actual hours for which an employee is paid
_____Any employee who has one actual paid hour in the following
period will be credited with the number of Hours of Service
indicated (check one):
_____Day(10 Hours of Service) _____Week(45 Hours of Service)
_____Semi-monthly payroll period (95 Hours of Service)
_____Month (190 Hours of Service)
3C3
Complete 3C3 to indicate how Hours of Service will be measured.
NOTE: An employee begins participation as of the first day of the
month in which he first fulfills the eligibility requirements you
have selected. If you are adopting this Plan to replace an
existing plan, employees will be credited under this Plan with
all service credited to them under the plan you are replacing.
4. Compensation (Plan Section 2.8)
Compensation for purposes of the Plan will be the amount of the
following that is actually paid by your Business to an employee
during the Plan Year (check one)
_____Form W-2 earnings as descried in Section 2.8 of the Plan
_____Form W-2 earnings as described in Section 2.8 of the Plan
plus any amounts withheld from the employee under a 401(k) plan,
cafeteria plan, SARSEP, tax-sheltered 403(b) arrangement, Section
457 deferred compensation plan or contributions described in
Section 414(h)(2) that are picked up by a governmental
employer.
_____All compensation included in the definition of Section 415
Compensation in Section 6.5(b) of the Plan
_____All compensation included in the definition of section 415
compensation in Section 6.5(b) of the Plan, plus any amounts
withheld from the employee under a 401(k) plan, cafeteria plan,
SARSEP, tax-sheltered 403(b) arrangement, Section 457 deferred
compensation plan or contributions described in Section 414(h)(2)
that are picked up by a governmental employer.
4
Complete this section to determine Plan compensation for
Employees other than owner-employees or self-employed
individuals. For owner-employees and self-employed individuals,
Compensation is earned income as defined in Section 2.12 of the
Basic Plan Document.
5. Contributions (Plan Section 4.3)
A. Amount The Employer will contribute to the Plan for each Plan
Year this Base Contribution Percentage _____ (not more than 25%)
of the Earnings of all Qualified Participants for the Plan Year.
Any Employee who has met the eligibility requirements in item 3
of this Plan Agreement is a Qualified Participant unless his
employment terminates before the last day of the Plan Year for
reasons other than his death or Retirement, and he is not
credited with more than 500 Hours of Service in the Plan Year.
5
NOTE: Refer to the Contribution Limits Worksheet contained in a
separate booklet for a detailed explanation of contribution
limits.
Enter the percentage of Compensation required to be contributed
to the Plan each year. The contribution cannot exceed 25% of
Compensation paid to all Participants during the Plan Year. If
you accept both this Plan and a profit sharing plan, the combined
percentages for the two must not exceed 25% of Compensation. If
you wish to integrate your Plan, skip 5A and complete 5B and 5C.
B. Allocation to Qualified Participants Contributions will be
shared by Qualifed Participants in proportion to their Earnings,
unless you check the following space to indicate that your Plan
will be integrated with Social Security, as explained on page 41.
_____The Plan will be integrated with Social Security, and the
Base Contribution Percentage will be _____% (not less than 3%
unless you will perform annual top-heavy testing for your Plan).
C. Integration Level The Integration Level will be (check one)
_____The Social Security Wage Base in effect at the beginning of
the Plan Year.
_____% (not more tan 100%) of the Social Security Wage Base in
effect at the beginning of the Plan Year.
_____$_____ (not more than the Social Security Wage Base).
5B and 5C
Complete 5B and 5C only if you wish to increase the amount of
contributions allocated to Participants who earn more than a
stated amount by integrating your plan with Social Security. See
page 41 for more information.
NOTE: If you maintain any other qualified plan in addition to
this Plan, only one plan may be integrated with Social Security.
If you integrate this Plan with Social Security, see also the
top-heavy provisions in item 10.
6. Investments (Plan Sections 13.2 and 13.3)
The Employer selects in part A below the Investment Products that
will be available under the Plan (in addition to life insurance
policies selected under Plan Article 14, if any). All Investment
Products must be sponsored, underwritten or managed by Putnam.
From the group of available Investment Products selected by the
Employer, each Participant chooses the investments for his own
Accounts, unless the Employer elects differently in part B below.
Investment instructions may be changed on any business day.
A. Available Investment Products (Plan Section 13.2) The
following investments will be available under the Plan (check
one)
_____Any Putnam funds _____Other Investment Products
In the event that there is any amount in the Trust Fund for which
no instructions or unclear instructions are delivered, it will be
invested in Putnam Daily Dividend Trust until instructions are
received in good order, and the Employer will be deemed to have
selected Putnam Daily Dividend Trust as an available Investment
Product for that purpose.
6A
If you wish to offer Putnam Capital Manager a variable annuity
issued by Hartford with underlying funds managed by
Putnam through your plan, please call Putnam for more
information, 1-800-662-0019.
B. Instructions (Plan Section 13.3) Investment instructions for
amounts held under the Plan generally will be given by each
Participant for his own Accounts and delivered to Putnam by the
Employer. Check below only if the Employer will make investment
decisions under the Plan.
_____The Employer will make investment decisions.
6B
If you place a check mark in the blank the Employer will direct
the investment of Employer contributions. If you do not check
the blank, the Plan provides that each Participant will direct
the investment of Employer contributions allocated to his
account.
7. Retirement Age (Plan Section 7.1)
Normal retirement age will be _____ (not over the lesser of 65 or
any mandatory retirement age enforced by the Employer).
7
Enter the age (no later than 65) when an Employee may retire from
the service of the Employer.
8. Other Plans
You must complete this section if you maintain or ever maintained
another qualified plan (other than a Putnam Profit Sharing Plan
under Plan Agreement #001) in which any Participant in this Plan
is (or was) a participant or could become a participant, or if
you maintain a welfare benefit fund (as defined in section 419(e)
of the Code) or an individual medical account (as defined in
section 415(1)(2) of the Code) under which amounts are treated as
annual additions with respect to any Participant in this Plan.
8
Skip this item 8 if the Plan is the only qualified plan your
Business has ever had.
The Plan and your other plan(s) combined will meet the
contribution limitation rules in Article 6 of the Plan as you
specify below:
A. If a Participant in the Plan is covered under another
qualified defined contribution plan maintained by your Business,
other than a master or prototype plan (check one)
_____The provisions of Section 6.2 of the Plan will apply as if
the other plan were a master or prototype plan.
_____The plans will limit total annual additions to the maximum
permissible amount, and will properly reduce any excess amounts,
in the manner you describe below.
_____
_____
B. If a Participant in the Plan is or has ever been a participant
in a defined benefit plan maintained by your Business, the plans
will meet the limits of Article 6 in the manner you describe
below:
_____
_____
If your Business has ever maintained a defined benefit plan,
state below the interest rate and mortality table to be used in
establishing the present value of any benefit under the defined
benefit plan, for purposes of computing the top-heavy ratio:
Interest rate:_____%
Mortality table:_________________________________________
8A and 8B
Complete 8A only if the Employer maintains or ever maintained any
other defined contribution plan (other than a master or prototype
plan) or any other defined benefit plan.
Complete 8B only if the Employer maintains or ever maintained a
defined benefit plan.
If any of these factual situations exist, the Employer should
consult with an attorney or actuary. Failure to complete this
section when applicable may adversely affect the tax-qualified
status of the Plan.
NOTE: Your description under A or B above must not leave the
selection of a method to your discretion from year to year.
9. Vesting
All Accounts are fully vested at all times.
10. Top-Heavy Provisions (Plan Section 15.3)
Federal tax laws require certain plans, called top-heavy plans,
to provide a minimum contribution for every non-key employee
covered by the plan. Whether a plan is top-heavy is determined
by an annual test, explained on page 46. If the plan s regular
contribution provisions already meet or exceed the top-heavy
minimum contribution, no additional action is required when the
plan is top-heavy, so there is no need to perform annual testing.
If the plan s regular contribution provisions do not already meet
or exceed the top-heavy minimum contribution, annual testing must
be performed, and, if the plan proves to be top-heavy, an
additional contribution must be made.
Your Plan s regular contribution provisions will meet or exceed
the top-heavy minimum, and you will not need to perform annual
testing, if any of the following applies:
(a) Your Plan is not integrated with Social Security; or
(b) Your Plan is integrated with Social Security and you have
specified in item 5.B. a Base Contribution Percentage of at least
3%; or
(c) You maintain any other qualified plan that automatically
provides a minimum top-heavy contribution or benefit for every
non-key employee covered by this Plan.
NOTE: If you maintain a defined benefit plan in addition to this
Plan, you cannot rely on categories (a) or (b).
If you fit into any of the above categories, STOP HERE. You do
not need to perform annual top-heavy testing.
If you do not fit into any of the above categories, then unless
you check this item 10 to indicate that you will perform annual
top-heavy testing for your Plan, the requirement of a minimum
contribution for each non-key employee, contained in Plan Section
15.3, will apply to your Plan at all times. If you check this
item 10, Section 15.3 will apply only in Plan Years when you Plan
fails the top-heavy test.
_____The Employer will perform annual top-heavy testing for the
Plan.
11. Plan Administrator (Plan Section 16.1)
You may appoint a person or a committee to serve as Plan
Administrator. You may remove and replace anyone you have
appointed, and anyone you have appointed may resign, without the
need to amend this Plan Agreement, provided that you notify
Participants in writing of any such change. If you do not
appoint a Plan Administrator, the Plan provides that the Employer
will be the Plan Administrator.
The initial Plan Administrator will be (check one)
_____This person:
_____A committee composed of these people:
__________
__________
__________
12. Reliance on Opinion Letter
You may rely on the opinion letter issued by the National Office
of the Internal Revenue Service for this Plan, and avoid filing
an application for an IRS determination letter, only if you never
maintain or maintained at any time any other plan, except a
Putnam Standard Profit Sharing Plan under Plan Agreement #001.
If you ever maintained or you later adopt any plan (including a
welfare benefit fund, as defined in Section 419(e) of the Code,
which provides post-retirement medical benefits allocated to
separate account for key employees, as defined in section
419A(d)(3) of the Code; or an individual medical account, as
defined in section 415(1)(2) of the Code) in addition to this
plan (other than a Putnam Standard Profit Sharing Plan under Plan
Agreement #001), you may not rely on the opinion letter issued by
the National Office of the Internal Revenue Service as evidence
that your Plan is qualified under Section 401 of the Internal
Revenue Code. If you adopt or maintain multiple plans and you
wish to obtain reliance that your plan(s) are qualified, you
should apply to the appropriate Key District Director of Internal
Revenue for a determination letter.
Putnam will inform you of all amendments it makes to the
prototype plan. If Putnam ever discontinues or abandons the
prototype plan, Putnam will inform you. This Plan Agreement #002
may be used only in conjunction with Putnam s basic plan document
#01.
12
Employers should review this section carefully. Adoption of the
Plan should be reviewed with your legal counsel and tax advisor.
<PAGE>
Employers Adoption of Putnam Standard Money Purchase Pension Plan
The Employer named below hereby adopts a PUTNAM STANDARD MONEY
PURCHASE PENSION PLAN, and appoints ___________ to serve as
Trustee of the Plan. The Employer agrees to pay the fees as
determined by completing the Plan Investment Form, in accordance
with the terms of the Plan. The Employer acknowledges that it
has received copies of the current prospectus for each Investment
Product available under the Plan, and represents that it will
deliver copies of the then-current prospectus for each such
Investment Product to each Participant before each occasion on
which the Participant makes an investment instruction as to his
Account. The Employer further acknowledges that the Plan will be
a Putnam Money Purchase Pension Sharing Plan upon Putnam s
acceptance of this Plan Agreement.
Employer signature(s) to adopt Plan:
_____
Date of signature:
Provide a signature from an authorized representative of the
Employer.
Please print name(s) of authorized person(s) signing above:
_________ Phone:
Phone:
A new Plan must be signed by the last day of the Employer s
Taxable Year in which the Plan is to be effective.
Dealer Information (to be completed by investment dealer)
Name of Investment Dealer ________________________________
Name and No. of Investment Dealer/Representative ______________
Name and No. of Branch Office ______________________________
Signature of Investment Dealer/Representative ________________
Authorized Dealer Signature _______________________________
Representative Phone Number ______________________________
Acceptance of Trustee
The Trustee accepts appointment in accordance with the terms and
conditions of the Plan, effective as of the date of execution by
the Employer set forth above.
A. Putnam Fiduciary Trust Company, Trustee
By ___________________________________________________
B. Other Trustee ________________________________________
By (Trustee) _________________ Trustee s Tax I.D. Number _____
Address of Trustee ______________________________________
Person for Putnam to Contact ____ Phone ____________________
Complete Part B only if you have appointed a Trustee other than
Putnam Fiduciary Trust Company.
NOTE: Putnam may impose an annual maintenance fee as a condition
of its acceptance of this plan as a Putnam Standard Money
Purchase Pension Plan.
C. Appointment and Acceptance of Insurance Trustee
1. Appointment to:
Name of Insurance Trustee ________________________________
You are hereby designated as Insurance Trustee for Policies to be
held in accordance with the terms and conditions of this Plan and
Trust.
Employer signature to appoint Insurance Trustee
By (Authorized Signature)
2. Acceptance as Insurance Trustee is agreed to in accordance
with the terms and conditions of the Plan, effective as of the
date of execution by the Employer as set forth above.
By Trustee s Tax I.D. Number
Address of Insurance Trustee
Person for Putnam to Contact Phone
Complete Part C only if insurance Policies will be purchased
under Article 14 of the Plan (in addition to Putnam Investment
Products).
Acceptance by Putnam
Putnam hereby accepts this Employer s Plan as a prototype
established under the Putnam Defined Contribution Retirement Plan
and Trust Agreement.
Putnam Mutual Funds Corp.
By ___________________________________________________
<PAGE>
Instructions for Completing and Distributing Notice to Interested
Parties
You must distribute the completed Notice to Interested Parties no
less than 7 days and no more than 21 days after you sign the Plan
Agreement for your Putnam Plan. For your current employees, you
may simply post a copy of the Notice on a bulletin board or other
space customarily used for announcements to your employees. If
you adopt your Putnam Plan as an amendment to an existing plan,
individuals who are not current employees but are entitled to
benefits under your existing plan (for example, vested former
employees or beneficiaries of deceased employees) should be sent
a copy of the Notice by first class mail no less than 10 days and
no more than 24 days after you sign your Putnam Plan Agreement.
Portions of the Notice must be completed by you as described
below.
Item 1 Enter the name of your business.
Item 2 Enter the name of your plan.
Item 3 Enter the final digit of the plan number you have chosen
for your plan. If this is the first plan you have ever adopted
for your business, or if you have adopted the Putnam Plan as an
amendment of your only existing plan, the correct number is 001.
If your business has one or more other tax qualified retirement
plans that were adopted before this plan, and you have not
adopted the Putnam Plan as an amendment to any plan, the correct
number for his plan is the next higher number after the number(s)
of your existing plan(s); for example, 002 or 003. Enter the
appropriate IRS opinion letter number. If you have adopted the
Profit Sharing and 401(k) Plan, enter D240174a, if you have
adopted the Money Purchase Pension Plan, D240175a.
Item 4 Enter the name and address of your business and the
nine-digit tax identification number assigned to your business
for federal income tax and employment tax reporting; for example,
04-0010023.
Item 5 If you have appointed a committee or a particular person
as plan administrator, enter the name(s) and address of the
person(s) appointed. If you have not selected a plan
administrator enter the word "Employer."
Item 6 Enter the minimum number of years of service and minimum
age required for eligibility to participate in your plan, as
selected by you in the Plan Agreement. If you selected no
minimum requirement, enter "0".
Item 7 Select from the attached address chart on page 28 the
address of the IRS Key District office that applies to you, and
enter that address in the space provided.
Item 8 If you have fewer than 100 employees, enter the number
equal to 10% of your employees, rounded up. For example, if you
have 12 employees, enter "2." If you have 100 or more employees,
enter "10."
Item 9 Calculate the dates that are 45, 55, 75 and 90 days after
the date you signed the Plan Agreement. Enter these dates in the
blanks as marked on the Notice.
Item 13 Enter the name of your business.
<PAGE>
IRS DISTRICT
Albany, August, Boston, Brooklyn,
Buffalo, Burlington, Hartford,
Manhattan, Portsmouth, Providence
KEY DISTRICT OFFICE
Internal Revenue Service
EP/EO Division
P.O. Box 1680, GPO
Brooklyn, NY 11202
IRS DISTRICT
Baltimore, District of Columbia, Newark, Philadelphia,
Pittsburgh, Richmond, Wilmington, any U.S. possession or foreign
country
KEY DISTRICT OFFICE
Internal Revenue Service
EP/EO Division
P.O. Box 17010
Baltimore, MD 21203
IRS DISTRICT
Cincinnati, Cleveland, Detroit, Indianapolis, Louisville,
Parkersburg
KEY DISTRICT OFFICE
Internal Revenue Service
EP/EO Division
P.O. Box 3159
Cincinnati, OH 45201
IRS DISTRICT
Albuquerque, Austin, Cheyenne, Dallas, Denver, Houston, Oklahoma
City, Phoenix, Salt Lake City, Wichita
KEY DISTRICT OFFICE
Internal Revenue Service
EP/EO Division
Mail code 4950 DAL
1100 Commerce Street
Dallas, TX 75242
IRS DISTRICT
Atlanta, Birmingham, Columbia, Ft. Lauderdale, Greensboro,
Jackson, Jacksonville, Little Rock, Nashville, New Orleans
KEY DISTRICT OFFICE
Internal Revenue Service
EP/EO Division
P.O. Box 941
Atlanta, GA 30370
IRS DISTRICT
Honolulu, Laguna Niguel, Las Vegas, Los Angeles, San Jose
KEY DISTRICT OFFICE
Internal Revenue Service
EP Application Receiving
Room 5127
P.O. Box 536
Los Angeles, CA 90053-0536
IRS DISTRICT
Aberdeen, Chicago, Des Moines, Fargo, Helena, Milwaukee, Omaha,
St. Louis, St. Paul, Springfield
KEY DISTRICT OFFICE
Internal Revenue Service
EP/EO Division
230 S. Dearborn
DPN 20-6
Chicago, IL 60604
IRS DISTRICT
Sacramento, San Francisco
KEY DISTRICT OFFICE
Internal Revenue Service
EP Application Receiving
Stop SF 4446
P.O. Box 36001
San Francisco, CA 94102
IRS DISTRICT
Anchorage, Boise, Portland, Seattle
KEY DISTRICT OFFICE
Internal Revenue Service
EP Application Receiving
P.O. Box 21224
Seattle, WA 98111
<PAGE>
Notice to Interested Parties
1. Notice to: All Employees of ______________________________
The employer named above has adopted the plan described in this
notice, and had provided this notice as part of the automatic
plan qualification process prescribed by the Internal Revenue
Service.
2. Name of Plan: ________________________________________
3. Plan Number: 00_______
Opinion Letter No.______
4. Name and address of Plan Sponsor:
Employer's Tax Identification No.: ________________________
5. Name of Plan Administrator:
______
______
6. The employees eligible to participate under the Plan are
those who have reached at least _____ years of age and completed
at least _____ years of service.
In addition, the following classifications of employees are
included:
7. Address of Key District Director having jurisdiction of Plan:
___
____
_____
_____Members of the following collective bargaining unit(s)(give
names of unions):
_____
_______
_____Nonresident aliens with no U.S. source of income.
Requests for Comments by the Department of Labor
8. It is not contemplated that the Plan will be submitted to the
Internal Revenue Service for an advanced determination as to
whether or not it meets the qualification requirements of Section
401 or 403(a) of the Internal Revenue Code.
9. The Internal Revenue Service has not issued a determination
letter with respect to the qualification of this Plan, which is a
standardized prototype plan sponsored by Putnam Mutual Funds
Corp. Plans in this category generally are entitled to automatic
qualification and are not required to seek a determination
letter.
Rights of Interested Parties
10. You have the right to submit to the IRS Key District
Director at the above address, 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 instead, individually or jointly with other interested
parties, request the Department of Labor to submit comments on
your behalf to the Key District Director regarding qualification
of the Plan. If the Department 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 IRS Key District
Director.
11. The Department of Labor may not comment on behalf of
interested parties unless requested to do so by the lesser of ten
employees or ten percent of the employees who qualify as
interested parties. The number of persons needed for the
Department to comment with respect to this Plan is _____ . If
you request the Department to comment, your request must be in
writing and must specify the matters upon which comments are
requested, and must also include:
(1) The information contained in items 2 through 5 of this
Notice; and
(2) the number of persons needed for the Department to comment.
A request to the Department to comment should be addressed as
follows:
Assistant Secretary
Pension and Welfare Benefit Administration
U.S. Department of Labor
200 Constitution Avenue, N.W.
Washington, D.C. 20216
Attn: 3001 Comment Request
Comments to the Internal Revenue Service
12. Comments submitted by you to the IRS Key District Director
must be in writing and received by him by _____ , 199_____ (75
days after Plan adoption). However, if there are matters that
you request the Department of Labor to comment upon on your
behalf, and the Department declines, you may submit comments on
these matters to the Key District Director to be received by him
within 15 days from the time the Department notifies you that it
will not comment on a particular matter, or by ____ , 199_____
(75 days after Plan adoption), whichever is later, but in no
event later than ___, 199__(90 days after Plan adoption). A
request to the Department to comment on your behalf must be
received by it by _____ , 199_____ (45 days after Plan adoption)
if you wish to preserve your right to comment on a matter upon
which the Department declines to comment, or by _____ , 199_____
(55 days after Plan adoption) if you wish to waive that right.
Additional Information
13. Detailed instructions regarding the requirements for
notification of interested parties may be found in sections 16,
17 and 18 of Revenue Procedure 91-10. Additional information
concerning this application (including an updated copy of the
Plan and related trust and copies of section 16 of Revenue
Procedure 91-10) are available at the offices of ______________
during the hours of 9:00 a.m. to 5:00 p.m. for inspection and
copying. (There may be a nominal charge for copying and/or
mailing.)
NOTE: Section 17 of Revenue Procedure 94-6 is included to provide
plan participants with additional information.
<PAGE>
Section 17 of Revenue Procedure 94-6
WHAT RIGHTS TO NOTICE AND COMMENT DO INTERESTED PARTIES HAVE?
* 01 Persons who qualify as interested parties under section
1.7476-1(b) of the regulations, have the following rights:
(1) To receive notice, in accordance with section 18 below, that
there will be filed an application for an
advance determination regarding the qualification of plans
described in sections 401, 403(a), 409 and 4975(e)(7) of the
Code, or, with respect to plans described in section 7.05 above,
to receive notice, in accordance with section 19 below, of the
adoption or amendment of such plans;
(2) To submit written comments with respect to the qualification
of such plans to the Internal Revenue Service;
(3) To request the Department of Labor to submit a comment to the
Service on behalf of the interested parties; and
(4) To submit written comments to the Service on matters with
respect to which the Department of Labor was requested to comment
but declined.
* 02 comments submitted by interested parties must be received
by the Key District Director by the 45th day after the date on
which the application for determination is received by the Key
District Director (see section 17.03 and 17.04 for filing
deadlines where the Department of Labor has been requested to
comment). Such comments must be in writing, signed by the
interested parties or by an authorized representative of such
parties (as provided in section 9.01(7) of Rev. Proc. 91-4),
addressed to the Key District director to whom the application
for determination was submitted, and contain the following
information:
(1) The names of the interested parties making the comments;
(2) The name and taxpayer identification number of the applicant
for a determination:
(3) The name of the plan, the plan identification number, and the
name of the plan administrator;
(4) Whether the parties submitting the comment are:
(a) Employees eligible to participate under the plan,
(b) Employees with accrued benefits under the plan, or former
employees with vested benefits under the plan,
(c) Beneficiaries of deceased former employees who are eligible
to receive or are currently receiving benefits under the plan,
(d) Employees not eligible to participate under the plan.
(5) The specific matters raised by the interested parties on the
question of whether the plan meets the requirements for
qualification involving sections 401 and 403(a) of the Code, and
how such matters relate to the interests of the parties making
the comment; and
(6) The address of the interested party submitting the comment
(or if a comment is submitted jointly by more than one party, the
name and address of a designated representative) to which all
correspondence, including a notice of the Service's final
determination with respect to qualification, should be sent.
(The address designated for notice by the Service will also be
used by the Department of Labor in communicating with the parties
submitting a request for comment.) The designated representative
may be one of the interested parties submitting the comment or an
authorized representative. If two or more interested parties
submit a single comment and one person is not designated in the
comment as the representative for receipt of correspondence, a
notice of determination mailed to any interested party who
submitted the comment shall be notice to all the interested
parties who submitted the comment for purposes of section
7476(b)(5) of the Code.
* 03 A request to the Department of Labor to submit to the Key
District Director a comment pursuant to section 3001(b)(2) of the
Employee Retirement Income Security Act of 1974 (ERISA) must be
made in accordance with the following procedures:
(1) The request must be received by the Department of Labor by
the 25th day after the day the application is received by the Key
District Director. However, if the parties requesting the
Department to submit a comment wish to preserve the right to
comment to the Key District Director in the event the Department
declines to comment, the request must be received by the
Department by the 15th day after the application is received by
the Key District Director.
(2) The request to the Department of Labor to submit a comment to
the Key District Director must:
(a) Be in writing;
(b) Be signed as provided in section 17.02 above;
(c) Contain the names of the interested parties requesting the
Department to comment and the address of the interested party or
designated representative to whom all correspondence with respect
to the request should be sent. See also section 17.02(6) above;
(d) Contain the information prescribed in section 17.02(2), (3),
(4), above;
(e) Contain the address of the Key District Director to whom the
application was or will be submitted;
(f) Contain a statement of the specific matters upon which the
Department's comment is sought, as well as how such matters
relate to the interested parties making the request; and
(g) Be addressed as follows:
Deputy Assistant Secretary
Pension and Welfare Benefits
Administration
U.S. Department of Labor
200 Constitution Avenue, N.W.
Washington, D.C. 20210
Attention: 3001 Comment Request
04 If a request described in 17.03 is made and the Department of
Labor notifies the interested parties making the request that it
declines to comment on a matter concerning qualification of the
plan which was raised in the request, the parties submitting the
request may still submit a comment to the Key District Director
on such matter. The comment must be received by the later of the
45th day after the day the application for determination is
received by the Key District Director or the 15th day after the
day on which notification is given by the Department that it
declines to submit a comment on such matter. (See section 17.07
for the date of notification.) In no event may the comment be
received later than the 60th day after the application for
determination was received. Such a comment must comply with the
requirements of section 17.02 and include a statement that the
comment is being submitted on matters raised in a request to the
Department upon which the Department declined to comment.
05 For rules regarding the confidentiality of contents of
written comments submitted by interested parties to the Service
pursuant to section 17.02 or 17.04, see section 601.201(o)(5) of
the Statement of Procedural Rules.
06 For rules regarding the availability to the application of
copies of all comments on the application submitted pursuant to
section 17.01(1), (2), or (3) of this revenue procedure, see
section 601.201(o)(5) of the Statement of Procedural Rules.
07 An application for an advance determination, a comment to the
Key District Director, or a request to the Department of Labor
shall be deemed made when it is received by the Key District
Director, or the Department. Notification by the Department that
it declines to comment shall be deemed given when it is received
by the interested party or designated representative. The notice
described in section 18.01 below shall be deemed given when it is
given in person, posted as prescribed in the regulations under
section 7476 of the Code, or received through the mail. In any
case where such an application, comment, request, notification,
or notice is sent by mail, it shall be deemed received as of the
date of the postmark (or if sent by certified or registered mail,
the date of certification or registration), if it is deposited in
the mail in the United States in an envelope or other appropriate
wrapper, first class postage prepaid, properly addressed.
However, if such an application, comment, request, notification,
or notice is not received within a reasonable period from the
date of postmark, the immediately preceding sentence shall not
apply.
<PAGE>
Plan Investment Form
Simplified Putnam Retirement Plans
Please use this form to indicate your plan's initial investment
in the Putnam Family of Funds, listing only one source of
contribution per page.
1. Employer Phone No. ( )
Address
City/State/Zip
Employer's Name (Please Print)
Authorized Employer Signature
2. Type of Simplified Putnam Retirement Plan (check one)
_____ Putnam Profit Sharing Plan (Keogh)
_____ Putnam Money Purchase Pension Plan (Keogh)
_____ Paired Putnam Profit Sharing and Money Purchase Pension
Plan (Keogh)
_____ Putnam Profit Sharing and 401(k) Plan
Note: If you have a Paired Putnam Profit Sharing and Money
Purchase Pension Plan, you have two plans involving separate Plan
contributions. Check this option and complete two Plan
Investment Forms. To do this, make a copy of this Form, complete
it accordingly and send both Forms with the plans' initial
contribution checks. Remember, you only need to include one
participant fee in one of your Plan contribution checks.
3. Dealer Representative Phone No. ( )
Dealer Firm
Branch Location
Representative's Signature
4. Participant Fee: $10.00 X _______ = ___________________
Number of
Participants Annual Participant Fee
Total Check Amount:
Annual Participant Fee $ __________
Employer Contribution $ __________
(from final page)
TOTAL $ __________
NOTE: Minimum contribution: $500 per plan; $25 per participant
account. This plan does not allow for employee voluntary
after-tax contributions.
<PAGE>
The following Putnam funds are available for retirement plan
accounts. Please use these fund codes, listing only one fund per
line, when completing the Plan Investment Form.
A26 Putnam Adjustable Rate U.S. Government Fund
A08 Putnam Convertible Income-Growth Trust
A0A Putnam Daily Dividend Trust
A43 Putnam Dividend Growth Fund
A29 Putnam Diversified Income Trust
B0H Putnam Energy-Resources Trust
A44 Putnam Europe Growth Fund
A02 The Putnam Fund for Growth and Income
A01 The George Putnam Fund of Boston
A18 Putnam Global Governmental Income Trust
A05 Putnam Global Growth Fund
A16 Putnam Federal Income Trust
A0L Putnam Health Sciences Trust
A10 Putnam American Government Income Fund
A0D Putnam High Yield Trust
A15 Putnam High Yield Advantage Fund
A04 Putnam Income Fund
A0U Putnam New Opportunities Trust
A03 Putnam Investors Fund
A0C Putnam Equity/Income Fund
A19 Putnam OTC Emerging Growth Fund
A0Y Putnam U.S. Government Income Trust
A06 Putnam Vista Fund
A07 Putnam Voyager Fund
In addition to Putnam mutual funds, retirement investments may be
made through the Putnam Capital Manager (PCM), a variable
annuity. The PCM investment options are listed below. (Please
call Putnam if you wish to use PCM in your retirement plan.)
PCM Fixed Account
PCM Money Market Account
PCM U.S. Government and High Quality Bond Fund
PCM High Yield Fund
PCM Growth and Income Fund
PCM International Equities Fund, a global fund
PCM Voyager Fund
PCM Multi-Strategy Fund
<PAGE>
Profit Sharing Plan Contributions
Employer Date
(Please list only one fund per line. Continue on an additional
sheet if necessary.)
Participant Participant Investment Employer
Name Social Security Fund Selected Profit Sharing Plan
Number (Please list only Contribution
one fund per line)
___________ ______________ __________ $__________
___________ ______________ __________ __________
Total Profit Sharing Plan Contributions: $ _____________
<PAGE>
Money Purchase Pension Plan Contributions
Employer Date
(Please list only one fund per line. Continue on an additional
sheet if necessary.)
Participant Participant Investment Employer
Name Social Security Fund Selected Money Purchase
Number (Please list only Pension Plan
one fund per line) Contribution
___________ _________ __________ $__________
___________ _________ __________ __________
Total Money Purchase Pension Plan Contributions: $ ___________
<PAGE>
Employee 401(k) Contributions
Employer Date
(Please list only one fund per line. Continue on an additional
sheet if necessary.)
Participant Participant Investment
Name Social Security Fund Selected Employee
Number (Please list only 401(k)
one fund per line) Contribution
________ ____________ __________ $__________
________ ____________ __________ __________
Total 401(k) Contributions: $ _____________
<PAGE>
Part III: Questions and Answers about the Simplified Putnam
Retirement Plans
General Comments 39
Key Definitions 40
Contributions 41
Plan Investments 45
Plan Distributions 45
Top-Heavy Testing 46
Plan Administration 47
Glossary of Terms 49
<PAGE>
Questions and Answers about the Simplified Putnam Retirement
Plans
While Putnam cannot give you legal or tax advice, our
professionals have prepared these Questions and Answers to assist
you in selecting among the many options presented in the Putnam
Plan Agreements #001 and #002. If you have questions after
reviewing them, consult your investment dealer or call Putnam
Retirement Plan Services at 1-800-662-0019.
Please remember that these Questions and Answers are only a
general guide to help you make decisions in consultation with
your legal and tax advisors.
I. General Comments
Q-1. Why should I adopt a Putnam Plan?
A-1. Simplified Putnam Retirement Plans offer you and your
Employees the opportunity to make retirement contributions on a
tax-favored basis. The benefits to your business are twofold.
First, a retirement plan will help you attract and retain good
employees. Second, your Plan will qualify for tax-favored
treatment. The tax laws generally do not allow employers to
deduct wages until an employee includes those wages in income.
But an employer can deduct its qualified retirement plan
contributions when they are made, even though employees will not
have to report those amounts as taxable income until the plan
later distributes benefits. In the meantime, the plan
contributions accumulate earnings tax-deferred.
Q-2. What documents do I need?
A-2. (1) A Putnam Basic Plan Document and
(2) A Putnam Plan Agreement #001 (Standard Profit Sharing (Keogh)
and Standard Profit Sharing and 401(k) Plan) or Putnam Plan
Agreement #002 (Standard Money Purchase Pensions Plan (Keogh)).
Q-3. What are these documents for?
A-3. The Putnam Basic Plan Document contains the general rules
for maintaining a Putnam Retirement Plan, and allows you to make
certain choices for your own plan. You indicate your choices
when you complete Putnam Plan Agreement #001 (for the Profit
Sharing Plan (Keogh) or the Profit Sharing and 401(k) Plan) or
#002 (for the Money Purchase Pension Plan Keogh).
Q-4. Do terms beginning with capital letters have special
meanings?
A-4. Both the Putnam Basic Plan Document and the Plan Agreements
contain terms that begin with capital letters because they have
special definitions in the Basic Plan Document. These Questions
and Answers also contain terms that begin with a capital letter
because they have a special definition, either here or in Article
2 of the Basic Plan Document. All of these terms are defined in
the Glossary of Terms at the end of these Questions and Answers.
When the term "item" is used in these Questions and Answers, it
refers to the numbered and lettered items to be completed in
Putnam Plan Agreement #001 or #002.
II. Key Definitions
Q-5. What is an Affiliated Employer for purposes of the Plan?
(Item 3.A)
A-5. The term Affiliated Employer includes the business that is
adopting or amending a Putnam plan, and any businesses related to
that business as part of:
* a "controlled group of corporations," as defined in Internal
Revenue Code Section 414(b),
* a group of businesses under "common control," as defined in
Internal Revenue Code Section 414(c), or
* an "affiliated service group," as defined in Internal Revenue
Code Section 414(m).
Generally, businesses that have 80% or more common ownership are
Affiliated Employers, and businesses with as little as 10% common
ownership may form an affiliated service group if one of them
regularly performs services for or with the other. Your close
relatives generally are considered to own any interest in a
business that you own, and vice versa, for purposes of these
rules. Please read the Affiliated Employers Worksheet (contained
in a separate booklet) and consult your attorney or tax advisor
if you suspect your business falls within any of the categories
mentioned above.
Q-6. How many Hours of Service should I specify as the minimum
requirement for an Eligibility Period? (item 3.C.2)
A-6. You may not require an Employee to complete more than 1,000
Hours of Service during the 12 months following his date of hire
(or anniversaries of that date) in order to be credited with an
Eligibility Period. Because 1,000 Hours of Service over 12
months equals approximately 20 hours per week, your election of
the 1,000-hour option will prevent Employees who normally work
less than 20 hours per week from becoming participants in your
Plan. On the other hand, you could completely avoid counting
Hours of Service by entering "1" in item 3.C.2 as the Hours of
Service requirement. In that case, an individual who is paid
for one Hour of Service will be credited with that Eligibility
Period. You may require, in item 3.C.1, that an employee remain
employed for one or two Eligibility Periods before he begins to
participate in your Plan. (One Eligibility Period maximum for
Elective Deferrals.)
Q-7. How should "Compensation" be defined for purposes of my
Plan? (Item 4)
A-7. The definition of Compensation you choose will affect the
amount you contribute to the Plan for you Employees. As a basic
measure, you may elect either Form W-2 wages or the amount
treated as compensation for purposes of Code Section 415, which
is described in Section 6.5(b) of the Basic Plan Document. (The
principal difference is that Form W-2 wages include all
reimbursements for moving expenses, while the Code Section 415
amount includes reimbursements for moving expenses only if the
reimbursed amount is not deductible by the Employee.)
The term Earnings refers to both the Compensation paid to an
Employee and the earned income of a self-employed worker. The
Earnings of a self-employed worker include only his earned income
from the trade or business with respect to which the Plan is
established, and do not include contributions to the Plan (to the
extent deductible under Code Section 404). See Section 2.13 of
the Basic Plan Document.
The definition of Compensation that you choose in the Plan
Agreement will not affect the calculation of certain limits in
the tax laws, for which special definitions apply regardless of
the definition in the Plan. For an explanation of these limits
and special definitions, see the Contribution Limits Worksheet
contained in a separate booklet.
Profit Sharing and 401(k) Plans Only:
Both of the basic measures of compensation exclude any pre-tax
contributions made by the Employee under a cafeteria (flexible
compensation) plan, 401(k) plan, SARSEP, 403(b) plan, Section 457
deferred compensation plan or contributions described in Section
414(h)(2) that are "picked up" by a governmental employer. You
may choose to add back these pre-tax amount for purposes of your
Putnam Plan. For example, suppose Employee A has Form W-2 wages
of $25,000, and he makes Elective Deferrals of $2,000 under a
Putnam Profit Sharing and 401(k) Plan. If your business makes an
Employer Contribution equal to 3% of each Plan Participant's
Earnings, Employee A's allocation will be $750 (3% of 25,000) if
the Plan counts only Form W-2 wages as Earnings, but $810 (3% of
$27,000) if the Elective Deferral
is added back.
Q-8. Is there a limit on the amount of Earnings my Plan may take
into account during a Plan Year?
A-8. Yes. Regardless of the definition of Earnings you choose
in item 4, for Plan Years beginning after December 31, 1993, only
the first $150,000 of any Employee's Gross Earnings (including
any pre-tax contributions) counts for your 1994 Plan Year for
purposes of your Putnam Plan. The calculation is made on the
basis of your Plan Year specified in item 2.A., which may or may
not be the calendar year. If your Plan Year contains less than
12 months (for example, if you did not establish your Plan as of
the first day of the Plan Year), you must limit each Employee's
Earnings to the portion of the $150,000 limit that corresponds to
the portion of 12 months represented by your Plan Year. The
ceiling will be adjusted periodically for inflation.
If your business employs the spouse or child (under age 19) of a
5% owner of the business, or of one of its ten most highly
compensated employees, the combined Earnings of the spouse or
child and those of the 5% owner or highly compensated employee
may not exceed the current dollar limit.
III. Contributions
Q-9. What does it mean to "integrate" my Plan with Social
Security? (Item 5.C and D of Plan Agreement #001, and Item 5.B
and C of Plan Agreement #002).
A-9. Generally, a Profit Sharing Plan or Money Purchase Pension
Plan must allocate Employer Contributions pro rata according to
the Earnings of Participants. For example, if the Earnings of
all Participants total $200,000 for a given year, a Participant
who earns $20,000 will be entitled to 10% ($20,000/$200,000) of
the Employer Contribution.
Integration represents a narrow exception to that general rule.
By integrating, a plan may allocate extra contributions to
Employees who have Earnings in excess of the Social Security Wage
Base ("Wage Base"). This extra allocation is allowed because
Social Security calls for no employer FICA tax payments on an
employee's income in excess of the Wage Base, and thus prevents
individuals who earn above the Wage Base from accruing Social
Security retirement benefits in the same proportion to total pay
as those earning below the Wage Base.
Q-10. How does integration work?
A-10. Section 4.2(c) of the Basic Plan Document sets forth the
Integration Formula according to which Employer Contributions
will be allocated among participants in an integrated Plan.
Under that formula, the amount of Earnings at which a plan begins
to make extra allocations is called its Integration Level.
A related term is Excess Earnings, which means the amount of a
Participant's Earnings above in Integration Level. For example,
if a plan has an Integration Level of $16,000, an Employee whose
Earnings are $20,000 a year has Excess Earnings of $4,000.
Remember, the term Earnings includes amounts above and below the
Integration Level.
Putnam has designed its Integration Formula to adjust
automatically each year so that the percentage of the extra
Employer Contribution allocated in proportion to Excess Earnings
is the maximum allowed by law. In general, the percentage rate
of extra Employer Contributions allocated on the basis of Excess
Earnings cannot exceed the percentage rate allocated on the basis
of total Earnings, or 5.7% of Excess Earnings, whichever is less.
For example, if your Plan requires an Employer Contribution
sufficient to provide all Participants an allocation of 3% of
their total Earnings, it may also allocate to the accounts of
Participants who earn more than the Integration Level an extra
amount equal to no more than 3% of their Excess Earnings. Thus,
a Participant with Earnings of $20,000 will get a regular
allocation of $600. If the Integration Level of the Plan is
$16,000, he will also get an extra allocation of $120. On the
other hand, if the Integration Formula results in an allocation
to all Participants of an amount in excess of 5.7% of their total
Earnings, the extra amount allocated to the Accounts of
Participants who earn more than the Integration Level may not be
more than 5.7% of their Excess Earnings.
Q-11. How should I choose my Plan's Integration Level? (Item 5.D
of Plan Agreement #001, and Item 5.C of Plan Agreement #002)
A-11. You may select an Integration Level from among the three
alternatives listed. The first choice presented is the Wage
Base, which is adjusted annually to keep pace with the cost of
living. Over recent years, the Wage Base has risen steadily:
Year 1991 1992 1993 1994
Wage Base $53,400 $55,500 $57,600 $60,600
By defining your Plan's Integration Level as the Wage Base, or as
a percentage of the Wage Base (the second option listed), you
will build in an annual increase that you can expect to reflect
the annual increase in pay levels. If instead you select a fixed
dollar amount as your Integration Level (the third option), your
formula is simpler, but it does not provide any hedge against
annual wage inflation.
To Maximize the extra allocations to Employees you want to
benefit through integration, the Integration Level should be set
as close as possible to the highest Earnings of the Participants
you want to exclude from sharing in extra contributions. For
example, suppose that your work force breaks down as follows for
1994:
Class of Employee Executives Supervisors Rank and File
Earnings Range Over $65,000 $30,000-$45,000 Under $20,000
If you want to make extra allocations only to your executives,
the Wage Base ($60,600 for 1994) would be appropriate. An
Integration Level equal to 50% of the Wage Base ($30,300 for
1994) would extend the benefits of integration to your
supervisors as well as executives.
Q-12. What types of contributions should I choose for my Profit
Sharing and 401(k) Plan? (Items 5 and 12 of Plan Agreement #001)
A-12. The various types of employer and employee contributions
that may be made to your Putnam Profit Sharing and 401(k) Plan
are described below.
Employer Contributions (Item 5).
Your business may make contributions in a discretionary amount
that can vary from year to year, or you may specify a formula
that will be used to calculate every year's contributions (for
example, 5% of pay for the year). Generally, every Employee's
share of each Employer Contribution will equal the percentage
that his Earnings bear to the total Earnings of all Participants.
Alternatively, you may elect to "integrate" your Plan with Social
Security. Item 5.C presents this choice, and Q&A-9 and Q&A-10
explain how integration works.
Elective Deferrals (Item 12.A).
These contributions are often called 401(k) or before-tax
contributions, because an Employee's taxable income will be
reduced by the amount he chooses to contribute as an Elective
Deferral. An active Employee under age 59 1/2 may withdraw
elective Deferrals only in the event of financial hardship, and
then only if you check "Yes" for item 12.D.
Qualified Matching Contributions (Item 12.B).
Qualified Matching Contributions cannot be withdrawn while a
Participant remains an active Employee. You may use Qualified
Matching Contributions to help your Plan pass the ADP Test, and
thereby increase the Elective Deferrals allowed for Highly
Compensated Employees. See Q&A-19.
Qualified Nonelective Contributions (Item 12.C).
Qualified Nonelective Contributions are subject to the same
distribution restrictions as Qualified Matching Contributions.
You may use Qualified Nonelective Contributions to help your Plan
pass the ADP Test, and thereby increase the Elective Deferrals
allowed for your Highly Compensated Employees. See Q&A-19.
Q-13. Are there any overall limits on the amount that may be
contributed to my Plan each year?
A-13. Yes, there are two different limits. For a detailed
explanation, refer to the Contribution Limits Worksheet contained
in a separate Booklet.
The first rule limits your overall contribution to the Plan for
each Plan Year to the amount your business is allowed to deduct
under section 404 of the Internal Revenue Code (see Section
4.2(a) of your Basic Plan Document).
The deduction limit for Profit Sharing Plans is 15% of the total
Earning paid during the Plan Year to all Plan Participants,
excluding Elective Deferrals. For purposes of the 15% Profit
Sharing Plan deduction limit, all of the following types of
contributions are aggregated:
* Employer Contributions
* Qualified Matching contributions
* Qualified Nonelective Contributions
* Elective Deferrals
The deduction limit for Money Purchase Pension Plans is 25% of
the total Earnings paid during the Plan Year to all Plan
Participants.
The second overall Plan contribution limit applies on a
Participant-by-Participant basis. This limit provides generally
that the Annual Additions (as defined in the next paragraph) to
each Participant's Account for a Plan Year may not exceed the
lesser of:
* 25% of the Participant's Earnings, excluding Elective Deferrals
and pre-tax contributions under a cafeteria (flexible
compensation) plan, SARSEP, 403(b) annuity or account, or a
Section 457 deferred compensation plan, or
* $30,000.
The following types of contributions are considered to be Annual
Additions: Employer Contributions, Qualified Matching
Contributions, Qualified Nonelective Contributions, and Elective
Deferrals. Rollover Contributions and investment earnings of all
kinds are not Annual Additions.
The Annual Additions limit applies on a combined basis to all
plans of a single business, and to all plans of any businesses
that would meet the definition of Affiliated Employers (in Q&A-3)
if "50%" were substituted for "80%."
Q-14. What is the deadline for making employer contributions for
a Plan Year?
A-14. In order to deduct the contributions your business makes
for a Plan Year, the contributions must be paid to the Trustee no
later than the due date (including any applicable extension) for
filing the tax return for the taxable year of your business that
corresponds to the Plan Year. In addition, ERISA requires that
Elective Deferrals to a 401(k) plan be paid to the Trustee as
soon as practicable after they are made or withheld, and in any
event within 90 days.
Q-15. For a Putnam Profit Sharing and 401(k) Plan, what is the
current dollar limit on the amount of a Participant's annual
Elective Deferrals, and how is that amount determined? (Item 12.A
of Plan Agreement #001)
A-15. For calendar year 1994, the dollar limit is $9,240. This
amount is revised annually by the Internal Revenue Service to
reflect the cost-of-living adjustments, and is published in an
IRS announced issued early each year. The limits for the past
four years have been as follows:
Year 1991 1992 1993 1994
Deferral Limit $8,475 $8,728 $8,994 $9,240
For the current limit, please call Putnam Retirement Plan
Services at 1-800-662-0019.
Q-16. Is there any other limit on the amount of Elective
Deferrals that my Employees may make?
A-16. No, for your Non-Highly Compensated Employees ("NHCEs").
Yes, for your Highly Compensated Employees ("HCEs"), because the
amount of their Elective Deferrals is subject to a second limit
under the ADP Test contained in Section 401(k) of the Internal
Revenue Code.
"ADP," an abbreviation of the term "actual deferral percentage,"
means the average of the percentages of Earnings that a group of
Employees contribute in the form of Elective Deferrals during the
Plan Year. For example, suppose Widget Company's Plan covers two
HCEs, who earn $75,000 and $100,000 respectively during the 1991
Plan Year. If the first HCE makes total Elective Deferrals of
$7,500 for the year, his deferral percentage equals 10% ($7,500
deferred divided by $75,000 Earnings). If the other HCE makes no
Elective Deferrals, her deferral percentage equals 0%. The
actual deferral percentage, or ADP, for the HCEs as a group
equals the average of 10% and 0%, or 5%. The same method applies
when you calculate the ADP of your NHCEs.
For each Plan Year, the ADP of your HCEs cannot exceed the ADP
of your NHCEs by more than a certain percentage. That percentage
varies as shown below:
Actual ADP of NHCE Group
1% 2% 3% 4% 5% 6% 8% 10% 12%
14% 16%
Maximum ADP of HCE Group
2% 4% 5% 6% 7% 8% 10% 2.5% 15%
17.5% 20%
For example, the ADP of Widget's two HCEs was 5%. According to
the above chart, the ADP of Widget's NHCEs must be at least 3% in
order for Widget's Plan to satisfy the ADP test.
Suppose the ADP of Widget's NHCEs was only 1%. The ADP of its
HCEs would then be capped at 2%. If the ADP of Widget's HCEs
exceeded 2% as of the end of the Plan Year being tested, Widget
would have to reduce that ADP to 2% by following one of the two
methods described in Q&A-18.
The precise rules for ADP testing are set forth in Section 5.6 of
your Basic Plan Document and a separate booklet. To protect the
qualified status of your Plan, your Plan Administrator is
responsible for performing the ADP Test each year to ensure that
the ADP of your HCEs falls within the limits described above.
The ADP Worksheet will guide you, step-by-step, through
performance of this test.
Q-17. Who is a Highly Compensated Employee?
A-17. Your Highly Compensated Employees ("HCEs") include any
Employee described in Section 2.58 of the Basic Plan Document.
The HCE Worksheet contained in a separate booklet will help you
identify your HCEs. Any Employee who is not an HCE is a
Non-Highly Compensated Employee ("NHCE").
Q-18. What if my Plan fails the ADP Test for a Plan Year?
A-18. If the ADP for HCEs for a Plan Year exceeds the maximum
allowed under the ADP Test, then the difference between the ADP
for HCEs and the ADP for NHCEs must be reduced by either lowering
the ADP for HCEs, or raising the ADP for NHCEs, or both.
To lower the ADP for HCEs, your Plan may refund sufficient
Elective Deferrals to HCEs to bring their ADP down to the level
that satisfies the ADP Test. Amounts refunded within the first
2-1/2 months after the end of a Plan Year, and the income
attributable to the refunded Excess Contributions, will be
included in the contributing HCEs' gross income in the taxable
year when the Excess Contributions were made (not the year when
the distribution occurs). Exception: If the total amount of
Excess Contributions refunded to a Participant is less than $100,
the refunded amount is taxable in the year of distribution. If
the refunds are not made until after the 2-1/2 month deadline,
the refunded amount and income will be taxable in the year of
distribution. Section 5.4 of your Basic Plan Document sets forth
the rules for calculating the income attributable to Excess
Contributions by HCEs.
Your business must take action to make the necessary refunds
within 2-1/2 months after the Plan Year ends in order to avoid
paying a nondeductible 10% excise tax on the Excess
Contributions. If the excess is not corrected within 12 months
after the Plan Year ends, the Elective Deferral portion of your
Plan will be disqualified.
An alternative way to correct a failed ADP Test is to raise the
ADP of the NHCE group to the required level by making Qualified
Nonelective Contributions for allocation to NHCEs only (see item
12.C.1). These contributions must be made by the due date
(including extensions) for the Employer's tax return for its
fiscal year that corresponds to the Plan Year to which the ADP
Test applies.
Q-19. How may Qualified Nonelective Contributions ("QNECs") and
Qualified Matching Contributions help my Plan pass the ADP Test
for a Plan Year?
A-19. QNECs and Qualified Matching Contributions may be counted
as Elective Deferrals by NHCEs in the ADP Test.
IV. Plan Investments
Q-20. Who should direct the investment of Employer contributions
to my Plan? (Item 6.B)
A-20. If your Plan is a 401(k) Plan, Participants always control
the investment of Elective Deferrals themselves. With respect to
all other contributions to a Profit Sharing or Money Purchase
Pension Plan, you may choose in item 6.B of your Plan Agreement
to make investment decisions for those contributions yourself.
If you elect to direct your Plan's investments, you may be held
personally liable for losses or for an inadequate rate of return.
On the other hand, if you do not elect this option, the Plan
provides that your Employees will direct the investment of all
assets in their accounts. The Plan has been drafted to take
advantage of the provisions of ERISA Section 404(c)1 if you
choose. Generally you cannot be held responsible for the
performance of the Plan's investments directed by Participants
and Beneficiaries in an ERISA Section 404(c) plan, provided that:
(1) Participants and Beneficiaries may choose from at least three
diversified categories of investments, designated by you, having
materially different risk and return characteristics;
(2) Participants and Beneficiaries may change their investment
instructions at least once in any three-month period, and more
frequently if any investment with comparatively high market
volatility is offered under the Plan; and
(3) You provide Participants and Beneficiaries with sufficient
information concerning the Plan's investment alternatives, such
as prospectuses. Please call Putnam Retirement Plan Services at
1-800-662-0019 for more information regarding these requirements.
Even if your Plan complies with the requirements described above
for an ERISA Section 404(c) plan, you remain responsible for
selecting and monitoring on an on-going basis the group of
investments that will be available under the Plan, and for
directing the investment of the account of a Participant or
Beneficiary who gives no directions himself or who is legally
incompetent. Putnam mutual funds and the separate investment
portfolios available under PCM annuity contracts are considered
"look-through" investments that provide diversification within a
risk and return category, even for small accounts in a Plan. Of
course, your Plan may offer more than three choices of
investments.
V. Plan Distributions
Q-21. Should my Profit Sharing and 401(k) Plan permit
Participants to choose life annuities as a form of distribution?
(Item 7.A.2 of Plan Agreement #001)
(Note: All Money Purchase Pension Plans are required to include
life annuities as a form of distribution.)
A-21. The life annuity option presented in item 7.A.2 allows
Participants to use their Account balances to purchase an annuity
contract such as the Putnam Capital Manager variable annuity.
Under the annuity contract, a Participant will receive monthly
payments for the remainder of his life, or for the Participant's
life and that of another person. If a Participant who is married
at the time of separation from service chooses a life annuity,
then the Participant's spouse must give notarized, written
consent to the election of any form of distribution other than a
"joint and survivor" annuity providing income for the spouse's
life, after the death of the Participant (see Article 11 of the
Basic Plan Document). Spousal consent will also be required for
any subsequent hardship distribution.
If you are adopting your Putnam Plan as a replacement for a prior
plan under which Participants had an option to receive their
benefits in the form of a life annuity, you must check "Yes" for
item 7.A.2.
Q-22. What rules apply if my Profit Sharing (Keogh) or Profit
Sharing and 401(k) Plan permits hardship distributions to
Participants? (Items 7.B and 12.D of Plan Agreement #001)
(Note: Money Purchase Pension Plans are not allowed to make
hardship distributions.)
A-22. Section 5.14 of the Basic Plan Document sets forth the
precise standards for making hardship distributions to Employees
from Putnam's Profit Sharing Plans.
Generally, an applicant for a hardship distribution must fulfill
two conditions to the satisfaction of the Plan Administrator.
The purpose for the hardship distribution must be one of the
following: (1) paying medical expenses of the Participant and his
family, (2) making a down payment or paying closing costs for
purchasing the Participant's primary residence, (3) paying
tuition for the upcoming 12 months of post-secondary education
for the Participant or his immediate family, or (4) paying an
amount necessary to prevent the Participant's eviction form his
principal residence, or foreclosure of the mortgage on it. In
addition, the amount distributed must be limited to the amount of
the expense that creates the hardship (plus taxes generated by
the distribution), and in a Profit Sharing and 401(k) Plan the
amount of a hardship distribution from any source other than the
Employer Contribution Account cannot exceed the aggregate amount
of Elective Deferrals he has made after December 31, 1988, plus
the balance credited to the Participant's Elective Deferral
Account as of December 31, 1988. Earnings that accrue on
Elective Deferrals after that date may not be distributed on
account of hardship.
Q-23. What income tax withholding rules apply to distributions
from the Plan?
A-23. If a Participant's Account distributions will continue
over a period of at least 10 years in substantially equal
installments, the Participant may elect whether to have federal
income tax withheld. If the Account will be distributed in any
other form -- such as a single payment -- then the Plan must
withhold federal income tax from the distribution unless the
Participant elects to have the distribution transferred directly
to an individual retirement account (IRA) or to another
employer's qualified retirement plan. Each Participant who is
entitled to a Plan distribution should receive the Special Tax
Notice explaining the choices the Participant has with respect to
income tax withholding. A copy of the Special Tax Notice is
available by contacting ***** at 1-800-622-0019.
VI. Top-Heavy Testing
Q-24. Can I avoid annual top-heavy testing of my Plan? (Item
10).
A-24. Yes, if you design the Plan to operate as though it is
always top-heavy. To do that, you must select in item 5 of your
Plan Agreement a contribution formula that meets the following
requirements:
If your Plan is a Profit Sharing Plan (Keogh), either leave item
5.C blank, or check the first blank in item 5.C.
If your Plan is a Profit Sharing and 401(k) Plan, either complete
the second blank in item 5.B with a percentage that is at least
3% AND leave item 5.C blank, or complete the first blank in item
12.C.2 with a percentage that is at least 3%.
If your Plan is a Money Purchase Pension Plan, either complete
item 5.A and leave items 5.B and 5.C blank, or leave item 5.A
blank and complete the second blank in item 5.B with a percentage
that is at least 3%.
Q-25. What is a top-heavy Plan? (Item 10).
A-25. Your Plan will be top-heavy for a Plan Year it its
Top-Heavy Ratio exceeds 60%. Q&A-26 explains how to compute the
Top-Heavy Ratio. The determination of whether your plan is
top-heavy must be made separately for each Plan Year, because the
top-heavy status of your Plan can change from Plan Year to Plan
Year.
Q-26. How is the Top-Heavy Ratio calculated?
A-26. The Top-Heavy Ratio is a fraction, determined for a Plan
Year, based on the Account balances in all qualified defined
contribution plans of your business as of the last day of the
preceding Plan Year. (In the first Plan Year of your Plan, these
determinations are made as of its last day.) The numerator of
the Top-Heavy Ratio fraction equals the sum of the Account
balances of your Key Employees, as defined in Q&A-27. The
denominator of the Top-Heavy Ratio fraction equals the sum of the
Account balances of all of your Employees (including Key
Employees). For purposes of determining the numerator and
denominator of the Top-Heavy Ratio fraction, any part of any
Account balance which has been distributed to a Participant in
the five-year period ending on the calculation date is added back
to the Participant's Account.
Q-27. Who is a Key Employee?
A-27. A person is a Key Employee of a business (corporation or
unincorporated form) if he owns certain amounts of the business
or has relatively large Gross Earnings from the business. Gross
Earnings means Earnings plus Elective Deferrals plus any pre-tax
contributions made by the Employee under a cafeteria (flexible
compensation) plan, 401(k) plan, SARSEP, 403(b) plan, or a
Section 457 deferred compensation plan.
Your Key Employees for 1994 include any individual who, during
your Plan Year beginning in 1994, falls into at least one of the
following categories:
receive more than $59,400 in Gross Earnings and is an officer of
your business.
receives more than $30,000 in Gross Earnings, and is one of the
ten (or fewer) Employees who own the largest employee-owned
interests in your business.
owns at least a 5% interest in your business.
receives more than $150,000 in Gross Earnings and owns at least
a 1% interest in your business.
Your Key Employees for 1994 also include anyone who was a Key
Employee in any of the previous four Plan Years.
The IRS annually adjusts the dollar amounts listed above
according to cost-of-living increases. For the most current
amounts, call Putnam Retirement Plan Services at 1-800-662-0019.
any Employee who is not a Key Employee is a Non-Key Employee.
Q-28. What are the consequences if my Plan is Top-Heavy? (Item
10)
A-28. As explained in item 10 of your Plan Agreement, for any
Plan Year in which your Plan is top-heavy, each Non-Key Employee
who is employed on the last day of the Plan Year must have
allocated to his account an Employer Contribution equal to the
lesser of:
(1) 3% of his Earnings, or
(2) the highest percentage of Earnings allocated to any Key
Employee (including the Key Employees' Elective Deferrals, if
any).
See the Top-Heavy Worksheet contained in a separate booklet for a
detailed explanation.
Q-29. Does this mean the contribution rules of my Plan may
change form year to year, depending on whether it is top-heavy?
A-29. Yes, unless you design the Plan to operate as though it is
always top-heavy, as described in Q&A-24.
VII. Plan Administration
Q-30. Whom should I appoint to be my Plan Administrator? (Item
11)
A-30. The person or entity you appoint as Plan Administrator
bears legal responsibility for the operation of your Plan. A
plan's administrator is a "fiduciary" under federal law, and is
therefore subject to duties of prudence and loyalty to the Plan
when acting as Plan Administrator. Frequently, the business that
adopts a Plan acts in this capacity, although you may instead
name a committee or individual by resolution or vote of the board
of directors.
The Plan Administrator has authority to interpret the provisions
of the Plan and apply them to specific situations, a such as
whether an Employee has become eligible to participate. All
decisions of the Plan Administrator must follow the written rules
of the Plan and must apply uniformly to all Participants in
similar circumstances.
Q-31. Do I have to obtain a special fidelity bond from an
insurance company for my Plan?
A-31. Yes, federal law requires a bond insuring the Plan against
any fraud or dishonesty which may be committed by you or any of
your officers or Employees who have access to the Plan's assets.
Often the bond coverage can be obtained as a rider to your
existing business insurance.
Q-32. Should I submit my Plan to the Internal Revenue Service
for a determination letter?
A-32. The Internal Revenue Service has issued a favorable
opinion letter as to the form of the Putnam Basic Plan Document,
Plan Agreement #001, and Plan Agreement #002. This letter shows
that Putnam's plan documents include all the terms required to
qualify for tax-favored treatment under Section 401(a) of the
Internal Revenue Code (see Q&A-1). You do not need to submit
your Putnam Plan to the Internal Revenue Service, provided that:
(1) you make only the choices presented in the Plan Agreement and
do not modify the Plan in any other way; and
(2) your business does not now have, and never has had, any other
plan except for a Putnam paired plan, as explained in Q&A-33.
Note: if you adopt a Putnam Plan as an amendment to an existing
plan of the same type (profit sharing or money purchase), the
existing plan is not an "other" plan for this purpose.
If you now maintain or you have ever maintained any other plan
except your Putnam Plan or a Putnam paired plan, you must file
IRS Form 5307, "Application for Determination for Adopters of
Master or Prototype, Regional Prototype or Volume Submitter
Plans," with the Internal Revenue Service no later than the last
day of your first Plan Year that begins after December 31, 1991.
Please keep in mind that, even if you take the above steps,
Putnam's opinion letter and your Plan's own determination letter
do not control whether or not your Plan complies in operation
with the Internal Revenue Code requirements described in the
Putnam Basic Plan Document and Plan Agreement. Compliance in
operation is your responsibility. We have prepared these
Questions and Answers to assist you, but there is no substitute
for individual attention to your particular situation.
Therefore, we strongly encourage you to consult with your legal
and tax advisors.
Q-33. What are Putnam paired plans?
A-33. Putnam paired plans are specially designed so that you can
adopt both a Profit Sharing Plan and a Money Purchase Pension
Plan, and not be required to submit either Putnam plan to the
Internal Revenue Service for a determination letter. A Putnam
Standard Money Purchase Pension Plan may be paired with either a
Putnam Standard Profit Sharing Plan (Keogh) or a Putnam Standard
Profit Sharing and 401(k) Plan. Only one of two paired plans may
be integrated with Social Security. If paired plans are
top-heavy, the top-heavy minimum contributions will be made in
the Money Purchase Pension Plan.
You might choose to adopt paired plans if you want to provide a
minimum contribution every year (such as 5% of Earnings), but
you also want to have the flexibility of making contributions
greater than 15% of Earnings when your business has an especially
profitable year. For example, if you adopt a Money Purchase
Pension Plan with an annual contribution equal to 10% of Earnings
and a Profit Sharing Plan with a discretionary contribution that
varies from year to year, your business could contribute and
deduct 10% of Earnings to the Money Purchase Pension Plan in any
year regardless of profits or losses, but could also contribute
and deduct up to 25% of Earnings in a profitable year (10% in the
Money Purchase Pension Plan and 15% in the Profit Sharing Plan).
Alternatively, you could use paired plans in order to have both a
fixed rate of annual employer contributions (in a Money Purchase
Pension Plan) and permit optional 401(k) contributions (in a
Profit Sharing and 401(k) Plan).
<PAGE>
Part VIII. Glossary of Terms
Account: All of a Participant s accounts. Basic Plan Document.
ADP Test: A test limiting the Elective Deferrals that may be
made on behalf of HCEs. (BPD5.6)
Affiliated Employer: A member of a controlled group of
corporations, or trades or businesses under common control, or an
affiliated service group, with your business. (BPD2.2)
Annual Additions: All of the following: Elective Deferrals,
Employer Contributions, Qualified Matching Contributions, and
Qualified Nonelective Contributions. (BPD Article 6)
Actual Deferral Percentage Test: See ADP Test.
Compensation: Whatever amount you designate in item 4. (BPD2.8)
Earnings: Compensation of an employee or earned income of a
self-employed worker, as limited (for 1994) to $150,000. Call
Putnam Retirement Plan Services 1-800-662-0019 for the current
limit. (BPD2.13)
Elective Deferrals: Before-tax contributions made pursuant to an
Employee s salary reduction agreement, according to the terms you
select in item 12.A of your Plan Agreement. (BPD2.54)
Eligibility Period: The 12-month periods beginning on an
Employees first day of work and anniversaries of that date.
(BPD2.15)
Employee: An individual who performs services for your business.
(BPD2.16)
Employer Contributions: Contributions made pursuant to item 5 of
your Plan Agreement. (BPD2.18)
ERISA: The Employee Retirement Income Security Act of 1974, a
federal law governing employee benefits, as amended from time to
time. (BPD2.19)
Family Member: An Employees spouse, children, grandchildren,
parents or grandparents, and the spouse of an Employee s child or
grandchild.
A Family Member of an Employee who is one of the 10 highest paid
Employees or is a 5% owner is not considered separately from the
Employee for purposes of determining who are HCEs. (BPD2.58)
Fidelity Bond: A bond, obtained from an insurance company, that
protects the Plan against loss from the dishonesty of persons who
handle contributions or distributions.
Gross Earnings: Earnings plus Elective Deferrals plus any other
pre-tax contributions to a cafeteria (flexible compensation)
plan, SARSEP or 403(b) plan.
Highly Compensated Employee (HCE): Generally, one who:
Received more than $99,000 in Gross Earnings in the 1994 Plan
Year or $96,368 the previous Plan Year.
Received more than $66,000 in Gross Earnings in the 1994 Plan
Year or $64,245 the previous Plan Year, and was in the top-paid
20% of your Employees.
Received more than $59,400 in Gross Earnings in the 1994 Plan
Year or $57,821 the previous Plan Year, and acted as an officer
of your business.
Owned at least a 5% interest in your business in the 1994 or 1993
Plan Year.
These compensation limits are adjusted annually. Please call
Putnam Retirement Plan Services at 1-800-662-0019 for the current
limits.
Hour of Service: Generally, any hour for which an Employee is
paid or entitled to payment. (BPD2.22)
Integration Level: The level of Earnings selected in item 5.
Participants who earn in excess of the Integration Level receive
an extra share of Employer Contributions. (BPD2.24)
Key Employee: Generally, an Employee who during the current Plan
Year falls into one of the following categories or was a Key
Employee during any of the previous four years:
Received more than $59,400 in Gross Earnings and acted as an
officer of the business.
Received more than $30,000 in Gross Earnings and was one of 10
Employees who owned the largest employee-owned interests in your
business.
Owned at least a 5% interest in your business.
Received more than $150,000 in Gross Earnings and owned at least
a 1% interest in your business. (BPD 15.2(a))
These compensation limits are adjusted annually. Please call
Putnam Retirement Plan Services at 1-800-345-4000 for the current
limits.
Non-Key Employee: An Employee who is not a Key Employee.
(BPD15.2(a))
Officer: For both corporate and non-corporate entities, officer
includes any person who performs officer-like functions.
Participant: An Employee who has satisfied the eligibility
requirements specified in item 3 of your Plan Agreement.
(BPD2.32)
Plan: Your Putnam Profit Sharing Plan (Keogh), Putnam Profit
Sharing and 401(k) Plan or Putnam Money Purchase Pension Plan
(Keogh). (BPD2.34)
Plan Administrator: The entity you appoint in item 11. The Plan
Administrator has responsibility for enforcing the terms of the
Plan. (Q&A-29; BPD2.35 and 16.1)
Plan Year: Your Plans 12-month reporting year, as selected in
item 2.A of your Plan Agreement. (BPD2.37)
Qualified Matching Contributions: Contributions made pursuant to
item 12.B. (BPD2.60)
Qualified Nonelective Contributions: Contributions made pursuant
to item 12.C. (BPD2.62)
Top-Heavy Plan: A plan subject to special contribution rules
because Key Employees Accounts hold 60% or more of Plan assets.
(BPD15.3)
Top-Heavy Ratio: The ratio of Key Employees Account balances to
total assets of the Plan, used to determine whether a plan is
top-heavy. (BPD15(c))
Wage Base: The maximum amount considered as wages for purposes
of Social Security (FICA) tax, as in effect on the first day of
the Plan Year. (BPD2.46)
<PAGE>
DRAFT OF 10/15/93
PUTNAM PROFIT SHARING AND 401(K) PLAN
PLAN AGREEMENT #001
This is the Plan Agreement for a Putnam prototype profit sharing
plan with optional Section 401(k) provisions. Please consult a
tax or legal advisor and review the entire form before you sign
it. If you fail to fill out this Putnam Plan Agreement properly,
the Plan may be disqualified. You can get further information to
help you complete the Plan Agreement from your investment dealer,
or from Putnam at:
Putnam Dedicated Corporate Services
One Adams Place E2B
Quincy, MA 02169
Phone: 1-800-752-9894
* * * * *
By executing this Plan Agreement, the Employer establishes a
profit sharing plan and trust upon the terms and conditions of
Putnam Basic Plan Document #05, as supplemented and modified by
the provisions elected by the Employer in this Plan Agreement.
This Plan Agreement must be accepted by Putnam in order for the
Employer to receive future amendments to the Putnam Profit
Sharing and 401(k) Plan.
* * * * *
All Employers complete items 1-13 below. Employers who wish to
adopt Section 401(k) provisions also complete item 14.
1. Business Information. The Employer adopting this Plan
is:
a. Business Name: ____________________________________
b. Business Address: _____________________________
________________________SIC Code: _______
_______________________________
Person for Putnam to Contact: __________________________
Phone: __________________________
c. Federal Tax Identification Number: __________________
<PAGE>
d. Form of Organization (check one):
_____ Sole proprietorship _____ Corporation
_____ Partnership _____ S Corporation
e. Taxable Year of Business:
______ Calendar Year
______ Fiscal year ending on _______________________
2. Plan Information.
a. Plan Year. Check one:
_____ The Plan Year will be the
same as the Taxable Year of
the Business shown in 1.E.
above. If the Taxable Year
of the Business changes, the
Plan Year will change
accordingly.
_____ The Plan Year will be the period of 12
months beginning on the first day of
__________________________ (month) and
ending on the last day of
__________________________ (month).
The Plan Year will also be your Plan's Limitation
Year for purposes of the contribution limitation
rules in Article 6 of the Plan.
If your Plan Year is the calendar year, do you
wish to make the "calendar year election" for
identifying your Highly Compensated Employees?
_____ Yes
_____ No
b. Effective Date of Adoption of Plan.
Are you adopting this Plan to replace an existing plan?
_____ Yes
_____ No
If you answered Yes in 2.B. above, the Effective Date
of your adoption of this Plan will be the first day of
the current Plan Year. Please complete the following:
<PAGE>
____________________________________________________________
Name of the plan you are replacing
____________________________________________________________
Original Effective Date of the plan you are replacing
If you answered No in 2.B. above, the Effective Date of
your adoption of this Plan will be the day you select
below (not before the first day of the current Plan
Year, and not before the day your Business began).
The Effective Date is: _______________________
month/day/year
3. Eligibility for Plan Participation (Plan Section 3.1).
Employees will be eligible to participate in the Plan
when they complete the requirements you select in A, B
and C below.
a. Classes of Eligible Employees. The Plan requires
coverage of all classes of employees of the
Employer and any Affiliated Employer, except for
union employees and nonresident aliens without
U.S.-source income. The general rules of the
Plan exclude employees in those two groups, but
if you want employees in one or both categories
to be eligible for your Plan, check the
appropriate space below.
The following employees will be eligible to participate
in the Plan:
_____ Members of the following collective
bargaining unit(s) (give names of unions):
________________________________________________________________
________________________________________________________________
________________________________________________________________
_____ Nonresident aliens with no U.S.-source
income
b. Age Requirement (check and complete one):
_____ No minimum age required for participation
_____ Employees must reach age __ (not over 21) to
participate
<PAGE>
c. Service Requirements.
i. To become eligible, an employee must
complete (choose one):
_____ a. No minimum service required. Skip
the rest of this part C.
_____ b. One 6-month Eligibility Period
_____ c. One 12-month Eligibility Period
_____ d. Two 12-month Eligibility Periods
(may not be chosen if you adopt
either Section 401(k) provisions
under item 14 or a vesting schedule
other than the first choice under
item 8.A, which provides for 100%
full and immediate vesting).
ii. A 6-month Eligibility Period is a 6 month
period beginning either on an employee's
first day of work with the Employer, or on
the date 6 months following the employee's
first day of work and anniversaries of those
dates. A 12-month Eligibility Period is the
12-month period beginning on an employee's
first day of work with the Employer, and
anniversaries of that date. If the Employer
acquires a business, will the Eligibility
Period for employees of the acquired
business be the 12-month period beginning on
the first day of work for the acquired
business and anniversaries of that date (or
the 6 month period beginning on the first
day of work for the acquired business, the
date 6 months following the first day of
work and anniversaries of those dates, if
applicable)?
_____ Yes
_____ No
<PAGE>
iii.
a. To receive credit for a 6-month Eligibility
Period, an employee must complete during it
at least:
_____ 500 Hours of Service
_____ _____________ Hours of Service
(under 500)
Note: If you adopt a 6-month Eligibility Period,
in any event, an employee will automatically
receive credit for the Eligibility Period if the
employee completes at least 1,000 Hours of
Service during a 12-month consecutive month
period following the first day of work.
b. To receive credit for a 12-month Eligibility
Period, an employee must complete during it
at least:
_____ 1,000 Hours of Service
_____ _____________ Hours of Service
(under 1,000)
iv. Hours of Service will be credited to
employees by the following method (check
one):
_____ a. Actual hours for which an employee
is paid
_____ b. Any employee who has one actual
paid hour in the following period
will be credited with the number of
Hours of Service indicated (check
one):
_____ Day (10 Hours of Service)
_____ Week (45 Hours of Service)
_____ Semi-monthly payroll period
(95 Hours of Service)
_____ Month (190 Hours of Service)
Note: If you are adopting this Plan to replace an existing plan,
employees will be credited under this Plan with all service
credited to them under the plan you are replacing.
v. Entry Dates. Each Employee in an eligible
class who completes the age and service
requirements specified above will begin to
participate in the Plan on (check one):
_____ The first day of the month in which he
fulfills the requirements
_____ The first of the following dates
occurring after he fulfills the
requirements (or, if earlier, the first
day of the first Plan Year that begins
after the date he fulfills the
requirements) (check one):
_____ The first day of any month (monthly).
_____ The first day of the first, fourth,
seventh and tenth months in a Plan Year
(quarterly).
_____ The first day of the first month and
the seventh month in a Plan Year
(semiannually).
d. (For New Plans Only) Will all Employees be
required to meet the age and service requirements
specified in B and C above?
_____ Yes
_____ No; all Employees on the Effective Date will
be eligible as of the Effective Date, even
if they have not met the age and service
requirements.
4. Compensation (Plan Section 2.8). Compensation for
purposes of the Plan will be the amount of the
following that is actually paid by your Business to an
employee during the Plan Year (check one):
_____ Form W-2 earnings as defined in Section 2.8 of
the Plan
_____ Form W-2 earnings as defined in Section 2.8 of
the Plan, plus any amounts withheld from the
employee under a 401(k) plan, cafeteria plan,
SARSEP, tax sheltered 403(b) arrangement, or
Code Section 457 deferred compensation plan, or
contributions described in Code Section 414(h)(2)
that are picked up by a governmental employer
<PAGE>
_____ All compensation included in the definition of
Code Section 415 Compensation in Section 6.5(b)
of the Plan
_____ All compensation included in the definition of
Code Section 415 Compensation in Section 6.5(b)
of the Plan, plus any amounts withheld from the
employee under a 401(k) plan, cafeteria plan,
SARSEP, tax sheltered 403(b) arrangement, or Code
Section 457 deferred compensation plan, or
contributions described in Code Section 414(h)(2)
that are picked up by a governmental employer
5. Contributions (Plan Sections 4.1 - 4.3).
a. Profit Limitation. Will Employer contributions
to the Plan be limited to the current and
accumulated profits of your Business? Check one:
_____ Yes
_____ No
If you will make contributions only under the Section
401(k) provisions in item 14 of this Plan Agreement,
skip the rest of this part 5.
b. Amount. The Employer will contribute to the Plan
for each Plan Year (check one):
_____ An amount chosen by the Employer from year
to year
______ ____% of the Earnings of all Qualified
Participants for the Plan Year
If you checked (2) above, will Forfeitures for a Plan
Year be applied to reduce the amount of the
contribution otherwise required?
_____ Yes
_____ No
If you check No, Forfeitures will be allocated as
though they were additional Employer Contributions.
<PAGE>
c. Allocations to Participants
1. Allocation to Qualified Participants. Any
Employee who has met the eligibility requirements
in item 3 of this Plan Agreement is a Qualified
Participant unless, for reasons other than his
death or Retirement, he is not an active Employee
on the last day of the Plan Year, and he is not
credited with more than 500 Hours of Service in
the Plan Year.
2. Integration with Social Security. Contributions
under paragraph B will be shared by Qualified
Participants in proportion to their Earnings,
unless you check one of the spaces below.
_____ Each Qualified Participant's share will be a
uniform dollar amount.
_____ Contributions will be shared according to
the Top-Heavy Integration Formula in Section
4.2(d)(1) of the Basic Plan Document in
every Plan Year, whether or not the Plan if
top-heavy.
_____ Contributions will be shared according to
the Top-Heavy Integration Formula in Section
4.2(d)(1) of the Basic Plan Document only in
Plan Years in which the Plan is top-heavy.
In all other Plan Years, contributions will
be shared according to the Non-Top-Heavy
Integration Formula in Section 4.2(d)(2) of
the Basic Plan Document.
3. Integration Level. (Complete only if you have
elected in 5C2 to integrate your Plan with Social
Security). The Integration Level will be (check
one):
____ The Social Security Wage Base in effect at the
beginning of the Plan Year.
____ __% (not more than 100%) of the Social Security
Wage Base in effect at the beginning of the Plan
Year.
____ $__________ (not more than the Social Security
Wage Base).
D. Participant Contributions. Will your Plan allow
Participants to make after-tax contributions?
Yes
No
6. Investments (Plan Sections 13.2 and 13.3). The
Employer selects in part A below the Investment
Products that will be available under the Plan (in
addition to life insurance policies selected under Plan
Article 14, if any). All Investment Products must be
sponsored, underwritten, managed or expressly agreed to
in writing by Putnam. From the group of available
Investment Products selected by the Employer, each
Participant chooses the investments for his own
Accounts unless the Employer elects differently in B
below.
a. Available Investment Products (Plan Section
13.2). The following investments will be
available under the Plan (check one):
_____ The group of Putnam funds selected by the
Employer and communicated to Participants in
writing. A current list of the funds
selected by the Employer from time to time
shall be kept with the records of the Plan.
The initial list of funds is as follows:
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
______ Putnam Fiduciary Trust Company GIC Fund
______ Other Investment Products (as defined in
Section 2.26 of the Plan)
In the event that there is any amount in the Trust Fund for which
no instructions or unclear instructions are delivered, it will be
invested in the default option selected by the Employer in its
Service Agreement with Putnam (or if the Employer makes no such
selection, in Putnam Daily Dividend Trust) until instructions are
received in good order, and the Employer will be deemed to have
selected the option indicated in its Service Agreement with
Putnam (or if none, Putnam Daily Dividend Trust) as an available
Investment Product for that purpose.
b. Instructions (Plan Section 13.3). Investment
instructions for amounts held under the Plan
generally will be given by each Participant for
his own Accounts and delivered to Putnam as
indicated in the Service Agreement between Putnam
and the Employer. Check below only if the
Employer will make investment decisions under the
Plan.
_____ The Employer will make investment decisions.
<PAGE>
c. Changes. Investment instructions may be changed
(check one):
_____ on any Valuation Date (daily)
_____ on the first day of any month (monthly)
_____ on the first day of the first, fourth,
seventh and tenth months in a Plan Year
(quarterly)
d. Voting of Employer Stock. Section 13.8 of the
Plan provides that Employer Stock held as an
investment under the Plan will be voted in
accordance with the Employer's instructions
unless the Employer elects that Participants will
direct the voting of Employer Stock to the extent
described in Section 13.8. Check below only if
Participants will direct the voting of Employer
Stock.
_____ Participants are hereby appointed named
fiduciaries for the purpose of voting of
Employer Stock in accordance with Section
13.8.
7. Distributions and Withdrawals.
a. Retirement Distributions.
i. Normal Retirement Age (Plan Section 7.1).
Normal retirement age will be _______ (not
over the lesser of 65 or any mandatory
retirement age enforced by the Employer).
ii. Early Retirement (Plan Section 7.1). Check
and complete the item below only if you want
Participants to become fully vested upon
fulfilling specified age and service
requirements before reaching normal
retirement age:
_____ Early retirement will be permitted at
age ____ with at least ________ Years
of Service.
<PAGE>
iii. Annuities (Plan Section 9.3). Will your
Plan permit a Participant to select a life
annuity form of distribution? You must
check Yes if this Plan replaces an existing
Plan that permits distributions in life
annuity form. Check one:
_____ Yes
_____ No
b. Hardship Distributions (Plan Section 12.2). Will
your Plan permit hardship distributions from
Employer Contribution Accounts? You must check
Yes if this Plan replaces an existing Plan that
permits hardship distributions. Check one:
_____ Yes
_____ No
c. Withdrawals after Age 59 1/2 (Plan Section 12.3).
Will your Plan permit employees over age 59 1/2 to
withdraw amounts upon request? You must check
Yes if this Plan replaces an existing Plan that
permits withdrawals after age 59 1/2. Check one:
_____ Yes
_____ No
8. Vesting.
a. Time of Vesting. The provision checked below
will determine a Participant's vested percentage
in his Employer Contribution Account and, if you
adopt the Section 401(k) provisions in item 14
and will make Employer Matching Contributions,
his Employer Matching Contribution Account (check
one):
_____ 100% vesting immediately upon participation
in the Plan. If you check this option, skip
the rest of this part 8.
_____ Six Year Graded Schedule:
Vested Percentage 20% 40% 60% 80% 100%
Years of Service 2 3 4 5 6
<PAGE>
_____ Three Year Cliff Schedule:
Vested Percentage 0% 100%
Years of Service 0-2 3
_____ Other Schedule (must be at least as
favorable as Six Year Graded Schedule or
Three Year Cliff Schedule):
Vested Percentage __% __% __% __% __%
Years of Service ___ ___ ___ ___ ___
b. Service. Skip this part B if your Plan will
include all of an employee's service in
determining his Years of Service for vesting.
Years of Service for vesting will exclude (check one or
more):
_____ Service before the Effective Date of the
Plan, if this is a new plan, or service
before the effective date of your existing
plan, if this Plan replaces an existing plan
_____ Service before the Plan Year in which an
employee reached age 18
_____ Service for a business acquired by the
Employer, before the date of acquisition
c. Hours of Service. The number of Hours of Service
required for crediting a Year of Service for
vesting will be (check one):
_____ 1,000 Hours of Service
_____ ___________________ Hours of Service
(under 1,000)
d. Year of Service Measuring Period (Plan Section
2.49). The periods of 12 months used for
measuring Years of Service will be (check one):
_____ Plan Years
_____ 12-month Eligibility Periods
Note: If you are adopting this Plan to replace an existing plan,
employees will be credited under this Plan with all service
credited to them under the plan you are replacing.
<PAGE>
9. Loans. Will your Plan permit loans to employees from
their Accounts?
_____ Yes
_____ No
10. Automatic Distribution of Small Accounts (Plan Section
9.1). Will your Plan automatically distribute vested
account balances not exceeding $3,500, within 60 days
after the end of the Plan Year in which a Participant
separates from employment?
_____ Yes
_____ No
Note: The time for distribution cannot be left to the discretion
of the Employer or the Plan Administrator. If you check No
above, small accounts will be distributable at the time selected
by the Participant.
11. Top-Heavy Minimum Contributions (Plan Section 15.3).
For any Plan Year in which the Plan is top-heavy, you
must provide for each Participant who is a non-key
employee and who is employed on the last day of the
Plan Year an allocation equal to 3% of his Earnings (or
if less, the highest percentage allocated to any key
employee). Neither Elective Deferrals, nor Employer
Matching Contributions nor Qualified Matching
Contributions for a non-key employee may be taken into
account for purposes of this requirement.
Skip paragraphs A and B below if you do not maintain any
other qualified plan in addition to this Plan.
a. If you maintain another qualified plan in
addition to this Plan, specify below whether a
non-key employee who participates in both plans
will receive a top-heavy minimum contribution (or
benefit) in this Plan or the other plan (check
one):
The top-heavy minimum contribution (or benefit) for
non-key employees participating both in this Plan and
another qualified plan maintained by the Employer will
be provided in:
_____ This Plan
_____ The plan named here: ______________________
<PAGE>
b. (Skip this paragraph if you do not maintain a
defined benefit plan.) If you maintain a defined
benefit plan in addition to this Plan, and the
Top-Heavy Ratio (as defined in Plan Section
15.2(c)) for the combined plans is between 60%
and 90%, you may elect to provide an increased
minimum allocation or benefit pursuant to Plan
Section 15.4. Specify your election by
completing the statement below:
The Employer will provide an increased (specify
contribution or benefit)
__________________________________ in its (specify
defined contribution or defined benefit)
______________________ plan as required under Plan
Section 15.4.
12. Other Plans. Skip this item 12 if the Plan is the only
qualified plan your Business has ever had. You must
complete this section 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.
The Plan and your other plan(s) combined will meet the
contribution limitation rules in Article 6 of the Plan as
you specify below:
a. If a Participant in the Plan is covered under
another qualified defined contribution plan
maintained by your Business, other than a master
or prototype plan (check one):
_____ The provisions of Section 6.2 of the Plan
will apply as if the other plan were a
master or prototype plan.
_____ The plans will limit total annual additions
to the maximum permissible amount, and will
properly reduce any excess amounts, in the
manner you describe below.
_________________________________________________________________
_________________________________________________________________
B. If a Participant in the Plan is or has ever been a
participant in a defined benefit plan maintained by
your Business, the plans will meet the limits of
Article 6 in the manner you describe below:
_________________________________________________________________
_________________________________________________________________
Note: Your description under A or B above must not leave the
selection of a method to your discretion from year to year.
13. Administration.
a. Plan Administrator (Plan Section 16.1). You may
appoint a person or a committee to serve as Plan
Administrator. You may remove and replace anyone
you have appointed, and anyone you have appointed
may resign, without the need to amend this Plan
Agreement, provided that you notify Participants
in writing of any such change. If you do not
appoint a Plan Administrator, the Plan provides
that the Employer will be the Plan
Administrator.
The initial Plan Administrator will be (check one):
_____ This person:
_______________________________
_____ A committee composed of these people:
________________________________________________________________
________________________________________________________________
________________________________________________________________
b. Recordkeeper (Plan Section 16.3). Unless Putnam
expressly permits otherwise, you must appoint
Putnam as Recordkeeper to perform certain routine
services determined upon execution of a written
Service Agreement between Putnam and you.
The initial Recordkeeper will be:
_______________________________________________________
Name
_______________________________________________________
Address
Complete item 14 below if your Plan will allow employees to elect
pre-tax contributions under Section 401(k) of the Code.
14. Section 401(k) Plan Provisions (Plan Article 5).
a. Elective Deferrals (Plan Section 5.2).
i. A Participant may make Elective Deferrals in
an amount not to exceed (check one):
_____ (a) ___% of his Earnings
_____ (b) $_______ (specify a dollar
amount) for each payroll
period
Note: Elective Deferrals may not exceed the annual dollar limit
under Section 402(g) of the Internal Revenue Code.
ii. A Participant may begin to make Elective
Deferrals, or change the amount of his
Elective Deferrals, as of the following
dates (check one):
_____ First business day of each month
(monthly).
_____ First business day of the first,
fourth, seventh and tenth months of the
Plan Year (quarterly).
_____ First business day of the first and
seventh months of the Plan Year
(semiannually).
_____ First business day of the Plan Year
only (annually).
iii. May Participants make Elective Deferrals of
bonuses?
_____ Yes
_____ No
Note: You may choose to make Employer Matching Contributions or
Qualified Matching Contributions, or neither, or both. Qualified
Matching Contributions are always fully vested and cannot be
distributed from the Plan before a Participant reaches age 59 1/2 or
leaves employment. They will be used, to the extent needed, to
help the Plan pass the ADP test explained on page __ of the Q &
As. Employer Matching Contributions are subject to the vesting
schedule elected in item 8 of this Plan Agreement, and can be
withdrawn during employment in the event of financial hardship
(as defined in Section 12.2 of the Plan) if you so elect in part
F below.
b. Employer Matching Contributions (Plan Section
5.8). Skip this part B if you will not make
Employer Matching Contributions.
i. The Employer will contribute and will
allocate to each Participant's Employer
Matching Account an amount equal to:
(Check the provision(s) desired, and fill in the
% blank(s) in each provision you check. If you
wish to determine the amount of Employer Matching
Contributions from year to year instead of
specifying a fixed percentage, write "V" for
variable in the % blank at the beginning of each
provision you check.)
_____ ___% of Elective Deferrals
_____ ___% of Elective Deferrals that do not
exceed ___% of Earnings
_____ ___% of Elective Deferrals that do not
exceed ___% of Earnings plus
___% of Elective Deferrals that do not
exceed ___% of Earnings
_____ ___% of Elective Deferrals that do not
exceed ___% of Earnings plus
___% of Elective Deferrals that do not
exceed ___% of Earnings plus
___% of Elective Deferrals that do not
exceed ___% of Earnings
ii. Will forfeited Employer Matching
Contributions be applied to reduce the total
contribution specified in B.(1) above?
_____ Yes
_____ No
If you check No, forfeited Employer Matching
Contributions will be allocated as though they
were additional Employer Matching Contributions.
c. Qualified Matching Contributions (Plan Section
2.58). Skip this part C if you will not make
Qualified Matching Contributions.
i. Qualified Matching Contributions will be
made with respect to (check one):
_____ Elective Deferrals by all Participants
_____ Elective Deferrals only by Non-Highly
Compensated Participants
ii. The amount of Qualified Matching
Contributions made with respect to a
Participant will be:
(Check the provision desired and fill in the %
blank(s) in the provision you check. If you wish
to determine the amount of Qualified Matching
Contributions from year to year instead of
specifying a fixed percentage, write "V" for
variable in the % blank at the beginning of each
provision you check.)
_____ ___% of his Elective Deferrals
_____ ___% of his Elective Deferrals that do
not exceed ___% of his Earnings
_____ ___% of his Elective Deferrals that do
not exceed ___% of Earnings, plus ___%
of Elective Deferrals that do not
exceed ___% of Earnings
_____ ___% of his Earnings
d. Qualified Nonelective Contributions (Plan Section
2.60): Skip this part D if you will not make
Qualified Nonelective Contributions.
i. Qualified Nonelective Contributions will be
made on behalf of (check one):
_____ All Participants
_____ Only Participants who are not Highly
Compensated Employees
ii. The amount of Qualified Nonelective
Contributions for a Plan Year will be (check
one):
_____ ___% (not over 15%) of the Earnings of
Participants on whose behalf Qualified
Nonelective Contributions are made
_____ An amount determined by the Employer
from year to year, to be shared in
proportion to Earnings by Participants
on whose behalf Qualified Nonelective
Contributions are made
Note: Qualified Nonelective Contributions will be used, to the
extent needed, to help the Plan pass the ADP test, explained on
page __ of the Q & As.
e. ACP Test. Every plan that has after-tax
Participant Contributions, Employer Matching
Contributions or Qualified Matching Contributions
must pass an annual test called the ACP test,
which is explained on page __ of the Q & As.
Elective Deferrals and Qualified Nonelective
Contributions will be used to help the Plan pass
the ACP test, to the extent needed.
f. Hardship Distributions from 401(k) Accounts (Plan
Sections 12.2 and 5.14).
<PAGE>
i. Will your Plan permit hardship distributions
from Elective Deferral Accounts? Check one:
_____ Yes
_____ No
ii. If your Plan has Employer Matching
Contributions, will it permit hardship
distributions from Employer Matching
Accounts? You must check Yes if this Plan
replaces an existing plan that permits
hardship distributions. Check one:
_____ Yes
_____ No
15. Reliance on Opinion Letter. If you ever maintained or
you later adopt any plan (including 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, you may not rely on
an opinion letter issued to Putnam by the National
Office of the Internal Revenue Service as evidence that
the Plan is qualified under Section 401 of the
Internal Revenue Code. If you maintain or adopt
multiple plans, in order to obtain reliance with
respect to plan qualification of the Plan, you must
receive a determination letter from the appropriate Key
District Office of Internal Revenue. Putnam will
prepare an application for such a letter upon your
request at a fee agreed upon by the parties.
The Employer 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 Code unless the terms of the plan, as herein adopted or
amended, that pertain to the requirements of Section
401(a)(4), 401(a)(17), 401(1), 401(a)(5), 410(b) and 414(s)
of the Code, as amended by the Tax Reform Act of 1986 or
later laws, (a) are made effective retroactively to the
first day of the first Year beginning after December 31,
1988 (or such later date on which these requirements first
become effective with respect to this plan); or (b) are made
effective no later than the first day on which the Employer
is no longer entitled, under regulations, to rely on a
reasonable, good faith interpretation of these requirements,
and the prior provisions of the plan constitute such an
interpretation.
Putnam will inform you of all amendments it makes to the
prototype plan. If Putnam ever discontinues or abandons the
prototype plan, Putnam will inform you. This Plan Agreement
#001 may be used only in conjunction with Putnam's basic
plan document #05.
<PAGE>
* * * * *
EMPLOYER'S ADOPTION OF PUTNAM
PROFIT SHARING AND 401(k) PLAN
The Employer named below hereby adopts a PUTNAM PROFIT SHARING
AND 401(k) PLAN, and appoints __________________ to serve as
Trustee of the Plan. (Note: you may appoint a trustee other than
Putnam Fiduciary Trust Company only with Putnam's express
permission.) The Employer acknowledges that it has received
copies of the current prospectus for each Investment Product
available under the Plan, and represents that it will deliver
copies of the then current prospectus for each such Investment
Product to each Participant before each occasion on which the
Participant makes an investment instruction as to his Account.
The Employer further acknowledges that the Plan will be
acknowledged by Putnam as a Putnam Profit Sharing and 401(k) Plan
only upon Putnam's acceptance of this Plan Agreement.
Employer signature(s) to adopt Plan: Date of
signature:
_________________________________________________________________
_________________________________________________________________
Please print name(s) of authorized person(s) signing above:
_________________________________________________________________
Phone:____________________
_________________________________________________________________
Phone:____________________
A new Plan must be signed by the last day of the Plan Year in
which the Plan is to be effective.
INVESTMENT DEALER INFORMATION
Firm: _________________________________________________________________
Branch: ________________________________________________________________
Address: _________________________________________________________________
<PAGE>
Registered Representative: ___________________________________
Name
_________________________________________
Phone
<PAGE>
* * * * *
ACCEPTANCE OF TRUSTEE
The Trustee accepts appointment in accordance with the terms and
conditions of the Plan, effective as of the date of execution by
the Employer set forth above.
A. Putnam Fiduciary Trust Company, Trustee
By: _________________________________________________________________
Complete Part B only if you have appointed a Trustee other than
Putnam Fiduciary Trust Company. Note: Putnam may impose an
annual maintenance fee as a condition of its acceptance of this
plan as a Putnam Prototype Profit Sharing and 401(k) Plan.
B. _________________________________, Trustee
By: _________________________________ Trustee's Tax I.D.
Number _______________
(Trustee)
_________________________________________________________________
Address of Trustee
Person for Putnam to Contact: ________________________________
P
h
o
n
e
:
_______________
Complete Part C only if insurance Policies will be purchased
under Article 14 of the Plan (in addition to Putnam Investment
Products).
C. Appointment and Acceptance of Insurance Trustee
1. Appointment to:
_________________________________________________________________
Name of Insurance Trustee
You are hereby designated as Insurance Trustee for Policies to be
held in accordance with the terms and conditions of this Plan and
Trust.
Employer signature to appoint Insurance Trustee:
By:______________________________________________________________
(Authorized Signature)
2. Acceptance as Insurance Trustee is agreed to in accordance
with the terms and conditions of the Plan, effective as of
the date of execution by the Employer as set forth above.
By:_____________________________________ Trustee's Tax I.D.
Number _________________
_________________________________________________________________
Address of Insurance Trustee
Person for Putnam to Contact: ________________________________
Phone: _______________
<PAGE>
* * * * *
ACCEPTANCE BY PUTNAM
Putnam hereby accepts this Employer's Plan as a prototype
established under Putnam Basic Plan Document #05.
Putnam Mutual Funds Corp.
By: ______________________________
<PAGE>
DRAFT OF 10/18/93
PUTNAM MONEY PURCHASE PLAN
PLAN AGREEMENT #002
This is the Plan Agreement for a Putnam prototype money purchase
plan. Please consult a tax or legal advisor and review the
entire form before you sign it. If you fail to fill out this
Putnam Plan Agreement properly, the Plan may be disqualified.
You can get further information to help you complete the Plan
Agreement from your investment dealer, or from Putnam at:
Putnam Dedicated Corporate Services
One Adams Place E2B
Quincy, MA 02169
Phone: 1-800-752-9894
* * * * *
By executing this Plan Agreement, the Employer establishes a
money purchase plan and trust upon the terms and conditions of
Putnam Basic Plan Document #05, as supplemented and modified by
the provisions elected by the Employer in this Plan Agreement.
THIS PLAN AGREEMENT MUST BE ACCEPTED BY PUTNAM IN ORDER FOR THE
EMPLOYER TO RECEIVE FUTURE AMENDMENTS TO THE PUTNAM MONEY
PURCHASE PLAN.
* * * * *
16. Business Information. The Employer adopting this Plan
is:
a. Business Name: ____________________________________
b. Business Address: ______________________________
_______________________________ SIC Code: ______
_______________________________
Person for Putnam to Contact: __________________________
Phone: __________________________
c. Federal Tax Identification Number: _____________
<PAGE>
d. Form of Organization (check one):
_____ Sole proprietorship _____ Corporation
_____ Partnership _____ S Corporation
e. Taxable Year of Business:
______ Calendar Year
______ Fiscal year ending on ________________________
17. Plan Information.
a. Plan Year. Check one:
_____ The Plan Year will be the
same as the Taxable Year of
the Business shown in 1.E.
above. If the Taxable Year
of the Business changes, the
Plan Year will change
accordingly.
_____ The Plan Year will be the period of 12
months beginning on the first day of
__________________________ (month) and
ending on the last day of
__________________________ (month).
The Plan Year will also be your Plan's Limitation
Year for purposes of the contribution limitation
rules in Article 6 of the Plan.
If your Plan Year is the calendar year, do you
wish to make the "calendar year election" for
identifying your Highly Compensated Employees?
_____ Yes
_____ No
b. Effective Date of Adoption of Plan.
Are you adopting this Plan to replace an existing plan?
_____ Yes
_____ No
<PAGE>
If you answered Yes in 2.B. above, the Effective Date
of your adoption of this Plan will be the first day of
the current Plan Year. Please complete the following:
_____________________________________________________________
Name of the plan you are replacing
______________________________________________________________
Original Effective Date of the plan you are replacing
If you answered No in 2.B. above, the Effective Date of
your adoption of this Plan will be the day you select
below (not before the first day of the current Plan
Year, and not before the day your Business began).
The Effective Date is: _______________________
month/day/year
18. Eligibility for Plan Participation (Plan Section 3.1).
Employees will be eligible to participate in the Plan
when they complete the requirements you select in A, B
and C below.
a. Classes of Eligible Employees. The Plan requires
coverage of all classes of employees of the
Employer and any Affiliated Employer, except for
union employees and nonresident aliens without
U.S.-source income. The general rules of the
Plan exclude employees in those two groups, but
if you want employees in one or both categories
to be eligible for your Plan, check the
appropriate space below.
The following employees will be eligible to participate
in the Plan:
_____ Members of the following collective
bargaining unit(s) (give names of unions):
________________________________________________________________
________________________________________________________________
________________________________________________________________
_____ Nonresident aliens with no U.S.-source
income
<PAGE>
b. Age Requirement (check and complete one):
_____ No minimum age required for participation
_____ Employees must reach age __ (not over 21) to
participate
c. Service Requirements.
i. To become eligible, an employee must
complete (choose one):
_____ a. No minimum service required. Skip
the rest of this part C.
_____ b. One 6-month Eligibility Period
_____ c. One 12-month Eligibility Period
_____ d. Two 12-month Eligibility Periods
(may not be chosen if you adopt
either Section 401(k) provisions
under item 14 or a vesting schedule
other than the first choice under
item 8.A, which provides for 100%
full and immediate vesting).
ii. A 6-month Eligibility Period is a 6-month
period beginning either on an employee's
first day of work with the Employer or on
the date 6-months following the employee's
first day of work, and anniversaries of
those dates. A 12-month Eligibility Period
is the 12-month period beginning on an
employee's first day of work with the
Employer, and anniversaries of that date.
If the Employer acquires a business, will
the Eligibility Period for employees of the
acquired business be the 12-month period
beginning on the first day of work for the
acquired business and anniversaries of that
date (or the 6-month period beginning on the
first day of work for the acquired business,
the date 6 months following the first day of
work and anniversaries of those dates, if
applicable)?
_____ Yes
_____ No
<PAGE>
iii.
a. To receive credit for a 6-month Eligibility
Period, an employee must complete during it
at least:
_____ 500 Hours of Service
_____ _____________ Hours of Service
(under 500)
Note: If you adopt a 6-month Eligibility Period,
in any event, an employee will automatically
receive credit for the Eligibility Period if the
employee completes at least 1,000 Hours of
Service during a 12-month consecutive month
period following the first day of work.
b. To receive credit for a 12-month Eligibility
Period, an employee must complete during it
at least:
_____ 1,000 Hours of Service
_____ _____________ Hours of Service
(under 1,000)
iv. Hours of Service will be credited to
employees by the following method (check
one):
_____ a. Actual hours for which an employee
is paid
_____ b. Any employee who has one actual
paid hour in the following period
will be credited with the number of
Hours of Service indicated (check
one):
_____ Day (10 Hours of Service)
_____ Week (45 Hours of Service)
_____ Semi-monthly payroll period
(95 Hours of Service)
_____ Month (190 Hours of Service)
Note: If you are adopting this Plan to replace an existing plan,
employees will be credited under this Plan with all service
credited to them under the plan you are replacing.
<PAGE>
v. Entry Dates. Each Employee in an eligible
class who completes the age and service
requirements specified above will begin to
participate in the Plan on (check one):
_____ The first day of the month in which he
fulfills the requirements.
_____ The first of the following dates
occurring after he fulfills the
requirements (or, if earlier, the first
day of the first Plan Year that begins
after the date he fulfills the
requirements) (check one):
_____ The first day of any month (monthly).
_____ The first day of the first, fourth,
seventh and tenth months in a Plan Year
(quarterly).
_____ The first day of the first month and
the seventh month in a Plan Year
(semiannually).
d. (For New Plans Only) Will all Employees be
required to meet the age and service requirements
specified in B and C above?
_____ Yes
_____ No; all Employees on the Effective Date will
be eligible as of the Effective Date, even
if they have not met the age and service
requirements.
19. Compensation (Plan Section 2.8). Compensation for
purposes of the Plan will be the amount of the
following that is actually paid by your Business to an
employee during the Plan Year (check one):
_____ Form W-2 earnings as defined in Section 2.8 of
the Plan.
_____ Form W-2 earnings as defined in Section 2.8 of
the Plan, plus any amounts withheld from the
employee under a 401(k) plan, cafeteria plan,
SARSEP, tax sheltered 403(b) arrangement, or
Code Section 457 deferred compensation plan, or
contributions described in Code Section 414(h)(2)
that are picked up by a governmental employer.
<PAGE>
_____ All compensation included in the definition of
Code Section 415 Compensation in Section 6.5(b)
of the Plan.
_____ All compensation included in the definition of
Code Section 415 Compensation in Section 6.5(b)
of the Plan, plus any amounts withheld from the
employee under a 401(k) plan, cafeteria plan,
SARSEP, tax sheltered 403(b) arrangement, or Code
Section 457 deferred compensation plan, or
contributions described in Code Section 414(h)(2)
that are picked up by a governmental employer.
20. Contributions (Plan Section 4.3).
a. Amount. The Employer will contribute to the Plan
for each Plan Year this Basic Contribution
Percentage (not more than 25%) ____% of the
Earnings of all Qualified Participants for the
Plan Year.
b. Allocations to Participants
1. Allocation to Qualified Participants. Any
Employee who has met the eligibility requirements
in item 3 of this Plan Agreement is a Qualified
Participant unless, for reasons other than his
death or Retirement, he is not an active Employee
on the last day of the Plan Year, and he is not
credited with more than 500 Hours of Service in
the Plan Year.
2. Integration with Social Security. Contributions
under paragraph B will be shared by Qualified
Participants in proportion to their Earnings,
unless you check the following space to indicate
that your Plan will be integrated with Social
Security, as explained on page 3 of the Qs & As.
The Plan will be integrated with Social Security,
and the Base Contribution Percentage will be ___%
(not less than 3% unless you will perform annual
top-heavy testing for your Plan).
3. Integration Level. (Complete only if you have
elected in 5.B.2. to integrate your Plan with
Social Security). The Integration Level will be
(check one):
____ The Social Security Wage Base in effect at the
beginning of the Plan Year.
<PAGE>
____ __% (not more than 100%) of the Social Security
Wage Base in effect at the beginning of the Plan
Year.
____ $__________ (not more than the Social Security
Wage Base).
c. Participant Contributions. Will your Plan allow
Participants to make after-tax contributions?
Yes
No
21. Investments (Plan Sections 13.2 and 13.3). The
Employer selects in part A below the Investment
Products that will be available under the Plan (in
addition to life insurance policies selected under Plan
Article 14, if any). All Investment Products must be
sponsored, underwritten, managed or expressly agreed to
in writing by Putnam. From the group of available
Investment Products selected by the Employer, each
Participant chooses the investments for his own
Accounts unless the Employer elects differently in B
below.
a. Available Investment Products (Plan Section
13.2). The following investments will be
available under the Plan (check one):
_____ The group of Putnam funds selected by the
Employer and communicated to Participants in
writing. A current list of the funds
selected by the Employer from time to time
shall be kept with the records of the Plan.
The initial list of funds is as follows:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
______ Putnam Fiduciary Trust Company GIC Fund
______ Other Investment Products (as defined in
Section 2.26 of the Plan)
In the event that there is any amount in the Trust Fund for which
no instructions or unclear instructions are delivered, it will be
invested in the default option selected by the Employer in its
Service Agreement with Putnam (or if the Employer makes no such
selection, in Putnam Daily Dividend Trust) until instructions are
received in good order, and the Employer will be deemed to have
selected the option indicated in its Service Agreement with
Putnam (or if none, Putnam Daily Dividend Trust) as an available
Investment Product for that purpose.
b. Instructions (Plan Section 13.3). Investment
instructions for amounts held under the Plan
generally will be given by each Participant for
his own Accounts and delivered to Putnam as
indicated in the Service Agreement between Putnam
and the Employer. Check below only if the
Employer will make investment decisions under the
Plan.
_____ The Employer will make investment decisions.
c. Changes. Investment instructions may be changed
(check one):
_____ on any Valuation Date (daily)
_____ on the first day of any month (monthly)
_____ on the first day of the first, fourth,
seventh and tenth months in a Plan Year
(quarterly)
d. Voting of Employer Stock. Section 13.8 of the
Plan provides that Employer Stock held as an
investment under the Plan will be voted in
accordance with the Employer's instructions
unless the Employer elects that Participants will
direct the voting of Employer Stock to the extent
described in Section 13.8. Check below only if
Participants will direct the voting of Employer
Stock.
_____ Participants are hereby appointed named
fiduciaries for the purpose of voting of
Employer Stock in accordance with Section
13.8.
22. Retirement Age.
a. Normal Retirement Age (Plan Section 7.1). Normal
retirement age will be _______ (not over the
lesser of 65 or any mandatory retirement age
enforced by the Employer).
b. Early Retirement (Plan Section 7.1). Check and
complete the item below only if you want
Participants to become fully vested upon
fulfilling specified age and service requirements
before reaching normal retirement age:
_____ Early retirement will be permitted at
age ____ with at least ________ Years
of Service.
23. Vesting.
a. Time of Vesting. The provision checked below
will determine a Participant's vested percentage
in his Employer Contribution Account.
_____ 100% vesting immediately upon participation
in the Plan. If you check this option, skip
the rest of this part 8.
_____ Six Year Graded Schedule:
Vested Percentage 20% 40% 60% 80% 100%
Years of Service 2 3 4 5 6
_____ Three Year Cliff Schedule:
Vested Percentage 0% 100%
Years of Service 0-2 3
_____ Other Schedule (must be at least as
favorable as Six Year Graded Schedule or
Three Year Cliff Schedule):
Vested Percentage __% __% __% __% __%
Years of Service ___ ___ ___ ___ ___
b. Service. Skip this part B if your Plan will
include all of an employee's service in
determining his Years of Service for vesting.
Years of Service for vesting will exclude (check one or
more):
_____ Service before the Effective Date of the
Plan, if this is a new plan, or service
before the effective date of your existing
plan, if this Plan replaces an existing plan
_____ Service before the Plan Year in which an
employee reached age 18
_____ Service for a business acquired by the
Employer, before the date of acquisition
c. Hours of Service. The number of Hours of Service
required for crediting a Year of Service for
vesting will be (check one):
_____ 1,000 Hours of Service
_____ ___________________ Hours of Service
(under 1,000)
d. Year of Service Measuring Period (Plan Section
2.49). The periods of 12 months used for
measuring Years of Service will be (check one):
_____ Plan Years
_____ 12-month Eligibility Periods
NOTE: IF YOU ARE ADOPTING THIS PLAN TO REPLACE AN EXISTING PLAN,
EMPLOYEES WILL BE CREDITED UNDER THIS PLAN WITH ALL SERVICE
CREDITED TO THEM UNDER THE PLAN YOU ARE REPLACING.
24. Loans. Will your Plan permit loans to employees from
their Accounts?
_____ Yes
_____ No
25. Automatic Distribution of Small Accounts (Plan Section
9.1). Will your Plan automatically distribute vested
account balances not exceeding $3,500, within 60 days
after the end of the Plan Year in which a Participant
separates from employment?
_____ Yes
_____ No
Note: The time for distribution cannot be left to the discretion
of the Employer or the Plan Administrator. If you check No
above, small accounts will be distributable at the time selected
by the Participant.
26. Top-Heavy Minimum Contributions (Plan Section 15.3).
For any Plan Year in which the Plan is top-heavy, you
must provide for each Participant who is a non-key
employee and who is employed on the last day of the
Plan Year an allocation equal to 3% of his Earnings (or
if less, the highest percentage allocated to any key
employee).
Skip paragraphs A and B below if you do not maintain any
other qualified plan in addition to this Plan.
a. If you maintain another qualified plan in
addition to this Plan, specify below whether a
non-key employee who participates in both plans
will receive a top-heavy minimum contribution (or
benefit) in this Plan or the other plan (check
one):
<PAGE>
The top-heavy minimum contribution (or benefit) for
non-key employees participating both in this Plan and
another qualified plan maintained by the Employer will
be provided in:
_____ This Plan (Check this if the other plan is
another Putnam prototype plan.)
_____ The plan named here: ______________________
b. (Skip this paragraph if you do not maintain a
defined benefit plan.) If you maintain a defined
benefit plan in addition to this Plan, and the
Top-Heavy Ratio (as defined in Plan Section
15.2(c)) for the combined plans is between 60%
and 90%, you may elect to provide an increased
minimum allocation or benefit pursuant to Plan
Section 15.4. Specify your election by
completing the statement below:
The Employer will provide an increased (specify
contribution or benefit)
__________________________________ in its (specify
defined contribution or defined benefit)
______________________ plan as required under Plan
Section 15.4.
27. Other Plans. Skip this item 12 if the Plan is the only
qualified plan your Business has ever had. You must
complete this section 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.
The Plan and your other plan(s) combined will meet the
contribution limitation rules in Article 6 of the Plan as
you specify below:
a. If a Participant in the Plan is covered under
another qualified defined contribution plan
maintained by your Business, other than a master
or prototype plan (check one):
_____ The provisions of Section 6.2 of the Plan
will apply as if the other plan were a
master or prototype plan.
_____ The plans will limit total annual additions
to the maximum permissible amount, and will
properly reduce any excess amounts, in the
manner you describe below.
_________________________________________________________________
________________________________________________________________
B. If a Participant in the Plan is or has ever been a
participant in a defined benefit plan maintained by
your Business, the plans will meet the limits of
Article 6 in the manner you describe below:
_________________________________________________________________
________________________________________________________________
NOTE: YOUR DESCRIPTION UNDER A OR B ABOVE MUST NOT LEAVE THE
SELECTION OF A METHOD TO YOUR DISCRETION FROM YEAR TO YEAR.
If your Business has ever maintained a defined benefit plan,
state below the interest rate and mortality table to be used in
establishing the present value of any benefit under the defined
benefit plan for purposes of computing the top-heavy ratio:
Interest rate: %______________________________________
Mortality table: __________________________________
28. Administration.
a. Plan Administrator (Plan Section 16.1). You may
appoint a person or a committee to serve as Plan
Administrator. You may remove and replace anyone
you have appointed, and anyone you have appointed
may resign, without the need to amend this Plan
Agreement, provided that you notify Participants
in writing of any such change. If you do not
appoint a Plan Administrator, the Plan provides
that the Employer will be the Plan
Administrator.
The initial Plan Administrator will be (check one):
_____ This person:
_______________________________
_____ A committee composed of these people:
________________________________________________________________
________________________________________________________________
________________________________________________________________
b. Recordkeeper (Plan Section 16.3). Unless Putnam
expressly permits otherwise, you must appoint
Putnam as Recordkeeper to perform certain routine
services determined upon execution of a written
Service Agreement between Putnam and you.
<PAGE>
The initial Recordkeeper will be:
______________________________________________________
Name
______________________________________________________
Address
29. Reliance on Opinion Letter. If you ever maintained or
you later adopt any plan (including 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, you may not rely on
an opinion letter issued to Putnam by the National
Office of the Internal Revenue Service as evidence that
the Plan is qualified under Section 401 of the
Internal Revenue Code. If you maintain or adopt
multiple plans, in order to obtain reliance with
respect to plan qualification of the Plan, you must
receive a determination letter from the appropriate Key
District Office of Internal Revenue. Putnam will
prepare an application for such a letter upon your
request at a fee agreed upon by the parties.
The Employer 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 Code unless the terms of the plan, as herein adopted or
amended, that pertain to the requirements of Section
401(a)(4), 401(a)(17), 401(1), 401(a)(5), 410(b) and 414(s)
of the Code, as amended by the Tax Reform Act of 1986 or
later laws, (a) are made effective retroactively to the
first day of the first Year beginning after December 31,
1988 (or such later date on which these requirements first
become effective with respect to this plan); or (b) are made
effective no later than the first day on which the Employer
is no longer entitled, under regulations, to rely on a
reasonable, good faith interpretation of these requirements,
and the prior provisions of the plan constitute such an
interpretation.
Putnam will inform you of all amendments it makes to the
prototype plan. If Putnam ever discontinues or abandons the
prototype plan, Putnam will inform you. This Plan Agreement
#002 may be used only in conjunction with Putnam's basic
plan document #05.
<PAGE>
* * * * *
EMPLOYER'S ADOPTION OF PUTNAM
MONEY PURCHASE PLAN
The Employer named below hereby adopts a PUTNAM MONEY PURCHASE
PLAN, and appoints __________________ to serve as Trustee of the
Plan. (Note: you may appoint a trustee other than Putnam
Fiduciary Trust Company only with Putnam's express permission.)
The Employer acknowledges that it has received copies of the
current prospectus for each Investment Product available under
the Plan, and represents that it will deliver copies of the then
current prospectus for each such Investment Product to each
Participant before each occasion on which the Participant makes
an investment instruction as to his Account. The Employer
further acknowledges that the Plan will be acknowledged by Putnam
as a Putnam Money Purchase Plan only upon Putnam's acceptance of
this Plan Agreement.
Employer signature(s) to adopt Plan: Date of
signature:
____________________________________________________
____________________________________________________
Please print name(s) of authorized person(s) signing above:
____________________________________________________
Phone:____________________
____________________________________________________
Phone:____________________
A new Plan must be signed by the last day of the Plan Year in
which the Plan is to be effective.
INVESTMENT DEALER INFORMATION
Firm: ____________________________________________________________
Branch: __________________________________________________________
Address: ________________________________________________________
<PAGE>
Registered Representative:__________________________________
Name
______________________________________
Phone
<PAGE>
* * * * *
ACCEPTANCE OF TRUSTEE
The Trustee accepts appointment in accordance with the terms and
conditions of the Plan, effective as of the date of execution by
the Employer set forth above.
A. Putnam Fiduciary Trust Company, Trustee
By: ______________________________________________________________
Complete Part B only if you have appointed a Trustee other than
Putnam Fiduciary Trust Company. Note: Putnam may impose an
annual maintenance fee as a condition of its acceptance of this
plan as a Putnam Prototype Money Purchase Plan.
B. _________________________________, Trustee
By: _________________________________ Trustee's Tax I.D.
Number _______________
(Trustee)
_________________________________________________________________
Address of Trustee
Person for Putnam to Contact: ________________________________
P
h
o
n
e
:
_______________
Complete Part C only if insurance Policies will be purchased
under Article 14 of the Plan (in addition to Putnam Investment
Products).
C. Appointment and Acceptance of Insurance Trustee
1. Appointment to:
_________________________________________________________________
Name of Insurance Trustee
You are hereby designated as Insurance Trustee for Policies to be
held in accordance with the terms and conditions of this Plan and
Trust.
Employer signature to appoint Insurance Trustee:
By:_____________________________________________________________
(Authorized Signature)
2. Acceptance as Insurance Trustee is agreed to in accordance
with the terms and conditions of the Plan, effective as of
the date of execution by the Employer as set forth above.
By:___________________ Trustee's Tax I.D. Number ________
_______________________________________________________________
Address of Insurance Trustee
Person for Putnam to Contact: ________________________________
Phone: _____________
<PAGE>
* * * * *
ACCEPTANCE BY PUTNAM
Putnam hereby accepts this Employer's Plan as a prototype
established under Putnam Basic Plan Document #05.
Putnam Mutual Funds Corp.
By: ______________________________
<PAGE>
PUTNAM PROFIT SHARING AND 401(K) PLAN
PLAN AGREEMENT #003
This is the Plan Agreement for a Putnam prototype profit sharing
plan with optional Section 401(k) provisions. Please consult a
tax or legal advisor and review the entire form before you sign
it. If you fail to fill out this Putnam Plan Agreement properly,
the Plan may be disqualified. You can get further information to
help you complete the Plan Agreement from your investment dealer,
or from Putnam at:
Putnam Defined Contribution Plans
Attn: Trust Administration/Level 3
859 Willard St. E3D
Quincy, MA 02269
Phone: 1-800-752-5766
* * * * *
By executing this Plan Agreement, the Employer establishes a
profit sharing plan and trust upon the terms and conditions of
Putnam Basic Plan Document #05, as supplemented and modified by
the provisions elected by the Employer in this Plan Agreement.
THIS PLAN AGREEMENT MUST BE ACCEPTED BY PUTNAM IN ORDER FOR THE
EMPLOYER TO RECEIVE FUTURE AMENDMENTS TO THE PUTNAM PROFIT
SHARING AND 401(K) PLAN.
* * * * *
All Employers complete items 1-11 below. Employers who wish to
adopt Section 401(k) provisions also complete item 12.
30. Business Information. The Employer adopting this Plan
is:
a. Business Name: ____________________________________
b. Business Address: ______________________________
_______________________________
_______________________________
Person for Putnam to Contact: __________________________
Phone: __________________________
c. Federal Tax Identification Number: _____________
<PAGE>
d. Form of Organization (check one):
_____ Sole proprietorship _____ Corporation
_____ Partnership _____ S Corporation
e. Taxable Year of Business:
_____ Calendar Year
_____ Fiscal year ending on _______________________
31. Plan Information.
a. Plan Year. Check one:
_____ The Plan Year will be the
same as the Taxable Year of
the Business shown in 2.A.
above. If the Taxable Year
of the Business changes, the
Plan Year will change
accordingly.
_____ The Plan Year will be the period of 12
months beginning on the first day of
__________________________ (month) and
ending on the last day of
__________________________ (month).
The Plan Year will also be your Plan's Limitation Year
for purposes of the contribution limitation rules in
Article 6 of the Plan.
b. Effective Date of Adoption of Plan.
Are you adopting this Plan to replace an existing plan?
_____ Yes
_____ No
If you answered Yes in 2.B. above, please complete the
following:
_____________________________________________________________
Name of the plan you are replacing
______________________________________________________________
Original Effective Date of the plan you are replacing
<PAGE>
The Effective Date of your adoption of this Plan will
be the day you select below (not before the first day
of the current Plan Year, and not before the day your
Business began).
The Effective Date is: _______________________
month/day/year
c. Identifying Highly Compensated Employees. Check
One:
_____ The Plan will use the regular method under
Plan Section 2.56 for identifying Highly
Compensated Employees.
If your Plan Year is the calendar year, do you
wish to make the regular method's "calendar year
election" for identifying your Highly Compensated
Employees?
_____ Yes
_____ No
_____ The Plan will use the simplified method
under Plan Section 2.56 for identifying
Highly Compensated Employees.
32. Eligibility for Plan Participation (Plan Section 3.1).
Employees will be eligible to participate in the Plan
when they complete the requirements you select in A, B
and C below.
a. Classes of Eligible Employees. The Plan requires
coverage of all classes of employees of the
Employer and any Affiliated Employer, except for
union employees and nonresident aliens without
U.S.-source income. The general rules of the
Plan exclude employees in those two groups, but
if you want employees in one or both categories
to be eligible for your Plan, check the
appropriate space below.
The following employees will be eligible to participate
in the Plan:
_____ Members of the following collective
bargaining unit(s) (give names of unions):
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_____ Nonresident aliens with no U.S.-source
income
b. Age Requirement (check and complete one):
_____ No minimum age required for participation
_____ Employees must reach age ___ (not over 21)
to participate
c. Service Requirements.
A 6-month Eligibility Period is a 6-month period
beginning either on an employee's first day of work
with the Employer or on the date 6 months following the
employee's first day of work, and anniversaries of
those dates. A 12-month Eligibility Period is the 12-
month period beginning on an employee's first day of
work with the Employer, and anniversaries of that date.
i. To become eligible, an employee must
complete (choose one):
_____ a. No minimum service required. Skip
the rest of this part C.
_____ b. One 6-month Eligibility Period
_____ c. One 12-month Eligibility Period
_____ d. Two 12-month Eligibility Periods
(may not be chosen if you adopt
either the Section 401(k)
provisions under item 12 or a
vesting schedule other than the
first choice under item 8.A, which
provides for 100% full and
immediate vesting).
<PAGE>
ii. If the Employer acquires a business, will
the Eligibility Period for employees of the
acquired business be the 12-month period
beginning on the first day of work for the
acquired business, and anniversaries of that
date (or the 6-month period beginning on the
first day of work for the acquired business,
the date 6 months following the first day of
work and anniversaries of those dates, if
applicable)?
_____ Yes
_____ No
iii. a. To receive credit for a 6-month
Eligibility Period, an employee must
complete during it at least:
_____ 500 Hours of Service
_____ _____________ Hours of Service (must be
1 hour or more)
(under 500)
Note: If you adopt a 6-month Eligibility Period,
in any event, an employee will automatically
receive credit for the Eligibility Period if the
employee completes at least 1,000 Hours of
Service during a 12 consecutive month period
following the first day of work.
b. To receive credit for a 12-month Eligibility
Period, an employee must complete it during
at least:
_____ 1,000 Hours of Service
_____ _____________ Hours of Service (must be
1 hour or more)
(under 1,000)
iv. Hours of Service will be credited to
employees by the following method (check
one):
_____ a. Actual hours for which an employee
is paid
<PAGE>
_____ b. Any employee who has one actual
paid hour in the following period
will be credited with the number of
Hours of Service indicated (check
one):
_____ Day (10 Hours of Service)
_____ Week (45 Hours of Service)
_____ Semi-monthly payroll period
(95 Hours of Service)
_____ Month (190 Hours of Service)
Note: If you are adopting this Plan to replace an existing plan,
employees will be credited under this Plan with all service
credited to them under the plan you are replacing.
v. Entry Dates. Each Employee in an eligible
class who completes the age and service
requirements specified above will begin to
participate in the Plan on (check one):
_____ The first day of the month in which he
fulfills the requirements.
_____ The first of the following dates
occurring after he fulfills the
requirements (check one):
_____ The first day of the month
following the date he fulfills the
requirements (monthly).
_____ The first day of the first, fourth,
seventh and tenth months in a Plan
Year (quarterly).
_____ The first day of the first month
and the seventh month in a Plan
Year (semiannually).
d. (For New Only) Will all Employees be required to
meet the age and service requirements specified
in B and C above?
_____ Yes
_____ No; all Employees on the Effective Date will
be eligible as of the Effective Date, even
if they have not met the age and service
requirements.
33. Compensation (Plan Section 2.8). Compensation for
purposes of the Plan will be the amount of the
following that is actually paid by your Business to an
employee during the Plan Year (check one):
_____ Form W-2 earnings as defined in Section 2.8 of
the Plan.
_____ Form W-2 earnings as defined in Section 2.8 of
the Plan, plus any amounts withheld from the
employee under a 401(k) plan, cafeteria plan,
SARSEP, tax sheltered 403(b) arrangement, or
Code Section 457 deferred compensation plan, or
contributions described in Code Section 414(h)(2)
that are picked up by a governmental employer.
_____ All compensation included in the definition of
Code Section 415 Compensation in Section 6.5(b)
of the Plan.
_____ All compensation included in the definition of
Code Section 415 Compensation in Section 6.5(b)
of the Plan, plus any amounts withheld from the
employee under a 401(k) plan, cafeteria plan,
SARSEP, tax sheltered 403(b) arrangement, or Code
Section 457 deferred compensation plan, or
contributions described in Code Section 414(h)(2)
that are picked up by a governmental employer.
34. Contributions (Plan Sections 4.1 and 4.2).
a. Profit Limitation. Will Employer contributions
to the Plan be limited to the current and
accumulated profits of your business? (check
one):
_____ Yes
_____ No
If you will make contributions only under the Section
401(k) provisions in item 12 of this Plan Agreement,
skip the rest of this part 5.
b. Amount. The Employer will contribute to the Plan
for each Plan Year (check one):
_____ An amount chosen by the Employer from year
to year
______ ____% of the Earnings of all Qualified
Participants for the Plan Year
______ $____ for each Qualified Participant
How will Forfeitures of Employer Contributions (Profit
Sharing) be applied?
_____ to reduce the amount of the contribution
otherwise required
_____ to reallocate as an additional Employer
Contribution to current participants
c. Allocations to Participants
1. Allocation to Qualified Participants. Any
Employee who has met the eligibility requirements
in item 3 of this Plan Agreement is a Qualified
Participant unless, for reasons other than his
death or Retirement, he is not an active Employee
on the last day of the Plan Year, and he is not
credited with more than 500 Hours of Service in
the Plan Year.
How will contributions be allocated?
_______ Prorata (percentage based on
compensation)
_______ Uniform Dollar (specific dollar amount
for each participant) $ _______.
_______ Integrated With Social Security (complete
(2) and (3) below)
2. Integration with Social Security. Contributions
under paragraph B will be shared by Qualified
Participants in proportion to their Earnings,
unless you check one of the spaces below.
_____ Contributions will be shared according
to the Top-Heavy Integration Formula in
Section 4.2(d)(1) of the Basic Plan
Document in every Plan Year, whether or
not the Plan is top-heavy.
_____ Contributions will be shared according
to the Top-Heavy Integration Formula in
Section 4.2(d)(1) of the Basic Plan
Document only in Plan Years in which
the Plan is top-heavy. In all other
Plan Years, contributions will be
shared according to the Non-Top-Heavy
Integration Formula in Section
4.2(d)(2) of the Basic Plan Document.
<PAGE>
3. Integration Level. (Complete only if you have
elected in 5.C.2 to integrate your Plan with
Social Security. The Integration Level will be
(check one):
____ The Social Security Wage Base in effect
at the beginning of the Plan Year.
____ __% (not more than 100%) of the Social
Security Wage Base in effect at the
beginning of the Plan Year.
____ $__________ (not more than the Social
Security Wage Base).
NOTE: The Social Security Wage Base is indexed
annually to reflect increases in the cost of living.
D. Participant Contributions (Plan Section 4.2(f)). Will
your Plan allow Participants to make after-tax
contributions?
Yes
No
35. Investments (Plan Sections 13.2 and 13.3). The
Employer selects in part A below the Investment
Products that will be available under the Plan. All
Investment Products must be sponsored, underwritten,
managed or expressly agreed to in writing by Putnam.
From the group of available Investment Products
selected by the Employer, each Participant chooses the
investments for his own Accounts unless the Employer
elects differently in B below.
a. Available Investment Products (Plan Section
13.2). The following investments will be
available under the Plan (check one):
Mutual Funds
_____ The group of Putnam funds selected by the
Employer and communicated to Participants in
writing. A current list of the funds
selected by the Employer from time to time
shall be kept with the records of the Plan.
The initial list of funds is as follows (up
to six (6) funds may be selected):
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Other Investment Options
______ Putnam Stable Value Fund
______ Existing Guaranteed Investment Contract
("GIC")
______________________________
Note: You may include an existing GIC option
above, provided that the entire balance of the
contract(s) mature within three years of the date
your assets are transferred to Putnam.
In the event that there is any amount in the Trust Fund
for which no instructions or unclear instructions are
delivered, it will be invested in the default option
selected by the Employer in its Service Agreement with
Putnam (or if the Employer makes no such selection, in
Putnam Daily Dividend Trust) until instructions are
received in good order, and the Employer will be deemed
to have selected the option indicated in its Service
Agreement with Putnam (or if none, Putnam Daily
Dividend Trust) as an available Investment Product for
that purpose.
b. Instructions (Plan Section 13.3). Investment
instructions for amounts held under the Plan
generally will be given by each Participant for
his own Accounts and delivered to Putnam as
indicated in the Service Agreement between Putnam
and the Employer. Check below only if the
Employer will make investment decisions under the
Plan with respect to the following contributions
made to the Plan.
_____ The Employer will make all investment
decisions.
_____ The Employer will make investment decisions
with respect to Employer Matching
Contributions made pursuant to Section 12.B
and C of this Plan Agreement.
_____ The Employer will make investment decisions
with respect to Qualified Nonelective
Contributions made pursuant to Section 12.D
of this Plan Agreement.
_____ The Employer will make investment decisions
with respect to Employer profit sharing
contributions made pursuant to Section 5.B.
of this Plan Agreement.
<PAGE>
c. Changes. Investment instructions may be changed
(check one):
_____ on any Valuation Date (daily)
_____ on the first day of any month.
_____ on the first day of the first, fourth,
seventh and tenth months in a Plan Year
(quarterly)
36. Distributions and Withdrawals.
a. Retirement Distributions.
i. Normal Retirement Age (Plan Section 7.1).
Normal retirement age will be _______ (not
over age 65).
ii. Early Retirement (Plan Section 7.1). Check
and complete the item below only if you want
Participants to become fully vested upon
fulfilling specified age and service
requirements before reaching normal
retirement age:
_____ Early retirement will be permitted at
age ____ with at least ________ Years
of Service.
iii. Annuities (Plan Section 9.3). Will your
Plan permit a Participant to select a life
annuity form of distribution? You must
check Yes if this Plan replaces an existing
plan that permits distributions in life
annuity form. Check one:
_____ Yes
_____ No
b. Hardship Distributions (Plan Section 12.2). Will
your Plan permit hardship distributions from
Employer Contribution Accounts? You must check
Yes if this Plan replaces an existing plan that
permits hardship distributions from Employer
Contribution Accounts. Check one:
_____ Yes
_____ No
<PAGE>
c. Withdrawals after Age 59 1/2 (Plan Section 12.3).
Will your Plan permit employees over age 59 1/2 to
withdraw amounts upon request? You must check
Yes if this Plan replaces an existing plan that
permits withdrawals after age 59 1/2. (check one):
_____ Yes
_____ No
d. Loans. Will your Plan permit loans under the
Putnam Loan Program to employees from their
Accounts? (Note: no other loan program may be
used)
_____ Yes
_____ No
e. Automatic Distribution of Small Accounts (Plan
Section 9.1). Will your Plan automatically
distribute vested account balances not exceeding
$3,500, within 60 days after the end of the Plan
Year in which a Participant separates from
employment?
_____ Yes
_____ No
Note: If you check No above, the time for
distribution cannot be left to the discretion of the
Employer or the Plan Administrator. Small accounts
will be distributable at the time selected by the
Participant.
37. Vesting (Plan Article 8).
a. Time of Vesting. The provision checked below
will determine a Participant's vested percentage
in his Employer Contribution Account and, if you
adopt the Section 401(k) provisions in item 12
and will make Employer Matching Contributions, in
his Employer Matching Account (check one):
_____ 100% vesting immediately upon participation
in the Plan. If you check this option, skip
the rest of this part 8.
_____ Six Year Graded Schedule:
Vested Percentage 20% 40% 60% 80% 100%
Years of Service 2 3 4 5 6
_____ Three Year Cliff Schedule:
Vested Percentage 0% 100%
Years of Service 0-2 3
_____ Other Schedule (must be at least as
favorable as Six Year Graded Schedule or
Three Year Cliff Schedule):
Vested Percentage __% __% __% __% __%
Years of Service ___ ___ ___ ___ ___
b. Service for Vesting. Skip this part B if your
Plan will include all of an employee's service in
determining his Years of Service for vesting.
Years of Service for vesting will exclude (check one or
more):
_____ Service before the Effective Date of the
Plan, if this is a new plan, or service
before the effective date of your existing
plan, if this Plan replaces an existing plan
_____ Service before the Plan Year in which an
employee reached age 18
_____ Service for a business acquired by the
Employer, before the date of acquisition
c. Hours of Service for Vesting. The number of
Hours of Service required for crediting a Year of
Service for vesting will be (check one):
_____ 1,000 Hours of Service
_____ ___________________ Hours of Service
(under 1,000)
d. Year of Service Measuring Period for Vesting
(Plan Section 2.50). The periods of 12 months
used for measuring Years of Service will be
(check one):
_____ Plan Years
_____ 12-month Eligibility Periods
Note: If you are adopting this Plan to replace an
existing plan, employees will be credited under this
Plan with all service credited to them under the plan
you are replacing.
<PAGE>
38. Top-Heavy Minimum Contributions (Plan Section 15.3).
For any Plan Year in which the Plan is top-heavy, you
must provide for each Participant who is a non-key
employee and who is employed on the last day of the
Plan Year an allocation equal to 3% of his Earnings (or
if less, the highest percentage allocated to any key
employee). Neither Elective Deferrals, Employer
Matching Contributions nor Qualified Matching
Contributions for a non-key employee may be taken into
account for purposes of this requirement.
Skip paragraphs A and B below if you do not maintain any
other qualified plan in addition to this Plan.
a. If you maintain another qualified plan in
addition to this Plan, specify below whether a
non-key employee who participates in both plans
will receive a top-heavy minimum contribution (or
benefit) in this Plan or the other plan (check
one):
The top-heavy minimum contribution (or benefit) for
non-key employees participating both in this Plan and
another qualified plan maintained by the Employer will
be provided in:
_____ This Plan
_____ The plan named here: ______________________
b. (Skip this paragraph if you do not maintain a
defined benefit plan.) If you maintain a defined
benefit plan in addition to this Plan, and the
Top-Heavy Ratio (as defined in Plan Section
15.2(c)) for the combined plans is between 60%
and 90%, you may elect to provide an increased
minimum allocation or benefit pursuant to Plan
Section 15.4. Specify your election by
completing the statement below:
The Employer will provide an increased (specify
contribution or benefit)
__________________________________ in its (specify
defined contribution or defined benefit)
______________________ plan as required under Plan
Section 15.4.
39. Other Plans. Skip this item 10 if this Plan is the
only qualified plan your Business has ever had or if
the only other plan your Business ever maintained was a
defined contribution master or prototype plan. You
must complete this section 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.
The Plan and your other plan(s) combined will meet the
contribution limitation rules in Article 6 of the Plan as
you specify below:
a. If a Participant in the Plan is covered under
another qualified defined contribution plan
maintained by your Business, other than a master
or prototype plan (check one):
_____ The provisions of Section 6.2 of the Plan
will apply as if the other plan were a
master or prototype plan.
_____ The plans will limit total annual additions
to the maximum permissible amount, and will
properly reduce any excess amounts, in the
manner you describe below.
_________________________________________________________________
_________________________________________________________________
B. If a Participant in the Plan is or has ever been a
participant in a defined benefit plan maintained by
your Business, the plans will meet the limits of
Article 6 in the manner you describe below:
________________________________________________________________
________________________________________________________________
Note: Your description under A or B cannot be left to discretion
changed from year to year. If you want to amend it from year to
year, you must execute a new plan agreement.
If your Business has ever maintained a defined benefit plan,
state below the interest rate and mortality table to be used in
establishing the present value of any benefit under the defined
benefit plan for purposes of computing the top-heavy ratio:
Interest rate: %__________________________
Mortality Table: __________________________
40. Administration.
a. Plan Administrator (Plan Section 16.1). You may
appoint a person or a committee to serve as Plan
Administrator. You may remove and replace anyone
you have appointed, and anyone you have appointed
may resign, without the need to amend this Plan
Agreement, provided that you notify Participants
in writing of any such change. If you do not
appoint a Plan Administrator, the Plan provides
that the Employer will be the Plan
Administrator.
The initial Plan Administrator will be (check one):
_____ This person:
_______________________________
_____ A committee composed of these people:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
b. Recordkeeper (Plan Section 16.4). You must
appoint Putnam as Recordkeeper to perform certain
routine services determined upon execution of a
written Service Agreement between Putnam and you.
_______________________________________________________
Name
_______________________________________________________
Address
COMPLETE ITEM 12 BELOW IF YOUR PLAN WILL ALLOW EMPLOYEES TO
ELECT PRE-TAX CONTRIBUTIONS UNDER SECTION 401(K) OF THE
CODE.
41. Section 401(k) Plan Provisions (Plan Article 5).
a. Elective Deferrals (Plan Section 5.2).
i. A Participant may make Elective Deferrals
for each year in an amount not to exceed
(check one):
_____ (a) _______% of his Earnings
_____ (b) $______ (specify a dollar
amount)
_____ (c) _______% of his Earnings up to
$_______ (specify dollar
amount)
Note: Elective Deferrals may not exceed the annual dollar
limit under Section 402(g) of the Internal Revenue Code.
ii. A Participant may begin to make Elective
Deferrals, or change the amount of his
Elective Deferrals, as of the following
dates (check one):
_____ First business day of each month
(monthly).
_____ First business day of the first,
fourth, seventh and tenth months of the
Plan Year (quarterly).
_____ First business day of the first and
seventh months of the Plan Year
(semiannually).
_____ First business day of the Plan Year
only (annually).
iii. May Participants make Elective Deferrals of
bonuses?
_____ Yes
_____ No
b. Employer Matching Contributions of Employee
Elective Deferrals (Plan Section 5.8). Skip this
part B if you will not make Employer Matching
Contributions. Employer Matching Contributions
are subject to the vesting schedule elected in
item 8 of this Plan Agreement, and can be
withdrawn during employment in the event of
financial hardship (as defined in Section 12.2 of
the Plan) if you so elect in part F below.
i. The Employer will contribute and will
allocate to each Participant's Employer
Matching Account an amount equal to:
(Check the provision(s) desired, and fill in the
% blank(s) in each provision you check. If you
wish to determine the amount of Employer Matching
Contributions from year to year instead of
specifying a fixed percentage, write "V" for
variable in the % blank at the beginning of each
provision you check. Also write "V" for variable
in the % blank for earnings.)
_____ ___% of Elective Deferrals
_____ ___% of Elective Deferrals that do not
exceed ___% of Earnings
_____ Additionally, in applying the above
limitation(s), Elective Deferrals shall
not exceed $__________.
(2) How will Forfeitures for Employer Matching
Contributions be applied?
_____ to reduce the amount of the
contribution otherwise required
_____ to reallocate as an additional Employer
Matching Contribution to current
participants
c. Hardship Distributions from 401(k) Accounts (Plan
Sections 12.2 and 5.14).
(1) Will your Plan permit hardship distributions from
Elective Deferral Accounts? (check one):
_____ Yes
_____ No
(2) If your Plan has Employer Matching Contributions,
will it permit hardship distributions from
Employer Matching Accounts?
_____ Yes
_____ No
42. QNEC and QMACs.
Note: Qualified Matching Contributions are always fully
vested and cannot be distributed from the Plan before a
Participant reaches age 59 1/2 or leaves employment. They will
be used to the extent needed, to help the Plan pass the ADP
test explained on page 8 of the Qs & As.
a. Qualified Matching Contributions (Plan Section
2.58). Skip this part A if you will not make
Qualified Matching Contributions.
i. Qualified Matching Contributions will be
made with respect to (check one):
_____ Elective Deferrals by all Participants
_____ Elective Deferrals only by Non-Highly
Compensated Participants
ii. The amount of Qualified Matching
Contributions made with respect to a
Participant will be:
(Check the provision desired and fill in the %
blank(s) in the provision you check. If you wish
to determine the amount of Qualified Matching
Contributions from year to year instead of
specifying a fixed percentage, write "V" for
variable in the % blank at the beginning of each
provision you check.)
_____ ___% of his Elective Deferrals
_____ ___% of his Elective Deferrals that do
not exceed ___% of his
Earnings
_____ ___% of his Earnings
_____ Additionally, in applying the above
limitation(s), Qualified Matching
Contributions shall not exceed
$________.
b. Qualified Nonelective Contributions (Plan Section
2.60).
i. Qualified Nonelective Contributions will be
made on behalf of (check one):
_____ All Participants
_____ Only Participants who are not Highly
Compensated Employees
ii. The amount of Qualified Nonelective
Contributions for a Plan Year will be (check
one). If you wish to determine the amount
of Qualified Nonelective Contributions from
year to year instead of specifying a fixed
percentage, write "V" for variable in the %
blank at the beginning of each provision you
check:
_____ ___% (not over 15%) of the Earnings of
Participants on whose behalf Qualified
Nonelective Contributions are made
_____ An amount determined by the Employer
from year to year, to be shared in
proportion to Earnings by Participants
on whose behalf Qualified Nonelective
Contributions are made
Note: Qualified Nonelective Contributions will be
used, to the extent needed, to help the Plan pass the
ADP test, explained on page 8 of the Qs & As.
c. ACP Test. Every plan that has after-tax
Participant Contributions, Employer Matching
Contributions or Qualified Matching Contributions
must pass an annual test called the ACP test,
which is explained on page 10 of the Qs & As.
Elective Deferrals and Qualified Nonelective
Contributions will be used to help the Plan pass
the ACP test, to the extent needed.
<PAGE>
43. Reliance on Opinion Letter. If you ever maintained or
you later adopt any plan (including 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, you may not rely on
an opinion letter issued to Putnam by the National
Office of the Internal Revenue Service as evidence that
the Plan is qualified under Section 401 of the
Internal Revenue Code. If you maintain or adopt
multiple plans, in order to obtain reliance with
respect to plan qualification of the Plan, you must
receive a determination letter from the appropriate Key
District Office of Internal Revenue. Putnam will
prepare an application for such a letter upon your
request at a fee agreed upon by the parties.
The Employer 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 Code unless the terms of the plan, as herein adopted or
amended, that pertain to the requirements of Sections
401(a)(4), 401(a)(5), 401(a)(17), 401(l), 410(b) and 414(s)
of the Code, as amended by the Tax Reform Act of 1986 or
later laws, (a) are made effective retroactively to the
first day of the first Year beginning after December 31,
1988 (or such later date on which these requirements first
become effective with respect to this plan); or (b) are made
effective no later than the first day on which the Employer
is no longer entitled, under regulations, to rely on a
reasonable, good faith interpretation of these requirements,
and the prior provisions of the plan constitute such an
interpretation.
Putnam will inform you of all amendments it makes to the
prototype plan. If Putnam ever discontinues or abandons the
prototype plan, Putnam will inform you. This Plan Agreement
#001 may be used only in conjunction with Putnam's basic
plan document #05.
<PAGE>
* * * * *
EMPLOYER'S ADOPTION OF PUTNAM
PROFIT SHARING AND 401(k) PLAN
The Employer named below hereby adopts a PUTNAM PROFIT SHARING
AND 401(k) PLAN, and appoints Putnam Fiduciary Trust Company to
serve as Trustee of the Plan. The Employer acknowledges that it
has received copies of the current prospectus for each Investment
Product available under the Plan, and represents that it will
deliver copies of the then current prospectus for each such
Investment Product to each Participant before each occasion on
which the Participant makes an investment instruction as to his
Account. The Employer further acknowledges that the Plan will be
acknowledged by Putnam as a Putnam Profit Sharing and 401(k) Plan
only upon Putnam's acceptance of this Plan Agreement.
Employer signature(s) to adopt Plan: Date of
signature:
____________________________________________________
____________________________________________________
Please print name(s) of authorized person(s) signing above:
____________________________________________________
Phone:____________________
____________________________________________________
Phone:____________________
A new Plan must be signed by the last day of the Plan Year in
which the Plan is to be effective.
INVESTMENT DEALER INFORMATION
Firm: ___________________________________________________________
Branch: _________________________________________________________
Address: ________________________________________________________
Registered Representative: ___________________________________
Name
_________________________________________
Phone
<PAGE>
* * * * *
ACCEPTANCE OF TRUSTEE
The Trustee accepts appointment in accordance with the terms and
conditions of the Plan, effective as of the date of execution by
the Employer set forth above.
A. Putnam Fiduciary Trust Company, Trustee
By: ______________________________________________________________
ACCEPTANCE BY PUTNAM
Putnam hereby accepts this Employer's Plan as a prototype
established under Putnam Basic Plan Document #05.
Putnam Mutual Funds Corp.
By: ______________________________
<PAGE>
PUTNAM BASIC PLAN DOCUMENT #05
TABLE OF CONTENTS
PAGE
ARTICLE 1. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Account. . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Affiliated Employer. . . . . . . . . . . . . . . . . . . . 2
2.3 Authorized Leave of Absence. . . . . . . . . . . . . . . . 2
2.4 Base Contribution Percentage . . . . . . . . . . . . . . . 3
2.5 Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 CODA . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 Compensation . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 Date of Employment . . . . . . . . . . . . . . . . . . . . 3
2.10 Disabled . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.11 Earned Income. . . . . . . . . . . . . . . . . . . . . . . 4
2.12 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.13 Effective Date . . . . . . . . . . . . . . . . . . . . . . 4
2.14 Eligibility Period . . . . . . . . . . . . . . . . . . . . 4
2.15 Employee . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 Employer . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 Employer Contribution Account. . . . . . . . . . . . . . . 5
2.17(a) Employer Stock . . . . . . . . . . . . . . . . . . . . 5
2.18 Excess Earnings. . . . . . . . . . . . . . . . . . . . . . 6
2.19 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 Hour of Service. . . . . . . . . . . . . . . . . . . . . . 6
2.22 Insurance Trustee. . . . . . . . . . . . . . . . . . . . . 7
2.23 Integration Level. . . . . . . . . . . . . . . . . . . . . 7
2.24 Investment Company . . . . . . . . . . . . . . . . . . . . 8
2.25 Investment Company Shares. . . . . . . . . . . . . . . . . 8
2.26 Investment Products. . . . . . . . . . . . . . . . . . . . 8
2.27 Leased Employee. . . . . . . . . . . . . . . . . . . . . . 8
2.28 One-Year Eligibility Break . . . . . . . . . . . . . . . . 8
2.29 One-Year Vesting Break . . . . . . . . . . . . . . . . . . 9
2.30 Owner-Employee . . . . . . . . . . . . . . . . . . . . . . 9
2.31 Participant. . . . . . . . . . . . . . . . . . . . . . . . 9
2.32 Participant Contribution Account . . . . . . . . . . . . . 9
2.33 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.34 Plan Administrator . . . . . . . . . . . . . . . . . . . . 9
2.35 Plan Agreement . . . . . . . . . . . . . . . . . . . . . . 9
2.36 Plan Year. . . . . . . . . . . . . . . . . . . . . . . . . 9
2.37 Policy . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.38 Putnam . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.39 Qualified Domestic Relations Order . . . . . . . . . . . . 10
2.40 Qualified Participant. . . . . . . . . . . . . . . . . . . 10
2.41 Recordkeeper . . . . . . . . . . . . . . . . . . . . . . . 10
2.42 Retirement . . . . . . . . . . . . . . . . . . . . . . . . 10
2.43 Rollover Account . . . . . . . . . . . . . . . . . . . . . 10
2.44 Self-Employed Individual . . . . . . . . . . . . . . . . . 10
2.45 Shareholder-Employee . . . . . . . . . . . . . . . . . . . 11
2.46 Social Security Wage Base. . . . . . . . . . . . . . . . . 11
2.47 Trust and Trust Fund . . . . . . . . . . . . . . . . . . . 11
2.48 Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.49 Valuation Date . . . . . . . . . . . . . . . . . . . . . . 11
2.50 Year of Service. . . . . . . . . . . . . . . . . . . . . . 11
2.51 Deferral Agreement . . . . . . . . . . . . . . . . . . . . 12
2.52 Elective Deferral. . . . . . . . . . . . . . . . . . . . . 12
2.53 Elective Deferral Account. . . . . . . . . . . . . . . . . 12
2.54 Employer Matching Contribution . . . . . . . . . . . . . . 12
2.55 Employer Matching Account. . . . . . . . . . . . . . . . . 12
2.56 Highly Compensated Employee. . . . . . . . . . . . . . . . 12
2.57 Non-Highly Compensated Employee. . . . . . . . . . . . . . 15
2.58 Qualified Matching Contribution. . . . . . . . . . . . . . 15
2.59 Qualified Matching Account . . . . . . . . . . . . . . . . 15
2.60 Qualified Nonelective Contribution . . . . . . . . . . . . 15
2.61 Qualified Nonelective Contribution Account . . . . . . . . 16
ARTICLE 3. PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . . . 17
3.1 Initial Participation. . . . . . . . . . . . . . . . . . . 17
3.2 Special Participation Rule . . . . . . . . . . . . . . . . 17
3.3 Resumed Participation. . . . . . . . . . . . . . . . . . . 18
3.4 Benefits for Owner-Employees . . . . . . . . . . . . . . . 18
3.5 Changes in Classification. . . . . . . . . . . . . . . . . 18
ARTICLE 4. CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . 20
4.1 Provisions Applicable to All Plans . . . . . . . . . . . . 20
4.2 Provisions Applicable Only to Profit Sharing Plans . . . . 21
4.3 Provisions Applicable Only to Money Purchase Pension
Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.4 Rollover Contributions . . . . . . . . . . . . . . . . . . 26
4.5 No Deductible Employee Contributions . . . . . . . . . . . 26
4.6 Paired Plans . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 5. CASH OR DEFERRED ARRANGEMENT UNDER SECTION
401(k) (CODA) . . . . . . . . . . . . . . . . . . . . . . . . 28
5.1 Applicability; Allocations . . . . . . . . . . . . . . . . 28
5.2 CODA Participation . . . . . . . . . . . . . . . . . . . . 28
5.3 Annual Limit on Elective Deferrals . . . . . . . . . . . . 28
5.4 Distribution of Certain Elective Deferrals . . . . . . . . 29
5.5 Satisfaction of ADP and ACP Tests. . . . . . . . . . . . . 30
5.6 Actual Deferral Percentage Test Limit. . . . . . . . . . . 30
5.7 Distribution of Excess Contributions . . . . . . . . . . . 32
5.8 Matching Contributions . . . . . . . . . . . . . . . . . . 33
5.9 Participant Contributions. . . . . . . . . . . . . . . . . 34
5.10 Recharacterization of Excess Contributions . . . . . . . . 34
5.11 Average Contribution Percentage Test Limit and
Aggregate Limit . . . . . . . . . . . . . . . . . . . . . . . . 35
5.12 Distribution of Excess Aggregate Contributions . . . . . . 38
5.13 Restriction on Distributions . . . . . . . . . . . . . . . 39
5.14 Hardship Distributions . . . . . . . . . . . . . . . . . . 40
5.15 Special Effective Dates. . . . . . . . . . . . . . . . . . 41
ARTICLE 6. LIMITATIONS ON ALLOCATIONS . . . . . . . . . . . . . . . . . 42
6.1 No Additional Plan . . . . . . . . . . . . . . . . . . . . 42
6.2 Additional Master or Prototype Plan. . . . . . . . . . . . 43
6.3 Additional Non-Master or Non-Prototype Plan. . . . . . . . 44
6.4 Additional Defined Benefit Plan. . . . . . . . . . . . . . 45
6.5 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 7. ELIGIBILITY FOR DISTRIBUTION OF BENEFITS . . . . . . . . . . 50
7.1 Retirement . . . . . . . . . . . . . . . . . . . . . . . . 50
7.2 Death. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.3 Other Termination of Employment. . . . . . . . . . . . . . 51
ARTICLE 8. VESTING. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.1 Vested Balance . . . . . . . . . . . . . . . . . . . . . . 52
8.2 Vesting of Accounts of Returned Former Employees . . . . . 52
8.3 Forfeiture of Non-Vested Amounts . . . . . . . . . . . . . 53
8.4 Special Rule in the Event of a Withdrawal. . . . . . . . . 54
8.5 Vesting Election . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 9. PAYMENT OF BENEFITS. . . . . . . . . . . . . . . . . . . . . 56
9.1 Distribution of Accounts . . . . . . . . . . . . . . . . . 56
9.2 Restriction on Immediate Distributions . . . . . . . . . . 56
9.3 Optional Forms of Distribution . . . . . . . . . . . . . . 58
9.4 Distribution Procedure . . . . . . . . . . . . . . . . . . 58
9.5 Lost Distributee . . . . . . . . . . . . . . . . . . . . . 59
9.6 Direct Rollovers . . . . . . . . . . . . . . . . . . . . . 59
9.7 Distributions Required by a Qualified Domestic Relations
Order. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 10. JOINT AND SURVIVOR ANNUITY REQUIREMENTS . . . . . . . . . . 61
10.1 Applicability . . . . . . . . . . . . . . . . . . . . . . 61
10.2 Qualified Joint and Survivor Annuity. . . . . . . . . . . 62
10.3 Qualified Preretirement Survivor Annuity. . . . . . . . . 62
10.4 Definitions . . . . . . . . . . . . . . . . . . . . . . . 62
10.5 Notice Requirements . . . . . . . . . . . . . . . . . . . 64
10.6 Transitional Rules. . . . . . . . . . . . . . . . . . . . 65
ARTICLE 11. MINIMUM DISTRIBUTION REQUIREMENTS . . . . . . . . . . . . . 68
11.1 General Rules . . . . . . . . . . . . . . . . . . . . . . 68
11.2 Required Beginning Date . . . . . . . . . . . . . . . . . 68
11.3 Limits on Distribution Periods. . . . . . . . . . . . . . 69
11.4 Determination of Amount to Be Distributed Each Year. . . 70
11.5 Death Distribution Provisions . . . . . . . . . . . . . . 71
11.6 Transitional Rule . . . . . . . . . . . . . . . . . . . . 73
ARTICLE 12. WITHDRAWALS AND LOANS . . . . . . . . . . . . . . . . . . . 75
12.1 Withdrawals from Participant Contribution Accounts . . . 75
12.2 Withdrawals on Account of Hardship. . . . . . . . . . . . 75
12.3 Withdrawals After Reaching Age 59 1/2 . . . . . . . . . . 75
12.4 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 75
12.5 Procedure; Amount Available . . . . . . . . . . . . . . . 78
ARTICLE 13. TRUST FUND AND INVESTMENTS. . . . . . . . . . . . . . . . . 79
13.1 Establishment of Trust Fund . . . . . . . . . . . . . . . 79
13.2 Management of Trust Fund. . . . . . . . . . . . . . . . . 79
13.3 Investment Instructions . . . . . . . . . . . . . . . . . 80
13.4 Valuation of the Trust Fund . . . . . . . . . . . . . . . 82
13.5 Distributions on Investment Company Shares. . . . . . . . 82
13.6 Registration and Voting of Investment Company Shares . . 83
13.7 Investment Manager. . . . . . . . . . . . . . . . . . . . 83
13.8 Employer Stock. . . . . . . . . . . . . . . . . . . . . . 83
13.9 Insurance Contracts . . . . . . . . . . . . . . . . . . . 86
ARTICLE 14. INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . 88
14.1 Purchase of Insurance Products. . . . . . . . . . . . . . 88
14.2 Limitation on Premiums. . . . . . . . . . . . . . . . . . 88
14.3 Policy Options. . . . . . . . . . . . . . . . . . . . . . 88
14.4 Insurability. . . . . . . . . . . . . . . . . . . . . . . 88
14.5 Dividends on Policies . . . . . . . . . . . . . . . . . . 88
14.6 Trustee of Policy . . . . . . . . . . . . . . . . . . . . 89
14.7 Obligations with Respect to Policies. . . . . . . . . . . 89
14.8 Distribution of Proceeds on Participant's Death . . . . . 89
14.9 Conversion of Policies. . . . . . . . . . . . . . . . . . 89
14.10 Conflict with Policies. . . . . . . . . . . . . . . . . . 90
14.11 Insurance Loans to Owner-Employees. . . . . . . . . . . . 90
ARTICLE 15. TOP-HEAVY PLANS . . . . . . . . . . . . . . . . . . . . . . 91
15.1 Superseding Effect. . . . . . . . . . . . . . . . . . . . 91
15.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . 91
15.3 Minimum Allocation. . . . . . . . . . . . . . . . . . . . 94
15.4 Adjustment of Fractions . . . . . . . . . . . . . . . . . 95
ARTICLE 16. ADMINISTRATION OF THE PLAN. . . . . . . . . . . . . . . . . 96
16.1 Plan Administrator. . . . . . . . . . . . . . . . . . . . 96
16.2 Claims Procedure. . . . . . . . . . . . . . . . . . . . . 96
16.3 Employer's Responsibilities . . . . . . . . . . . . . . . 97
16.4 Recordkeeper. . . . . . . . . . . . . . . . . . . . . . . 97
16.5 Prototype Plan. . . . . . . . . . . . . . . . . . . . . . 98
ARTICLE 17. TRUSTEE AND INSURANCE TRUSTEE . . . . . . . . . . . . . . . 99
17.1 Powers and Duties of the Trustee. . . . . . . . . . . . . 99
17.2 Limitation of Responsibilities. . . . . . . . . . . . . .100
17.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . .101
17.4 Reliance on Employer. . . . . . . . . . . . . . . . . . .101
17.5 Action Without Instructions . . . . . . . . . . . . . . .101
17.6 Advice of Counsel . . . . . . . . . . . . . . . . . . . .102
17.7 Accounts. . . . . . . . . . . . . . . . . . . . . . . . .102
17.8 Access to Records . . . . . . . . . . . . . . . . . . . .103
17.9 Successors. . . . . . . . . . . . . . . . . . . . . . . .103
17.10 Persons Dealing with Trustee or Insurance Trustee. . . .103
17.11 Resignation and Removal; Procedure. . . . . . . . . . . .103
17.12 Action of Trustee Following Resignation or Removal . . .103
17.13 Action of Insurance Trustee Following Resignation or
Removal. . . . . . . . . . . . . . . . . . . . . . . . . .103
17.14 Effect of Resignation or Removal. . . . . . . . . . . . .103
17.15 Fiscal Year of Trust. . . . . . . . . . . . . . . . . . .104
17.16 Limitation of Liability . . . . . . . . . . . . . . . . .104
17.17 Indemnification . . . . . . . . . . . . . . . . . . . . .104
ARTICLE 18. AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . .105
18.1 General . . . . . . . . . . . . . . . . . . . . . . . . .105
18.2 Delegation of Amendment Power . . . . . . . . . . . . . .106
ARTICLE 19. TERMINATION OF THE PLAN AND TRUST . . . . . . . . . . . . .107
19.1 General . . . . . . . . . . . . . . . . . . . . . . . . .107
19.2 Events of Termination . . . . . . . . . . . . . . . . . .107
19.3 Effect of Termination . . . . . . . . . . . . . . . . . .107
19.4 Approval of Plan. . . . . . . . . . . . . . . . . . . . .108
ARTICLE 20. TRANSFERS TO OR FROM OTHER QUALIFIED PLANS;
MERGERS. . . . . . . . . . . . . . . . . . . . . . . . . . .109
20.1 General . . . . . . . . . . . . . . . . . . . . . . . . .109
20.2 Amounts Transferred . . . . . . . . . . . . . . . . . . .109
20.3 Merger or Consolidation . . . . . . . . . . . . . . . . .109
ARTICLE 21. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .110
21.1 Notice of Plan. . . . . . . . . . . . . . . . . . . . . .110
21.2 No Employment Rights. . . . . . . . . . . . . . . . . . .110
21.3 Distributions Exclusively From Plan . . . . . . . . . . .110
21.4 No Alienation . . . . . . . . . . . . . . . . . . . . . .110
21.5 Provision of Information. . . . . . . . . . . . . . . . .110
21.6 No Prohibited Transactions. . . . . . . . . . . . . . . .110
21.7 Governing Law . . . . . . . . . . . . . . . . . . . . . .110
21.8 Gender. . . . . . . . . . . . . . . . . . . . . . . . . .111
<PAGE>
PUTNAM BASIC PLAN DOCUMENT #05
ARTICLE 44. INTRODUCTION
By executing the Plan Agreement, the Employer has established
a retirement plan (the "Plan") according to the terms and
conditions of the Plan Agreement and this Putnam Basic Plan
Document #05, for the purpose of providing a retirement fund for
the benefit of Participants and Beneficiaries.<PAGE>
ARTICLE 45. DEFINITIONS
The terms defined in Sections 2.1 through 2.49 appear
generally throughout the document. Sections 2.50 through 2.60 and
Article 5 contain definitions of terms used only in a CODA and
Section 10.4 contains additional definitions related to
distributions from the Plan. Articles 6 and 11 contain additional
definitions of terms used only in those Articles.
45..1 Account means any of, and Accounts means all of, a
Participant's Employer Contribution Account, Participant
Contribution Account, Rollover Account, and if the Plan contains a
CODA, the accounts maintained for the Participant pursuant to
Article 5.
45..2 Affiliated Employer, for purposes of the Plan other
than Article 6, means the Employer and a trade or business, whether
or not incorporated, which is any of the following:
(a) A member of a group of controlled corporations
(within the meaning of Section 414(b) of the Code) which
includes the Employer; or
(b) A trade or business under common control (within the
meaning of Section 414(c) of the Code) with the Employer; or
(c) A member of an affiliated service group (within the
meaning of Section 414(m) of the Code) which includes the
Employer; or
(d) An entity otherwise required to be aggregated with
the Employer pursuant to Section 414(o) of the Code.
In determining an Employee's service for vesting and for
eligibility to participate in the Plan, all employment with
Affiliated Employers will be treated as employment by the Employer.
For purposes of Article 6 only, the definitions in paragraphs
(a) and (b) of this Section 2.2 shall be modified by adding at the
conclusion of the parenthetical phrase in each such paragraph the
words "as modified by Section 415(h) of the Code."
45..3 Authorized Leave of Absence means a leave of absence
from employment granted in writing by an Affiliated Employer.
Authorized Leave of Absence shall be granted on account of military
service for any period during which an Employee's right to
re-employment is guaranteed by law, and for such other reasons and
periods as an Affiliated Employer shall consider proper, provided
that Employees in similar situations shall be similarly treated.
45..4 Base Contribution Percentage means the percentage so
specified in the Plan Agreement.
45..5 Beneficiary means a person entitled to receive benefits
under the Plan upon the death of a Participant, in accordance with
Section 7.2 and Articles 10 and 11.
45..6 CODA means a cash or deferred arrangement that meets
the requirements of Section 401(k) of the Code, adopted as part of
a profit sharing plan.
45..7 Code means the Internal Revenue Code of 1986, as
amended.
45..8 Compensation means all of an Employee's compensation
determined in accordance with the definition elected by the
Employer in the Plan Agreement. For purposes of that election,
"Form W-2 earnings" means "wages" as defined in Section 3401(a) of
the Code in connection with income tax withholding at the source,
and all other compensation paid to the Employee by the Employer in
the course of its trade or business, for which the Employer is
required to furnish the Employee with a written statement under
Sections 6041(d), 6051(a)(3) and 6052 of the Code, determined
without regard to exclusions based on the nature or location of the
employment or the services performed (such as the exception for
agricultural labor in Section 3401(a)(2) of the Code).
Compensation shall include only amounts actually paid to the
Employee during the Plan Year, except that if the Employer so
elects in the Plan Agreement, Compensation shall include any amount
which is contributed to an employee benefit plan for the Employee
by the Employer pursuant to a salary reduction agreement, and which
is not includible in the gross income of the Employee under Section
125, 402(a)(8), 402(h) or 403(b) of the Code. (For a self-employed
person, the relevant term is Earned Income, as defined in Section
2.11.)
45..9 Date of Employment means the first date on which an
Employee performs an Hour of Service; or, in the case of an
Employee who has incurred one or more One-Year Eligibility Breaks
and who is treated as a new Employee under the rules of Section
3.3, the first date on which he performs an Hour of Service after
his return to employment.
45..10 Disabled means unable to engage in any substantial
gainful activity by reason of any medically determinable physical
or mental impairment that can be expected to result in death or
which has lasted or can be expected to last for a continuous period
of not less than 12 months. The permanence and degree of such
impairment shall be supported by medical evidence.
45..11 Earned Income means a Self-Employed Individual's net
earnings from self-employment in the trade or business with respect
to which the Plan is established, excluding items not included in
gross income and the deductions allocable to such items, and
reduced by (i) contributions by the Employer to qualified plans, to
the extent deductible under Section 404 of the Code, and (ii) the
deduction allowed to the taxpayer under Section 164(f) of the Code
for taxable years beginning after December 31, 1989.
45..12 Earnings, for determining all benefits provided under
the Plan for all Plan Years beginning after December 31, 1988,
means the first $200,000 (as adjusted by the Secretary of the
Treasury at the same time and in the same manner as under Section
415(d) of the Code, except that the dollar increase effective on
any January 1 is effective for all Plan Years beginning in the
calendar year in which that January 1 occurs, and the first such
dollar increase is effective on January 1, 1990) of the sum of the
Compensation and the Earned Income received by an Employee during
a Plan Year. Notwithstanding the foregoing, for Plan Years
beginning after December 31, 1993, Earnings means the first
$150,000 (as adjusted periodically by the Secretary of the Treasury
for inflation) of the sum of the Compensation and Earned Income
received by an Employee during a Plan Year. To calculate an
allocation to a Participant's Account for any Plan Year shorter
than 12 months, the dollar limit on Earnings must be multiplied by
a fraction of which the denominator is 12 and the numerator is the
number of months in the Plan Year. In determining the Earnings of
a Participant, the rules of Section 414(q)(6) of the Code shall
apply, except that in applying those rules the term "family" shall
include only the Participant's spouse and the Participant's lineal
descendants who have not reached age 19 by the last day of the Plan
Year. If as a result of the application of such rules the
applicable Earnings limitation described above is exceeded, then
the limitation shall be prorated among the affected individuals in
proportion to each such individual's Earnings as determined under
this Section prior to the application of this limitation.
45..13 Effective Date means the date so designated in the
Plan Agreement. If the Plan Agreement indicates that the Employer
is adopting the Plan as an amendment of an existing plan, the
provisions of the existing plan apply to all events preceding the
Effective Date, except as to specific provisions of the Plan which
set forth a retroactive effective date in accordance with Section
1140 of the Tax Reform Act of 1986.
45..14 Eligibility Period means a period of service with the
Employer which an Employee is required to complete in order to
commence participation in the Plan. A 12-month Eligibility Period
is a period of 12 consecutive months beginning on an Employee's
most recent Date of Employment or any anniversary thereof, in which
he is credited with at least 1,000 Hours of Service. A 6-month
Eligibility Period is a period of 6 consecutive months beginning on
an Employee's most recent Date of Employment or any anniversary
thereof, or on the 6-month anniversary of such Date of Employment
or any anniversary thereof, in which he is credited with at least
500 Hours of Service; provided, however, that if he is credited
with 1,000 Hours of Service during a 12-consecutive-month period
following his Date of Employment or any anniversary thereof, he
shall be credited with an Eligibility Period. Notwithstanding the
foregoing, if the Employer has elected in the Plan Agreement to
establish a number less than 1,000 as the requisite for crediting
a 12-month Eligibility Period or less than 500 a 6-month
Eligibility Period, that number shall be so substituted, and in the
case of an Employee in a seasonal industry (as defined under
regulations prescribed by the Secretary of Labor) in which the
customary extent of employment during a calendar year is fewer than
1,000 Hours of Service in the case of a 12-month Eligibility
Period, the number specified in any regulations prescribed by the
Secretary of Labor dealing with years of service shall be
substituted for 1,000. If the Employer so elects in the Plan
Agreement, an Employee's most recent Date of Employment for
purposes of this Section 2.14 shall be the first date on which he
performed services for a business acquired by the Employer.
45..15 Employee means a common law Employee of an Affiliated
Employer; in the case of an Affiliated Employer which is a sole
proprietorship, the sole proprietor thereof; in the case of an
Affiliated Employer which is a partnership, a partner thereof; and
a Leased Employee of an Affiliated Employer. The term "Employee"
includes an individual on Authorized Leave of Absence, a Self-
Employed Individual and an Owner-Employee.
45..16 Employer means the Employer named in the Plan
Agreement and any successor to all or the major portion of its
assets or business which assumes the obligations of the Employer
under the Plan Agreement.
45..17 Employer Contribution Account means an account
maintained on the books of the Plan on behalf of a Participant, in
which are recorded the amounts allocated for his benefit from
contributions by the Employer (other than contributions pursuant to
Article 5), Forfeitures by former Participants (if the Plan
provides for reallocation of Forfeitures), amounts reapplied under
Section 6.1(d), and the income, expenses, gains and losses incurred
thereon.
2.17(a) Employer Stock means securities constituting
"qualifying employer securities" of an Employer within the meaning
of Section 407(d)(5) of ERISA.
45..18 Excess Earnings means a Participant's Earnings in
excess of the Integration Level of the Plan.
45..19 ERISA means the Employee Retirement Income Security
Act of 1974, as amended.
45..20 Forfeiture means a nonvested amount forfeited by a
former Participant, pursuant to Section 8.3, or an amount forfeited
by a former Participant or Beneficiary who cannot be located,
pursuant to Section 9.5.
45..21 Hour of Service means each hour described in
paragraphs (a), (b), (c), (d) or (e) below, subject to paragraphs
(f) and (g) below.
(a) Each hour for which an Employee is paid, or entitled
to payment, for the performance of duties for an Affiliated
Employer. These hours shall be credited to the Employee for
the computation period or periods in which the duties are
performed.
(b) Each hour for which an Employee is paid, or entitled
to payment, by an Affiliated 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 501 Hours of Service shall be credited under this
paragraph for any single continuous period of absence (whether
or not such period occurs in a single computation period)
unless the Employee's absence is not an Authorized Leave of
Absence. Hours under this paragraph shall 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 an
Affiliated Employer. The same Hours of Service shall not be
credited under both paragraph (a) or paragraph (b), as the
case may be, and under this paragraph (c); and no more than
501 Hours of Service shall be credited under this paragraph
(c) with respect to payments of back pay, to the extent that
such pay is agreed to or awarded for a period of time
described in paragraph (b) during which the Employee did not
perform or would not have performed any duties. 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) Each hour during an Authorized Leave of Absence.
Such hours shall be credited at the rate of a customary full
work week for an Employee.
(e) Solely for purposes of determining whether a OneYear
Vesting Break or a One-Year Eligibility Break has occurred,
each hour which otherwise would have been credited to an
Employee but for an absence from work by reason of: the
pregnancy of the Employee, the birth of a child of the
Employee, the placement of a child with the Employee in
connection with the adoption of the child by the Employee, or
caring for a child for a period beginning immediately after
its birth or placement. If the Plan Administrator cannot
determine the hours which would normally have been credited
during such an absence, the Employee shall be credited with
eight Hours of Service for each day of absence. No more than
501 Hours of Service shall be credited under this paragraph by
reason of any pregnancy or placement. Hours credited under
this paragraph shall be treated as Hours of Service only in
the Plan Year or Eligibility Period or both, as the case may
be, in which the absence from work begins, if necessary to
prevent the Participant's incurring a One-Year Vesting Break
or One-Year Eligibility Break in that period, or, if not, in
the period immediately following that in which the absence
begins. The Employee must timely furnish to the Employer
information reasonably required to establish (i) that an
absence from work is for a reason specified above, and (ii)
the number of days for which the absence continued.
(f) Hours of Service shall be determined on the basis of
actual hours for which an Employee is paid or entitled to
payment, or as otherwise specified in the Plan Agreement.
(g) If the Employer maintains the plan of a predecessor
Employer, service for the predecessor Employer shall be
treated as service for the Employer. If the Employer does not
maintain the plan of a predecessor Employer, service for the
predecessor Employer shall be treated as service for the
Employer only to the extent that the Employer so elects in the
Plan Agreement.
(h) Hours of Service shall be credited to a Leased
Employee as though he were an Employee.
45..22 Insurance Trustee means the person named in the Plan
Agreement as Insurance Trustee, and any successor thereto.
45..23 Integration Level means the Earnings amount selected
by the Employer in the Plan Agreement.
45..24 Investment Company means an open-end registered
investment company for which Putnam Mutual Funds Corp., or its
affiliate acts as principal underwriter, or for which Putnam
Investment Management, Inc., or its affiliate serves as an
investment adviser; provided that its prospectus offers its shares
under the Plan.
45..25 Investment Company Shares means shares issued by an
Investment Company.
45..26 Investment Products means any of the investment
products specified by the Employer in accordance with Section 13.2,
from the group of those products sponsored, underwritten or managed
by Putnam as shall be made available by Putnam under the Plan, and
such other products as shall be expressly agreed to in writing by
Putnam for availability under the Plan. The term "Investment
Products" does not include any Policy selected pursuant to Article
14.
45..27 Leased Employee means any person (other than an
Employee of the recipient) who pursuant to an agreement between the
recipient and any other person ("leasing organization") has
performed services for the recipient (or for the recipient 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 year, and such services are of a type historically
performed by Employees in the business field of the recipient
Employer. The compensation of a Leased Employee for purposes of
the Plan means the Compensation (as defined in Section 2.8) of the
Leased Employee attributable to services performed for the
recipient Employer. Contributions or benefits provided to a leased
Employee by the leasing organization which are attributable to
services performed for the recipient Employer shall be treated as
provided by the recipient Employer. Provided that leased Employees
do not constitute more than 20% of the recipient's nonhighly
compensate workforce, a leased Employee shall not be considered an
Employee of the recipient if he is covered by a money purchase
pension plan providing: (1) a nonintegrated Employer contribution
rate of at least 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 Section 125, Section 402(a)(8),
Section 402(h) or Section 403(b) of the Code), (2) immediate
participation, and (3) full and immediate vesting.
45..28 One-Year Eligibility Break means a 12-month
Eligibility Period during which an individual is not credited with
more than 500 Hours of Service; provided, however, that in the case
of an Employee in a seasonal industry, there shall be substituted
for 500 the number of Hours of Service specified in any regulations
of the Secretary of Labor dealing with breaks in service, and
provided further that if the Employer has elected in the Plan
Agreement to establish a number less than 500 as the requisite
Hours of Service for crediting a 12-month Eligibility Period, that
number shall be substituted for 500.
45..29 One-Year Vesting Break means a Year of Service
measuring period, as elected by the Employer in the Plan Agreement,
during which an individual is not credited with more than 500 Hours
of Service; provided, however, that in the case of an Employee in
a seasonal industry, there shall be substituted for 500 the number
of Hours of Service specified in any regulations for the Secretary
of Labor dealing with breaks in service, and provided further that
if the Employer has elected in the Plan Agreement to establish a
number less than 500 as the requisite Hours of Service for
crediting a Year of Service, that number shall be substituted for
500.
45..30 Owner-Employee means the sole proprietor of an
Affiliated Employer that is a sole proprietorship, or a partner
owning more than 10% of either the capital or profits interest of
an Affiliated Employer that is a partnership. The Plan
Administrator shall be responsible for identifying Owner-Employees
to the Recordkeeper.
45..31 Participant means each Employee who has met the
requirement for participation in Article 3. An Employee is not a
Participant for any period before the entry date applicable to him.
45..32 Participant Contribution Account means an account
maintained on the books of the Plan, in which are recorded
nondeductible contributions by a Participant pursuant to Sections
4.2(f), 4.3(e) and 5.9, and any income, expenses, gains or losses
incurred thereon.
45..33 Plan means the form of defined contribution retirement
plan and trust agreement adopted by the Employer, consisting of the
Plan Agreement and the Putnam Basic Plan Document #05 as set forth
herein, together with any and all amendments and supplements
thereto.
45..34 Plan Administrator means the Employer or its appointee
pursuant to Section 16.1.
45..35 Plan Agreement means the separate agreement entered
into between the Employer and the Trustee (and the Insurance
Trustee, if any) and accepted by Putnam, under which the Employer
adopts the Plan and selects among its optional provisions.
45..36 Plan Year means the period of 12 consecutive months
specified by the employer in the Plan Agreement.
45..37 Policy means an ordinary life insurance, term
insurance, retirement income or endowment policy or an individual
or group annuity contract issued by a life insurance company in
connection with the Plan, or an interest therein. An ordinary life
insurance policy within the meaning of this definition provides
non-decreasing death benefits and non-increasing premiums. Policy
shall also include any other insurance policy expressly agreed to
in writing by Putnam.
45..38 Putnam means Putnam Mutual Funds Corp., or a company
affiliated with it which Putnam Mutual Funds Corp. has designated
as its agent to perform specified actions or procedures in
connection with the prototype Plan.
45..39 Qualified Domestic Relations Order means any judgment,
decree or order (including approval of a property settlement
agreement) which constitutes a "qualified domestic relations order"
within the meaning of Code Section 414(p). A judgment, decree or
order shall not fail to be a Qualified Domestic Relations Order
merely because it requires a distribution to an alternate payee (or
the segregation of accounts pending distribution to an alternate
payee) before the Participant is otherwise entitled to a
distribution under the Plan.
45..40 Qualified Participant means any Participant who is an
active Employee on the last day of the Plan Year in question or who
is credited with more than 500 Hours of Service during the Plan
Year in question or whose Retirement or death occurred during the
Plan Year in question. If the Plan is not adopted to replace an
existing plan, this Section 2.39 is effective on the Effective
Date. If the Plan replaces an existing plan, this Section 2.39 is
effective on the first day of the first Plan Year that begins after
December 31, 1988, or if later, on the Effective Date, and the
provision of the existing plan that this Section 2.39 replaces
shall continue to apply until that time.
45..41 Recordkeeper means the person or entity designated by
the Employer in the Plan Agreement to perform the duties described
in Section 16.4, and any successor thereto. If Putnam is the
Recordkeeper, the terms and conditions of its service will be as
specified in a service agreement between the Employer and Putnam.
45..42 Retirement means ceasing to be an Employee in
accordance with Section 7.1.
45..43 Rollover Account means an account established for an
Employee who makes a rollover contribution to the Plan pursuant to
Section 4.4.
45..44 Self-Employed Individual means an individual whose
personal services are a material income-producing factor in the
trade or business for which the Plan is established, and who has
Earned Income for the taxable year from that trade or business, or
would have Earned Income but for the fact that the trade or
business had no net profits for the taxable year.
45..45 Shareholder-Employee means any officer or Employee of
an electing small business corporation, within the meaning of
Section 1362 of the Code, who on any day during a taxable year of
the Employer owns (or is considered as owning under Section
318(a)(1) of the Code) more than 5% of the outstanding stock of the
Employer. The Plan administrator shall be responsible for
identifying Shareholder-Employees to the Recordkeeper.
45..46 Social Security Wage Base means the maximum amount
considered as wages under Section 3121(a)(1) of the Code as in
effect on the first day of the Plan Year.
45..47 Trust and Trust Fund mean the trust fund established
under Section 13.1.
45..48 Trustee means the person, or the entity with trustee
powers, named in the Plan Agreement as trustee, and any successor
thereto.
45..49 Valuation Date means each day when the New York Stock
Exchange is open, or such other date or dates as the Employer may
designate by written agreement with the Recordkeeper.
45..50 Year of Service means a Plan Year or an 12-month
Eligibility Period, as elected by the Employer in the Plan
Agreement, in which an Employee is credited with at least 1,000
Hours of Service; provided, however, that if the Employer has
elected in the Plan Agreement to establish a number less than 1,000
as the requisite for crediting a Year of Service, that number shall
be substituted for 1,000, and provided further that in the case of
an Employee in a seasonal industry (as defined under regulations
prescribed by the Secretary of Labor) in which the customary extent
of employment during a calendar year is fewer than 1,000 Hours of
Service, the number specified in any regulations prescribed by the
Secretary of Labor dealing with years of service shall be
substituted for 1,000. An Employee's Years of Service shall
include service credited prior to the Effective Date under any
predecessor plan. If the initial Plan Year is shorter than 12
months, each Employee who is credited with at least 1,000 Hours of
Service in the 12-month period ending on the last day of the
initial Plan Year shall be credited with a Year of Service with
respect to the initial Plan Year.
If the Employer has so elected in the Plan Agreement, Years of
Service for vesting shall not include:
(a) Service in any Plan Year (or comparable period prior
to the Effective Date) completed before the Employee reached
age 18;
(b) Service completed during a period in which the
Employer did not maintain the Plan or any predecessor plan (as
defined under regulations prescribed by the Secretary of the
Treasury).
If the Employer has so elected in the Plan Agreement, Years of
Service for vesting shall include employment by a business acquired
by the Employer, before the date of the acquisition.
The following definitions apply only to cash or deferred
arrangements under Section 401(k) (CODA):
45..51 Deferral Agreement means an Employee's agreement to
make one or more Elective Deferrals in accordance with Section 5.2.
45..52 Elective Deferral means any contribution made to the
Plan by the Employer at the election of a Participant, in lieu of
cash compensation, including contributions made pursuant to a
Deferral Agreement or other deferral mechanism.
45..53 Elective Deferral Account means an account maintained
on the books of the Plan, in which are recorded a Participant's
Elective Deferrals and the income, expenses, gains and losses
incurred thereon.
45..54 Employer Matching Contribution means a contribution
made by the Employer (i) to the Plan pursuant to Section 5.8, or
(ii) to another defined contribution plan on account of a
Participant's "elective deferrals" or "employee contributions," as
those terms are used in Section 401(m)(4) of the Code.
45..55 Employer Matching Account means an account maintained
on the books of the Plan, in which are recorded the Employer
Matching Contributions made on behalf of a Participant and the
income, expenses, gains and losses incurred thereon.
45..56 Highly Compensated Employee means any highly
compensated active Employee or highly compensated former Employee
as defined in subsection (a) below; provided, however, that if the
Employer so elects in the Plan Agreement, Highly Compensated
Employee means any highly compensated Employee under the simplified
method described in subsection (b) below.
(a) Regular Method. 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 $75,000 (as adjusted pursuant to Section 415(d) of
the Code); (ii) received compensation from the Employer in
excess of $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 50% of the
dollar limitation in effect under Section 415(b)(1)(A) of the
Code. The term also includes (i) Employees who are both
described in the preceding sentence if the term "determination
year" is substituted for the term "look-back year," and among
the 100 Employees who received the most compensation from the
Employer during the determination year; and (ii) Employees who
are 5% owners at any time during the look-back year or
determination year. If no officer has satisfied the
compensation requirement of (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.
A highly compensated former Employee includes any
Employee who separated from service (or was deemed to have
separated) before the determination year, performed no service
for the Employer during the determination year, and was a
highly compensated active Employee for either the year of
separation from service or any determination year ending on or
after the Employee's 55th birthday.
If during a determination year or look-back year an
Employee is a family member of either a 5% owner who is an
active or former Employee, or a Highly Compensated Employee
who is one of the 10 most highly paid Highly Compensated
Employees ranked on the basis of compensation paid by the
Employer during the year, then the family member and the 5%
owner or top-ten Highly Compensated Employee shall be treated
as a single Employee receiving compensation and Plan
contributions or benefits equal to the sum of the compensation
and contributions or benefits of the family member and the 5%
owner or top-ten Highly Compensated Employee. For purposes of
this Section 2.56(a), family members include the spouse,
lineal ascendants and descendants of the Employee or former
Employee and the spouses of such lineal ascendants and
descendants.
For purposes of this subsection (a), the "determination
year" shall be the Plan Year, and the "look-back year" shall be the
12-month period immediately preceding the determination year;
provided, however, that in a Plan for which the Plan Year is the
calendar year, the current Plan Year shall be both the
"determination year" and the "look-back year" if the Employer so
elects in the Plan Agreement.
(b) Simplified Method. An Employee is a Highly
Compensated Employee under this simplified method if (i) the
Employee is a 5-percent owner during the Plan Year; (ii) the
Employee's compensation for the Plan Year exceeds $75,000 (as
adjusted pursuant to Section 415(d) of the Code); (iii) the
Employee's compensation for the Plan Year exceeds $50,000 (as
adjusted pursuant to Section 415(d) of the Code) and the
Employee is in the top-paid group of Employees; or (iv) the
Employee is an officer of the Employer and received
compensation during the Plan Year that is greater than 50% of
the dollar limitation under Code Section 415(b)(1)(A).
The lookback provisions of Code Section 414(q) do not
apply to determining Highly Compensated Employees under this
simplified method. An Employer that applies this simplified
method for determining Highly Compensated Employees may choose
to apply this method on the basis of the Employer's workforce
as of a single day during the Plan Year ("snapshot day"). In
applying this simplified method on a snapshot basis, the
Employer shall determine who is a Highly Compensated Employee
on the basis of the data as of the snapshot day. If the
determination of who is a Highly Compensated Employee is made
earlier than the last day of the Plan Year, the Employee's
compensation that is used to determine an Employee's status
must be projected for the Plan Year under a reasonable method
established by the Employer.
Notwithstanding the foregoing, in addition to those
Employees who are determined to be highly compensated on the
Plan's snapshot day, as described above, where there are
Employees who are not employed on the snapshot day but who are
taken into account for purposes of testing under Section 5.6
or 5.11, the Employer must treat as a Highly Compensated
Employee any Eligible Employee for the Plan Year who:
(1) terminated prior to the snapshot day and was
a Highly Compensated Employee in the prior year;
(2) terminated prior to the snapshot day and (i)
was a 5-percent owner, (ii) had compensation for the Plan
Year greater than or equal to the projected compensation
of any Employee who is treated as a Highly Compensated
Employee on the snapshot day (except for Employees who
are Highly Compensated Employees solely because they are
5-percent owners or officers), or (iii) was an officer
and had compensation greater than or equal to the
projected compensation of any other officer who is a
Highly Compensated Employee on the snapshot day solely
because that person is an officer; or
(3) becomes employed subsequent to the snapshot day
and (i) is a 5-percent owner, (ii) has compensation for
the Plan Year greater than or equal to the projected
compensation of any Employe who is treated as a Highly
Compensated Employee on the snapshot day (except for
Employees who are Highly Compensated Employees solely
because they are 5-percent owners or officers), or (iii)
is an officer and has compensation greater than or equal
to the projected compensation of any other officer who is
a Highly Compensated Employee on the snapshot day solely
because that person is an officer.
If during a Plan Year an Employee is a family member of
either a 5-percent owner who is an Employee, or a Highly
Compensated Employee who is one of the ten most highly paid
Highly Compensated Employees ranked on the basis of
compensation paid by the Employees during the year, then the
family member and the 5-percent owner or top-ten-Highly-
Compensated-Employee shall be treated as a single Employee
receiving compensation and Plan contributions or benefits
equal to the sum of the compensation and contributions or
benefits of the family member and the 5-percent owner or top-
ten-Highly-Compensated-Employee. For purposes of this Section
2.56(b), family members include the spouse, lineal ascendants
and descendants of the Employee and the spouses of such lineal
ascendants and descendants.
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 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.
45..57 Non-Highly Compensated Employee means an Employee who
is not a Highly Compensated Employee.
45..58 Qualified Matching Contribution means a contribution
made by the Employer that: (i) is allocated in proportion to a
Participant's Elective Deferrals, (ii) is fully vested at all times
and (iii) is distributable only in accordance with Section 5.11.
45..59 Qualified Matching Account means an account maintained
on the books of the Plan, in which are recorded the Qualified
Matching Contributions on behalf of a Participant and the income,
expense, gain and loss attributable thereto.
45..60 Qualified Nonelective Contribution means a
contribution (other than an Employer Matching Contribution or
Qualified Matching Contribution) made by the Employer, that: (i) a
Participant may not elect to receive in cash until it is
distributed from the Plan; (ii) is fully vested at all times; and
(iii) is distributable only in accordance with Section 5.11.
45..61 Qualified Nonelective Contribution Account means an
account maintained on the books of the Plan, in which are recorded
the Qualified Nonelective Contributions on behalf of a Participant
and the income, expense, gain and loss attributable thereto.
<PAGE>
ARTICLE 46. PARTICIPATION
46..1 Initial Participation. An Employee shall begin
participation in the Plan as of the entry date specified in the
Plan Agreement, or as of the Effective Date, whichever is later;
provided, however, that:
(a) If the Plan is adopted as an amendment of a
predecessor plan of the Employer, every Employee who was
participating under the predecessor plan when it was so
amended shall become a Participant in the Plan as of the
Effective Date, whether or not he has satisfied the age and
service requirements specified in the Plan Agreement; and
(b) Unless the Employer specifies otherwise in the Plan
Agreement, any individual who is (i) a nonresident alien
receiving no earned income from an Affiliated Employer which
constitutes income from sources within the United States, or
(ii) included in a unit of Employees covered by a collective
bargaining agreement between the Employer and Employee
representatives (excluding from the term "Employee
representatives" any organization of which more than half of
the members are Employees who are owners, officers, or
executives of an Affiliated Employer), if retirement benefits
were the subject of good faith bargaining and no more than 2%
of the Employees covered by the collective bargaining
agreement are professionals as defined in Section 1.410(b)-9
of the Income Tax Regulations, shall not participate in the
Plan until the later of the date on which he ceases to be
described in clause (i) or (ii), whichever is applicable, or
the entry date specified by the Employer in the Plan
Agreement; and
(c) If the Plan is not adopted as an amendment of a
predecessor plan of the Employer, all Employees on the
Effective Date shall begin participation on the Effective
Date, if the Employer so elects in the Plan Agreement; and
(d) A Participant shall cease to participate in the Plan
when he becomes a member of a class of Employees ineligible to
participate in the Plan, and shall resume participation
immediately upon his return to a class of Employees eligible
to participate in the Plan.
46..2 Special Participation Rule. With respect to a Plan in
which the Employer has specified full and immediate vesting in the
Plan Agreement, an Employee who incurs a One-Year Eligibility Break
before completing the number of Eligibility Periods required under
Section 3.1 shall not thereafter be credited with any Eligibility
Period completed before the One-Year Eligibility Break.
46..3 Resumed Participation. A former Employee who incurs a
One-Year Eligibility Break after having become a Participant shall
participate in the Plan as of the date on which he again becomes an
Employee, if (i) his Employer Contribution Account or Employer
Matching Account had become partially or fully vested before he
incurred a One-Year Vesting Break, or (ii) he incurred fewer than
five consecutive One-Year Eligibility Breaks. In any other case,
when he again becomes an Employee he shall be treated as a new
Employee under Section 3.1.
46..4 Benefits for Owner-Employees. If the Plan provides
contributions or benefits for one or more Owner-Employees who
control both the trade or business with respect to which the Plan
is established and one or more other trades or businesses, the Plan
and plans established with respect to such other trades or
businesses must, when looked at as a single plan, satisfy Sections
401(a) and (d) of the Code with respect to the Employees of this
and all such other trades or businesses. 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
each such other trade or business must be included in a plan which
satisfies Sections 401(a) and (d) of the Code and which provides
contributions and benefits not less favorable than those provided
for such Owner-Employees under the Plan. If an individual is
covered as an Owner-Employee under the plans of two or more trades
or businesses which he does not control and such individual
controls a trade or business, then the contributions or benefits of
the Employees under the plan of the trade or business which he does
control must be as favorable as those provided for him under the
most favorable plan of the trade or business which he does not
control. For purposes of this Section 3.4, an Owner-Employee, or
two or more Owner-Employees, shall be considered to control a trade
or business if such Owner-Employee, or such two or more Owner-
Employees together:
(a) own the entire interest in an unincorporated trade
or business, or
(b) in the case of a partnership, own more than 50% of
either the capital interest or the profits interest in such
partnership.
For purposes of the preceding sentence, an Owner-Employee or
two or more Owner-Employees shall be treated as owning any interest
in a partnership which is owned, directly 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.
46..5 Changes in Classification. If a Participant ceases to
be a member of a classification of Employees eligible to
participate in the Plan, but does not incur a One-Year Eligibility
Break, he will continue to be credited with Years of Service for
vesting while he remains an Employee, and he will resume
participation as of the date on which he again becomes a member of
a classification of Employees eligible to participate in the Plan.
If such a Participant incurs a One-Year Eligibility Break, Section
3.3 will apply. If a Participant who ceases to be a member of a
classification of Employees eligible to participate in the Plan
becomes a member of a classification of Employees eligible to
participate in another plan of the Employer, his Account, if any,
under the Plan shall, upon the Administrator's direction, be
transferred to the plan in which he has become eligible to
participate, if such plan permits receipt of such Account.
If an Employee who is not a member of a classification of
Employees eligible to participate in the Plan satisfies the age and
service requirements specified in the Plan Agreement, he will begin
to participate immediately upon becoming a member of an eligible
classification. If such an Employee has account balances under
another plan of the Employer, such account balances shall be
transferred to the Plan upon the Employee's commencement of
participation in the Plan, if such other plan permits such
transfer.<PAGE>
ARTICLE 47. CONTRIBUTIONS
47..1 Provisions Applicable to All Plans.
(a) Payment and Crediting of Employer Contributions.
The Employer shall pay to the order of the Trustee the
aggregate contribution to the Trust Fund (other than the
premium payments on any Policy) for each Plan Year. Each
contribution shall be accompanied by written instructions from
the Employer, in the manner prescribed by Putnam. Neither the
Trustee nor Putnam shall be under any duty to inquire into the
correctness of the amount or the timing of any contribution,
or to collect any amount if the Employer fails to make a
contribution as provided in the Plan.
(b) Responsibility for Premium Payments. Contributions
to be applied to the payment of the premiums on any Policy
shall be paid by the Employer directly to the insurer in cash.
In determining the amount of any premium due under any Policy
with respect to any Participant, the Employer and the
Insurance Trustee may rely conclusively upon information
furnished by the provider of the Policy. For purposes of
Sections 4.2, 4.3 and Article 5, all Employer contributions
used to pay premiums on Policies shall be treated as
contributions made to the appropriate Participant's Employer
Contribution Account. If the Employer omits any premium
payment or makes any mistake concerning a premium payment,
neither the Employer nor the Insurance Trustee shall have any
liability in excess of the premium to be paid.
(c) Time for Payment. The aggregate of all
contributions with respect to a Plan Year shall be transferred
to the Trustee or the insurer no later than the due date
(including extensions) for filing the Employer's federal
income tax return for that Plan Year.
(d) Limitations on Allocations. All allocations shall
be subject to the limitations in Article 6.
(e) Establishment of Accounts. The Employer will
establish and maintain (or cause to be established and
maintained) for each Participant individual accounts adequate
to disclose his interest in the Trust Fund, including such of
the following separate accounts as shall apply to the
Participant: Employer Contribution Account, Participant
Contribution Account, and Rollover Account; and in a Plan with
a CODA, Elective Deferral Account, Qualified Nonelective
Account, Qualified Matching Account and Employer Matching
Account. The maintenance of such accounts shall be only for
recordkeeping purposes, and the assets of separate accounts
shall not be required to be segregated for purposes of
investment.
(f) Restoration of Accounts. Notwithstanding any other
provision of the Plan, for any Plan Year in which it is
necessary to restore any portion of a Participant's Account
pursuant to Section 8.3(b) or 9.5, to the extent that the
amount of Forfeitures available is insufficient to accomplish
such restoration, the Employer shall contribute the amount
necessary to eliminate the insufficiency, regardless of
whether the contribution is currently deductible by the
Employer under Section 404 of the Code. Forfeitures shall be
considered available for allocation pursuant to Sections 4.2
and 5.8 in a Plan Year only after all necessary restoration of
Accounts has been accomplished.
47..2 Provisions Applicable Only to Profit Sharing Plans.
(a) Amount of Annual Contribution. The Employer will
contribute for each Plan Year an amount determined in
accordance with the formula specified by the Employer in the
Plan Agreement, less any amounts reapplied for the Plan Year
under Section 6.1(d), not to exceed the amount deductible
under Section 404 of the Code. If the Employer so elects in
the Plan Agreement, the amount of Forfeitures occurring in a
Plan Year shall be applied to reduce the Employer's
contribution by a like amount, and such Forfeitures shall be
treated as a portion of the Employer contribution for purposes
of paragraphs (b) and (c).
(b) Allocation of Contributions: General Rule. As of
the last day of each Plan Year, the Employer's contribution
(and any amounts reapplied under Section 6.1(d)) for the Plan
Year shall be allocated among the Employer Contribution
Accounts of Qualified Participants in proportion to their
Earnings, unless the Employer elects in the Plan Agreement to
allocate contributions in a uniform dollar amount to the
Account of each Qualified Participant. This rule does not
apply to a Plan that is integrated with Social Security or to
allocations in a CODA.
(c) Per Capita Allocation. An Employer may elect in the
Plan Agreement to allocate Employer Contributions and any
amounts reapplied under Section 6.1(d) (but not allocations in
a CODA) in a uniform dollar amount to the Account of each
Qualified Participant.
(d) Plans Integrated with Social Security. Subject to
Section 4.6 and if the Employer elects in the Plan Agreement
an allocation formula integrated with Social Security,
Employer contributions (and any amounts reapplied under
Section 6.1(d)) shall be allocated as of the last day of the
Plan Year, as follows:
(1) Top-Heavy Integration Formula. If the Plan is
required to provide a minimum allocation for the Plan
Year pursuant to the Top-Heavy Plan rules of Article 15,
or if the Employer has specified in the Plan Agreement
that this paragraph (1) will apply whether or not the
Plan is Top-Heavy, then:
(A) First, among the Employer Contribution
Accounts of all Qualified Participants, in the
ratio that each Qualified Participant's Earnings
bears to all Qualified Participants' Earnings. The
total amount allocated in this manner shall be
equal to 3% of all Qualified Participants' Earnings
(or, if less, the entire amount to be allocated).
(B) Next, among the Employer Contribution
Accounts of all Qualified Participants who have
Excess Earnings, in the ratio that each Qualified
Participant's Excess Earnings bears to all
Qualified Participants' Excess Earnings. The total
amount allocated in this manner shall be equal to
3% of all Qualified Participants' Excess Earnings
(or, if less, the entire amount remaining to be
allocated).
(C) Next, among the Employer Contribution
Accounts of all Qualified Participants, in the
ratio that the sum of each Qualified Participant's
Earnings and Excess Earnings bears to the sum of
all Qualified Participants' Earnings and Excess
Earnings. The total amount allocated in this
manner shall not exceed the lesser of (i) the sum
of all Participants' Earnings and Excess Earnings
multiplied by the Top-Heavy Maximum Disparity
Percentage determined under subparagraph (1)(E), or
(ii) the entire amount remaining to be allocated.
(D) Finally, any amount remaining shall be
allocated among the Employer Contribution Accounts
of all Qualified Participants in the ratio that
each Qualified Participant's Earnings bears to all
Qualified Participants' Earnings.
(E) The Top-Heavy Maximum Disparity
Percentage shall be the lesser of (i) 2.7% or (ii)
the applicable percentage from the following table:
<PAGE>
If the Plan's
Integration Level
is More than:<PAGE>
But not more than:<PAGE>
The applicable
percentage is:<PAGE>
$0<PAGE>
The greater of
$10,000 or 20% of
the Social Security
Wage Base<PAGE>
2.7%<PAGE>
The greater of
$10,000 or 20% of
the Social Security
Wage Base<PAGE>
80% of the Social
Security Wage Base<PAGE>
1.3%<PAGE>
80% of the Social
Security Wage Base<PAGE>
Less than the
Social Security
Wage Base<PAGE>
2.4%<PAGE>
<PAGE>
If the Plan's Integration Level is equal to the Social
Security Wage Base, the Top-Heavy Maximum Disparity Percentage is
2.7%.
(2) Non-Top Heavy Integration Formula. If the Plan
is not required to provide a minimum allocation for the
Plan Year pursuant to the Top-Heavy Plan rules of Article
15, and the Employer has not specified in the Plan
Agreement that paragraph (1) will apply whether or not
the Plan is Top-Heavy, then:
(A) An amount equal to (i) the Maximum
Disparity Percentage determined under subparagraph
(2)(C) multiplied by the sum of all Qualified
Participants' Earnings and Excess Earnings, or (ii)
if less, the entire amount to be allocated, shall
be allocated among the Employer Contribution
Account of all Participants in the ratio that the
sum of each Qualified Participant's Earnings and
Excess Earnings bears to the sum of all Qualified
Participants' Earnings and Excess Earnings.
(B) Any amount remaining after the allocation
in paragraph (2)(A) shall be allocated among the
Employer Contribution Accounts of all Qualified
Participants in the ratio that each Qualified
Participant's Earnings bears to all Qualified
Participants' Earnings.
(C) The Maximum Disparity Percentage shall be
the lesser of (i) 5.7% or (ii) the applicable
percentage from the following table:
If the Plan's
Integration Level
is more than:<PAGE>
But not more than:<PAGE>
The applicable
percentage is:<PAGE>
$0<PAGE>
The greater of
$10,000 or 20% of
the Social Security
Wage Base<PAGE>
5.7%<PAGE>
The greater of
$10,000 or 20% of
the Social Security
Wage Base<PAGE>
80% of the Social
Security Wage Base<PAGE>
4.3%<PAGE>
80% of the Social
Security Wage Base<PAGE>
Less than the
Social Security
Wage Base<PAGE>
5.4%<PAGE>
<PAGE>
If the Plan's Integration Level is equal to the Social
Security Wage Base, the Maximum Disparity Percentage is 5.7%.
(3) In this Section 4.2, Earnings means Earnings as
defined in Section 2.12.
(e) Allocation of Forfeitures. Forfeitures shall be
allocated among the Employer Contribution Accounts of all
Qualified Participants in accordance with paragraph (a) or
(b), whichever applies to Employer Contributions. Forfeitures
may be allocated pursuant to paragraphs (d)(1)(B), (d)(1)(C)
and (d)(2)(A) only to the extent that the limitation described
therein has not been fully utilized by the allocation of
Employer Contributions and amounts reapplied under Section
6.1(d).
(f) Participant Contributions. If so specified in the
Plan Agreement, a Participant may make nondeductible
contributions to the Plan in accordance with the Plan
Agreement. Such contributions shall be limited so as to meet
the nondiscrimination test of Section 401(m) of the Code, as
set out in Section 5.11 of the Plan. Participant
contributions will be allocated to the Participant
Contributions Account of the contributing Participant. All
Participant Contributions Accounts will be fully vested at all
times.
47..3 Provisions Applicable Only to Money Purchase Pension
Plans.
(a) Amount of Annual Contributions. The Employer will
contribute for each Plan Year an amount described in paragraph
(b) or (c) below, whichever is applicable, less any amounts
reapplied for the Plan Year under Section 6.1(d), not to
exceed the amount deductible under Section 404(c) of the Code.
If the Employer so elects in the Plan Agreement, the amount of
Forfeitures occurring in a Plan Year shall be applied to
reduce the Employer's contribution by a like amount, and such
Forfeitures shall be treated as a portion of the Employer
Contribution for purposes of paragraphs (b) and (c).
(b) Allocation of Contributions; General Rule. The
Employer shall contribute an amount equal to the product of
the Earnings of all Qualified Participants and the Base
Contribution Percentage, and the contribution shall be
allocated as of the last day of the Plan Year among the
Employer Contribution Accounts of all Qualified Participants
in the ratio that the Earnings of each Qualified Participant
bears to the Earnings of all Qualified Participants. This
general rule does not apply to a Plan that is integrated with
Social Security.
(c) Plans Integrated with Social Security. Subject to
Section 4.6 and if the Employer has elected in the Plan
Agreement to integrate the Plan with Social Security, the
Employer shall contribute an amount equal to the sum of the
following amounts, and the contribution shall be allocated as
of the last day of the Plan Year as follows:
(1) To the Employer Contribution Account of each
Qualified Participant, an amount equal to the product of
the Base Contribution Percentage and his Earnings, and
(2) To the Employer Contribution Account of each
Qualified Participant who has Excess Earnings, the
product of his Excess Earnings and the lesser of (i) the
Base Contribution Percentage or (ii) the Money Purchase
Maximum Disparity Percentage determined under paragraph
(d).
(3) The Base Contribution Percentage shall be no
less than three percent in either of the following
circumstances: (i) any Plan Year of a Plan for which the
Plan Agreement does not specify that the Employer will
perform annual Top-Heavy testing, or (ii) any Plan Year
in which the Plan is required to provide a minimum
allocation for the Plan Year pursuant to the Top-Heavy
Plan rules of Article 15.
(d) The Money Purchase Maximum Disparity Percentage is
equal to the lesser of (i) 5.7% or (ii) the applicable
percentage from the following table:
If the Plan's
Integration Level
is more than:<PAGE>
But not more than:<PAGE>
The applicable
percentage is:<PAGE>
$0<PAGE>
The greater of
$10,000 or 20% of
the Social Security
Wage Base<PAGE>
5.7%<PAGE>
The greater of
$10,000 or 20% of
the Social Security
Wage Base<PAGE>
80% of the Social
Security Wage Base<PAGE>
4.3%<PAGE>
80% of the Social
Security Wage Base<PAGE>
Less than the
Social Security
Wage Base<PAGE>
5.4% <PAGE>
If the Plan's Integration Level is equal to the Social
Security Wage Base, the Money Purchase Maximum Disparity Percentage
is 5.7%.
(e) Participant Contributions. If so specified in the
Plan Agreement, a Participant may make nondeductible
contributions to the Plan in accordance with the Plan
Agreement. Such contributions shall be limited so as to meet
the nondiscrimination test of Section 401(m) of the Code, as
set out in Section 5.11 of the Plan. Participant
contributions will be allocated to the Participant
Contributions Account of the contributing Participant. All
Participant Contributions Accounts will be fully vested at all
times.
(f) Separate Allocation of Forfeitures. If the Employer
has not elected in the Plan Agreement to use Forfeitures to
reduce the amount of its contribution, Forfeitures shall be
allocated among the Employer Contribution Accounts of all
Qualified Participants in proportion of their Earnings.
47..4 Rollover Contributions. An Employee in an eligible
class may contribute at any time cash or other property (which is
not a collectible within the meaning of Section 408(m) of the Code)
acceptable to the Trustee representing qualified rollover amounts
under Sections 402, 403, or 408 of the Code. Amounts so
contributed shall be credited to a Rollover Account for the
Participant.
47..5 No Deductible Employee Contributions. The Plan
Administrator shall not accept deductible employee contributions.
47..6 Paired Plans. An Employer may adopt as paired plans
Putnam Profit Sharing and 401(k) Plan (Plan Agreement #001) and
Putnam Money Purchase Pension Plan (Plan Agreement #002). Only one
of the two paired plans may be integrated with Social Security. In
any Plan Year in which Putnam paired plans are top-heavy, each non-
key employee who is eligible to participate in both plans will have
allocated to his account in the Putnam Money Purchase Pension Plan
a minimum contribution that meets the requirements of Section 15.3.
<PAGE>
ARTICLE 48. CASH OR DEFERRED ARRANGEMENT UNDER SECTION 401(k)
(CODA)
48..1 Applicability; Allocations. This Article 5 applies to
any plan for which the Employer has elected in the Plan Agreement
to include a CODA. The Employer may specify in the Plan Agreement
that contributions will be made to the Plan only under the CODA, or
that contributions may be made under Section 4.2 as well as under
the CODA. Allocations to Participants' Accounts of contributions
made pursuant to this Article 5 shall be made as soon as
administratively feasible after their receipt by the Trustee, but
in any case no later than as of the last day of the Plan Year for
which the contributions were made.
48..2 CODA Participation. Each Employee who has met the
eligibility requirements of Article 3 may make Elective Deferrals
to the Plan by completing and returning to the Plan Administrator
a Deferral Agreement form which provides that the Participant's
cash compensation from the Employer will be reduced by the amount
indicated in the Deferral Agreement, and that the Employer will
contribute an equivalent amount to the Trust on behalf of the
Participant. The following rules will govern Elective Deferrals:
(a) Subject to the limits specified in the Plan
Agreement and set forth in Section 5.3, a Deferral Agreement
may apply to any amount or percentage of either or both of the
Earnings payable to a Participant in each regular payroll
period of the Employer, or one or more bonuses payable to a
Participant from time to time as specified by the Employer.
(b) In accordance with such reasonable rules as the Plan
Administrator shall specify, a Deferral Agreement will become
effective as soon as is administratively feasible after the
Deferral Agreement is returned to the Plan Administrator, and
will remain effective until it is modified or terminated. No
Deferral Agreement may become effective retroactively.
(c) A Participant may modify his Deferral Agreement by
completing and returning to the Plan Administrator a new
Deferral Agreement form as of any of the dates specified in
the Plan Agreement, and any such modification will become
effective as described in paragraph (b).
(d) A Participant may terminate his Deferral Agreement
at any time upon advance written notice to the Plan
Administrator, and any such Termination will become effective
as described in paragraph (b).
48..3 Annual Limit on Elective Deferrals. During any taxable
year of a Participant, his Elective Deferrals under the Plan and
any other qualified plan of an Affiliated Employer shall not exceed
the dollar limit contained in Section 402(g) of the Code in effect
at the beginning of the taxable year. With respect to any taxable
year, a Participant's Elective Deferrals for purposes of this
Section 5.3 include all Employer contributions made on his behalf
pursuant to an election to defer under any qualified CODA as
described in Section 401(k) of the Code, any simplified employee
pension cash or deferred arrangement (SARSEP) as described in
Section 402(h)(1)(B) of the Code, any eligible deferred
compensation plan under Section 457 of the Code, any plan described
under Section 501(c)(18) of the Code, and any Employer
contributions made on behalf of the Participant for the purchase of
an annuity contract under Section 403(b) of the Code pursuant to a
salary reduction agreement. The amount of Elective Deferrals of a
Participant who receives a hardship distribution pursuant to
Section 5.14 shall be reduced, for the taxable year next following
the distribution, by the amount of Elective Deferrals made in the
taxable year of the hardship distribution.
48..4 Distribution of Certain Elective Deferrals. "Excess
Elective Deferrals" means those Elective Deferrals described in
Section 5.3 that are includible in a Participant's gross income
under Section 402(g) of the Code, to the extent that the
Participant's aggregate elective deferrals for a taxable year
exceed the dollar limitation under that Code Section. Excess
Elective Deferrals shall be treated as Annual Additions under the
Plan, whether or not they are distributed under this Section 5.4.
A Participant may designate to the Plan any Excess Elective
Deferrals made during his taxable year by notifying the Employer on
or before the following March 15 of the amount of the Excess
Elective Deferrals to be so designated. A Participant who has
Excess Elective Deferrals for a taxable year, taking into account
only his Elective Deferrals under the Plan and any other plans of
the Affiliated Employers, shall be deemed to have designated the
entire amount of such Excess Elective Deferrals.
Notwithstanding any other provision of the Plan, Excess
Elective Deferrals, plus any income and minus any loss allocable
thereto, shall be distributed no later than April 15 to any
Participant to whose Account Excess Elective Deferrals were so
designated or deemed designated for the preceding year. The income
or loss allocable to Excess Elective Deferrals is the income or
loss allocable to the Participant's Elective Deferral Account for
the taxable year multiplied by a fraction, the numerator of which
is the 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 the year.
To the extent that the return to a Participant of his Elective
Deferrals would reduce an Excess Amount (as defined in Section
6.5(f)), such Excess Deferrals shall be distributed to the
Participant in accordance with Article 6.
48..5 Satisfaction of ADP and ACP Tests. In each Plan Year,
the Plan must satisfy the ADP test described in Section 5.6 and the
ACP test described in Section 5.9. The Employer may cause the Plan
to satisfy the ADP or ACP test or both tests for a Plan Year by any
of the following methods or by any combination of them:
(a) By the distribution of Excess Contributions in
accordance with Section 5.7, or the distribution of Excess
Aggregate Contributions in accordance with Section 5.12, or
both; or
(b) If the Employer has so elected in the Plan
Agreement, by making Qualified Nonelective Contributions or
Qualified Matching Contributions or both, in accordance with
the Plan Agreement and this Section 5.5.
48..6 Actual Deferral Percentage Test Limit. The Actual
Deferral Percentage (hereinafter "ADP") for Participants who are
Highly Compensated Employees for each Plan Year and the ADP for
Participants who are Non-Highly Compensated Employees for the same
Plan Year must satisfy one of the following tests:
(a) The ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
Participants who are Non-Highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
(b) The ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
Participants who are Non-Highly Compensated Employees for the
same Plan Year multiplied by 2.0, provided that the ADP for
Participants who are Highly Compensated Employees does not
exceed the ADP for Participants who are Non-Highly Compensated
Employees by more than two percentage points.
The following special rules shall apply to the computation of
the ADP:
(c) "Actual Deferral Percentage" means, for a specified
group of Participants for a Plan Year, the average of the
ratios (calculated separately for each Participant in the
group) of (1) the amount of Employer contributions actually
paid over to the Trust on behalf of the Participant for the
Plan Year to (2) the Participant's Earnings for the Plan Year
(or, provided that the Employer applies this method to all
Employees for a Plan Year, the Participant's Earnings for that
portion of the Plan Year during which he was eligible to
participate in the Plan). Employer contributions on behalf of
any Participant shall include: (i) his Elective Deferrals,
including Excess Elective Deferrals of Highly Compensated
Employees, but excluding (A) Excess Elective Deferrals of Non-
Highly Compensated Employees that arise solely from Elective
Deferrals made under the Plan or another plan maintained by an
Affiliated Employer, and (B) Elective Deferrals that are taken
into account in the Average Contribution Percentage test
described in Section 5.11 (provided the ADP test is satisfied
both with and without exclusion of these Elective Deferrals),
and excluding Elective Deferrals returned to a Participant to
reduce an Excess Amount as defined in Section 6.5(f); and (ii)
if the Employer has elected to make Qualified Nonelective
Contributions, such amount of Qualified Nonelective
Contributions, if any, as shall be necessary to enable the
Plan to satisfy the ADP test; and (iii) if the Employer has
elected to make Qualified Matching Contributions, such amount
of Qualified Matching Contributions, if any, as shall be
necessary to enable the Plan to satisfy the ADP test. For
purposes of computing Actual Deferral Percentages, an Employee
who would be a Participant but for his failure to make
Elective Deferrals shall be treated as a Participant on whose
behalf no Elective Deferrals are made.
(d) In the event that the 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 the Plan, then
this Section 5.6 shall be applied by determining the ADP 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.
(e) The ADP 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
these are treated as Elective Deferrals for purposes of the
ADP test) allocated to his Accounts under two or more CODAs
described in Section 401(k) of the Code that are maintained by
the Affiliated Employers 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 CODA. If a Highly
Compensated Employee participates in two or more CODAs that
have different Plan Years, all CODAs ending with or within the
same calendar year shall be treated as a single CODA, except
that CODAs to which mandatory disaggregation applies in
accordance with regulations issued under Section 401(k) of the
Code shall be treated as separate CODAs.
(f) For purposes of determining the ADP of a Participant
who is a 5% owner or one of the ten most highly-paid Highly
Compensated Employees, the Elective Deferrals (and Qualified
Nonelective Contributions or Qualified Matching Contributions,
or both, if these are treated as Elective Deferrals for
purposes of the ADP test) and the Compensation of such a
Participant shall include the Elective Deferrals (and, if
applicable, Qualified Nonelective Contributions and Qualified
Matching Contributions, or both) and Compensation for the Plan
Year of his Family Members (as defined in Section 414(q)(6) of
the Code). Family Members of such Highly Compensated
Employees shall be disregarded as separate employees in
determining the ADP both for Participants who are Non-Highly
Compensated Employees and for Participants who are Highly
Compensated Employees.
(g) For purposes of the ADP test, Elective Deferrals,
Qualified Nonelective Contributions and Qualified Matching
Contributions must be made before the last day of the 12-month
period immediately following the Plan Year to which those
contributions relate.
(h) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ADP test and the amount of
Qualified Nonelective Contributions or Qualified Matching
Contributions, or both, used in satisfying the test.
(i) The determination and treatment of the ADP amounts
of any Participant shall satisfy such other requirements as
may be prescribed by the Secretary of the Treasury.
48..7 Distribution of Excess Contributions. "Excess
Contributions" means, with respect to any Plan Year, the excess of:
(a) The aggregate amount of Employer contributions
actually taken into account in computing the ADP of Highly
Compensated Employees for the Plan Year, over
(b) The maximum amount of Employer contributions
permitted by the ADP test, determined by reducing
contributions made on behalf of Highly Compensated Employees
in order of their ADPs, beginning with the highest of such
percentages.
Notwithstanding any other provision of the 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 Excess Contributions
were allocated for the preceding Plan Year. The income or loss
allocable to Excess Contributions is the income or loss allocable
to the Participant's Elective Deferral Account (and, if applicable,
his Qualified Nonelective Account or Qualified Matching Account or
both) for the Plan Year multiplied by a fraction, the numerator of
which is the 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 these are
included in the ADP test) without regard to any income or loss
occurring during the Plan Year. If such excess amounts are
distributed more than 2 1/2 months after the last day of the Plan Year
in which the excess amounts arose, an excise tax equal to 10% of
the excess amounts will be imposed on the Employer maintaining the
Plan. Such distributions shall be made to Highly Compensated
Employees on the basis of the respective portions of the Excess
Contributions attributable to each of them. Excess Contributions
shall be allocated to a Participant who is a family member subject
to the family member aggregation rules of Section 414(q)(6) of the
Code in the proportion that the Participant's Elective Deferrals
(and other amounts treated as his Elective Deferrals) bear to the
combined Elective Deferrals (and other amounts treated as Elective
Deferrals) of all of the Participants aggregated to determine his
family members' combined ADP. Excess Contributions shall be
treated as Annual Additions under the Plan.
Excess Contributions shall be distributed from the
Participant's Elective Deferral Account and Qualified Matching
Account (if applicable) in proportion to the Participant's Elective
Deferrals and Qualified Matching Contributions (to the extent used
in the ADP test) for the Plan Year. Excess Contributions shall be
distributed from the Participant's Qualified Nonelective Account
only to the extent that such Excess Contributions exceed the
balance in the Participant's Elective Deferral Account and
Qualified Matching Account.
48..8 Matching Contributions. If so specified in the Plan
Agreement, the Employer will make Matching Contributions to the
Plan in accordance with the Plan Agreement, but no Matching
Contribution shall be made with respect to an Elective Deferral
that is returned to a Participant because it represents an Excess
Elective Deferral, an Excess Contribution or an Excess Amount (as
defined in Section 6.5(f)); and if a Matching Contribution has
nevertheless been made with respect to such an Elective Deferral,
the Matching Contribution shall be forfeited, notwithstanding any
other provision of the Plan.
(a) Employer Matching Contributions. Employer Matching
Contributions will be allocated among the Employer Matching
Accounts of Participants in proportion to their Elective
Deferrals. Employer Matching Accounts shall become vested
according to the vesting schedule specified in the Plan
Agreement, but regardless of that schedule shall be fully
vested upon the Participant's Retirement (or, if earlier, his
fulfillment of the requirements for early retirement, if any,
or attainment of the normal retirement age specified in the
Plan Agreement), his death during employment with an
Affiliated Employer, and in accordance with Section 19.3.
Forfeitures of Employer Matching Contributions, other than
Excess Aggregate Contributions, shall be made in accordance
with Section 8.3. Forfeitures of Employer Matching Accounts
for a Plan Year shall be applied to reduce the total Employer
Matching Contribution for the Plan Year, or allocated among
the Employer Matching Accounts of Participants in addition to
the Employer Matching Contribution for the Plan Year, as
elected by the Employer in the Plan Agreement.
(b) Qualified Matching Contributions. Qualified
Matching Contributions will be allocated among the Qualified
Matching Contribution Accounts of Participants as specified by
the Employer in the Plan Agreement.
48..9 Participant Contributions. If so specified in the Plan
Agreement, a Participant may make nondeductible contributions to
the Plan in accordance with the Plan Agreement. Such
contributions, together with any matching contributions (as defined
in Section 401(m)(4) of the Code), shall be limited so as to meet
the nondiscrimination test of Section 401(m) of the Code, as set
forth in Section 5.11 of the Plan. Participant contributions will
be allocated to the Participant Contributions Account of the
contributing Participant. All Participant Contribution Accounts
will be fully vested at all times.
48..10 Recharacterization of Excess Contributions. Provided
that the Plan Agreement permits all Participants to make
Participant Contributions, the Employer may treat a Participant's
Excess Contributions as an amount distributed to the Participant
and then contributed by the Participant to the Plan as a
Participant Contribution. Recharacterized amounts will remain
nonforfeitable and subject to the same distribution requirements as
Elective Deferrals. Amounts may not be recharacterized by a Highly
Compensated Employe to the extent that a recharacterized amount in
combination with other Participant Contributions made by that
Employee would exceed any stated limit under the Plan on
Participant Contributions. Recharacterization must occur no later
than two and one-half months after the last day of the Plan Year in
which the Excess Contributions arose, and is deemed to occur no
earlier than the date the last Highly Compensated Employee is
informed in writing by the Employer of the amount recharacterized
and the consequences thereof. Recharacterized amounts will be
taxable to the Participant for his tax year in which the
Participant would have received them in cash.
48..11 Average Contribution Percentage Test Limit and
Aggregate Limit. The Average Contribution Percentage (hereinafter
"ACP") for Participants who are Highly Compensated Employees for
each Plan Year and the ACP for Participants who are Non-Highly
Compensated Employees for the same Plan Year must satisfy one of
the following tests:
(a) The ACP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
Participants who are Non-Highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
(b) The ACP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
Participants who are Non-Highly Compensated Employees for the
same Plan Year multiplied by two (2), provided that the ACP
for Participants who are Highly Compensated Employees does not
exceed the ACP for Participants who are Non-Highly Compensated
Employees by more than two percentage points.
The following rules shall apply to the computation of the ACP:
(c) Average Contribution Percentage means the average of
the Contribution Percentages of the Eligible Participants in
a group.
(d) Contribution Percentage means the ratio (expressed
as a percentage) of a Participant's Contribution Percentage
Amounts to the Participant's Earnings for the Plan Year (or,
provided that the Employer applies this method to all
Employees for a Plan Year, the Participant's Earnings for that
portion of the Plan Year during which he was eligible to
participate in the Plan).
(e) Contribution Percentage Amounts means the sum of the
Participant Contributions, Employer Matching Contributions,
and Qualified Matching Contributions (to the extent not taken
into account for purposes of the ADP 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 Employer Matching
Contributions allocated to the Participant's Account, taken
into account in the year in which the allocation is made. If
the Employer has elected in the Plan Agreement to make
Qualified Nonelective Contributions, such amount of Qualified
Nonelective Contributions, if any, as shall be necessary to
enable the Plan to satisfy the ACP test shall be in the
Contribution Percentage Amounts. Elective Deferrals shall
also be included in the Contribution Percentage Amounts to the
extent, if any, needed to enable the Plan to satisfy the ACP
test, so long as the ADP test is met before the Elective
Deferrals are used in the ACP test, and continues to be met
following the exclusion of those Elective Deferrals that are
used to meet the ACP test.
(f) Eligible Participant means any Employee who is
eligible to make an Elective Deferral, if Elective Deferrals
are taken into account in the calculation of the Contribution
Percentage, or to receive an Employer Matching Contribution
(or a Forfeiture thereof) or a Qualified Matching
Contribution.
(g) Aggregate Limit means the sum of (i) 125% of the
greater of the ADP of the Non-Highly Compensated Employees for
the Plan Year, or the ACP 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 CODA, and
(ii) the lesser of 200% of, or two plus, the lesser of the ADP
or ACP. "Lesser" is substituted for "greater" in clause (i)
of the preceding sentence, and "greater" is substituted for
"lesser" after the phrase "two plus the" in clause (ii) of the
preceding sentence, if that formulation will result in a
larger Aggregate Limit.
(h) If one or more Highly Compensated Employees
participate in both a CODA and a plan subject to the ACP test
maintained by an Affiliated Employer, and the sum of the ADP
and ACP of those Highly Compensated Employees subject to
either or both tests exceeds the Aggregate Limit, then the ACP
of those Highly Compensated Employees who also participate in
a CODA will be reduced (beginning with the Highly Compensated
Employee whose ACP is the highest) so that the Aggregate Limit
is not exceeded. The amount by which each Highly Compensated
Employee's Contribution Percentage Amount is reduced shall be
treated as an Excess Aggregate Contribution. In determining
the Aggregate Limit, the ADP and ACP of Highly Compensated
Employees are determined after any corrections required to
meet the ADP and ACP tests. The Aggregate Limit will be
considered satisfied if both the ADP and ACP of the Highly
Compensated Employees does not exceed 1.25 multiplied by the
ADP and ACP of the Non-Highly Compensated Employees.
(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 account under two or more plans
described in Section 401(a) of the Code, or CODAs described in
Section 401(k) of the Code, that are maintained by an
Affiliated 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 or more
CODAs that have different plan years, all CODAs ending with or
within the same calendar year shall be treated as a single
CODA, except that CODAs to which mandatory disaggregation
applies in accordance with regulations issued under Section
401(k) of the Code shall be treated as separate CODAs.
(j) In the event that the Plan satisfies the
requirements of Sections 401(m), 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 the Plan, then
this Section 5.11 shall be applied by determining the
Contribution 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(m) of the Code only if they have the same Plan Year.
(k) For purposes of determining the Contribution
Percentage of a Participant who is a 5% owner or one of the
ten most highly-paid Highly Compensated Employers, the
Contribution Percentage Amounts and Compensation of the
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 of
such Highly Compensated Employees shall be disregarded as
separate employees in determining the Contribution Percentage
both for Participants who are Non-Highly Compensated Employees
and for Participants who are Highly Compensated Employees.
(l) For purposes of the ACP test, Matching Contributions
and Qualified Nonelective Contributions will be considered
made for a Plan Year if made no later than the end of the
12-month period beginning on the day after the close of the
Plan Year.
(m) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ACP test and the amount of
Qualified Nonelective Contributions or Qualified Matching
Contributions, or both, used in the ACP test.
(n) 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.
48..12 Distribution of Excess Aggregate Contributions.
Notwithstanding any other provision of the Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable
thereto, shall be forfeited if 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. The income or loss
allocable to Excess Aggregate Contributions is the income or loss
allocable to the Participant's Employer Matching Contribution
Account, Qualified Matching Contribution Account (if any, and if
all amounts therein are not used in the ADP test) and, if
applicable, Qualified Nonelective Account and Elective Deferral
Account for the Plan Year, multiplied by a fraction, the numerator
of which is the Participant's Excess Aggregate Contributions for
the year and the denominator of which is the Participant's account
balance(s) attributable to Contribution Percentage Amounts without
regard to any income or loss occurring during the Plan Year.
Excess Aggregate Contributions shall be allocated to a Participant
who is subject to the family member aggregation rules of Section
414(q)(6) of the Code in the proportion that the Participant's
Employer Matching Contributions (and other amounts treated as his
Employer Matching Contributions) bear to the combined Employer
Matching Contributions (and other amounts treated as Employer
Matching Contributions) of all of the Participants aggregated to
determine its family members' combined ACP. If excess amounts
attributable to Excess Aggregate Contributions are distributed more
than 2 1/2 months after the last day of the Plan Year in which such
excess amounts arose, an excise tax equal to 10% of the excess
amounts will be imposed on the Employer maintaining the Plan.
Excess Aggregate Contributions shall be treated as Annual Additions
under the Plan.
Forfeitures of Excess Aggregate Contributions that are
Employer Matching Contributions shall either be reallocated to the
accounts of Non-Highly Compensated Employees or applied to reduce
Employer Contributions, as elected by the Employer in the Plan
Agreement. Other forfeitures of Excess Aggregate Contributions
shall be applied to reduce Employer contributions.
Excess Aggregate Contributions shall be forfeited if
forfeitable, or distributed on a pro-rata basis from the
Participant's Participant Contribution Account, Employer Matching
Account, and Qualified Matching Account (and, if applicable, the
Participant's Qualified Nonelective Account or Elective Deferral
Account, or both).
Excess Aggregate Contributions means, with respect to any Plan
Year, the excess of:
(a) The aggregate Contribution Percentage Amounts taken
into account in computing the numerator of the Contribution
Percentage and actually made on behalf of Highly Compensated
Employees for the Plan Year, over
(b) The maximum Contribution Percentage Amounts
permitted by the ACP test and the Aggregate Limit (determined
by reducing contributions made on behalf of Highly Compensated
Employees in order of their Contribution Percentages,
beginning with the highest of such percentages).
Such determination shall be made after first determining
Excess Elective Deferrals pursuant to Section 5.4, and then
determining Excess Contributions pursuant to Section 5.7.
48..13 Restriction on Distributions. No distribution may be
made from a Participant's Elective Deferral Account, Qualified
Nonelective Account or Qualified Matching Account until the
occurrence of one of the following events:
(a) The Participant's Disability, death or termination
of employment with the Affiliated Employers;
(b) Termination of the Plan without the establishment of
another defined contribution plan other than an employee stock
ownership plan as defined in Section 4975(e) or Section 409 of
the Code, or a simplified employee pension plan as defined in
Section 408(k) of the Code;
(c) The Participant's attainment of age 59 1/2 (if the
Employer has elected in the Plan Agreement to permit such
distributions); or
(d) In the case of an Employer that is a corporation,
the disposition by the Employer to an unrelated entity of (i)
substantially all of the assets (within the meaning of Section
409(d)(2) of the Code) used in a trade or business of the
Employer, if the Employer continues to maintain the Plan after
the disposition, but only with respect to Employees who
continue employment with the entity acquiring such assets; or
(ii) the Employer's interest in a subsidiary (within the
meaning of Section 409(d)(3) of the Code), if the Employer
continues to maintain the Plan after the disposition, but only
with respect to Employees who continue employment with such
subsidiary.
In addition, if the Employer has elected in the Plan Agreement
to permit such distributions, a distribution may be made from a
Participant's Elective Deferral Account in the event of his
financial hardship as described in Section 5.14. All distributions
upon any of the events listed above are subject to the conditions
of Article 10, Joint and Survivor Annuity Requirements. In
addition, distributions made after March 31, 1988, on account of an
event described in subSection (b) or (d) above must be made in a
lump sum.
48..14 Hardship Distributions. If the Employer has so
elected in the Plan Agreement, upon a Participant's written request
the Employer may permit a distribution from his Elective Deferral
Account and from his Employer Matching Account. The terms and
conditions of Section 12.2 and the special vesting rule contained
in Section 8.4 shall apply to hardship distributions from an
Employer Contribution Account or an Employer Matching Account. The
further terms of this Section 5.14 shall apply to hardship
distributions from an Elective Deferral Account. No hardship
distribution shall be made from a Qualified Nonelective Account or
a Qualified Matching Account.
(a) The maximum amount that may be distributed on
account of hardship from an Elective Deferral Account after
December 31, 1988, shall not exceed the sum of (1) the amount
credited to the Account as of December 31, 1988, and (2) the
aggregate amount of the Elective Deferrals made by the
Participant after December 31, 1988, and before the hardship
distribution.
(b) Hardship distributions shall be permitted only on
account of the following financial needs:
(1) Expenses for medical care described in Section
213(d) of the Code for the Participant, his spouse,
children and dependents, or necessary for these persons
to obtain such care;
(2) Purchase of the principal residence of the
Participant (excluding regular mortgage payments);
(3) Payment of tuition and related educational fees
for the upcoming 12 months of post-secondary education
for the Participant, his spouse, children or dependents;
or
(4) Payments necessary to prevent the Participant's
eviction from, or the foreclosure of a mortgage on, his
principal residence.
(c) Hardship distributions shall be subject to the
spousal consent requirements contained in Sections 411(a)(11)
and 417 of the Code, to the same extent that those
requirements apply to a Participant pursuant to Section 10.1.
(d) A hardship distribution will be made to a
Participant only upon satisfaction of the following
conditions:
(1) The Participant has obtained all nontaxable
loans and all distributions other than hardship
distributions available to him from all plans maintained
by the Affiliated Employers;
(2) The hardship distribution does not exceed the
amount of the Participant's financial need as described
in paragraph (b) plus any amounts necessary to pay
federal, state and local income taxes and penalties
reasonably anticipated to result from the distribution;
(3) All plans maintained by the Affiliated
Employers provide that the Participant's Elective
Deferrals and voluntary after-tax contributions will be
suspended for a period of 12 months following his receipt
of a hardship distribution; and
(4) All plans maintained by the Affiliated
Employers provide that the amount of Elective Deferrals
that the Participant may make in his taxable year
immediately following the year of a hardship distribution
will not exceed the applicable limit under Section 402(g)
of the Code for the taxable year, reduced by the amount
of Elective Deferrals made by the Participant in the
taxable year of the hardship distribution.
48..15 Special Effective Dates. If the Plan is adopted as an
amendment of an existing plan, the provisions of Sections 5.3 and
Section 5.7 through 5.11 are effective as of the first day of the
first Plan Year beginning after December 31, 1986.
<PAGE>
ARTICLE 49. LIMITATIONS ON ALLOCATIONS
49..1 No Additional Plan. 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), or an individual medical account (as defined in Section
415(1)(2) of the Code) which provides an Annual Addition as defined
in Section 6.5(a), maintained by an Affiliated Employer:
(a) The amount of Annual Additions (as defined in
Section 6.5(a)) which may be credited to the Participant's
Accounts for any Limitation Year will not exceed the lesser of
the Maximum Annual Additions or any other limitation contained
in this Plan. If the Employer contribution 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 Annual Additions, the amount
contributed or allocated will be reduced so that the Annual
Additions for the Limitation Year will equal the Maximum
Annual Additions.
(b) Before determining a Participant's actual Section
415 Compensation for a Limitation Year, the Employer may
determine the Maximum Annual Additions for the Participant on
the basis of a reasonable estimation of the Participant's
Section 415 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 Annual Additions for
the Limitation Year will be determined on the basis of the
Participant's actual Section 415 Compensation for the
Limitation Year.
(d) If pursuant to paragraph (c), or as a result of the
reallocation of Forfeitures, or as a result of a reasonable
error in determining the amount of Elective Deferrals that may
be made by a Participant, the Annual Additions exceed the
Maximum Annual Additions, the Excess Amount will be disposed
of as follows:
(1) Any nondeductible voluntary Participant
contributions and Elective Deferrals, to the extent they
would reduce the Excess Amount, will be returned to the
Participant.
(2) If after the application of (1) above 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 Accounts 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.
(3) If after the application of (1) above an Excess
Amount still exists, and the Participant is not covered
by the Plan at the end of a 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.
(4) If a suspense account is in existence at any
time during a Limitation Year pursuant to this Section
6.1(d), it will 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.
49..2 Additional Master or Prototype Plan. If in addition to
this Plan a Participant is covered under another qualified Master
or Prototype defined contribution plan or a welfare benefit fund
(as defined in Section 419(e) of the Code), or an individual
medical account (as defined in Section 415(1)(2) of the Code) which
provides an Annual Addition as defined in Section 6.5(a),
maintained by an Affiliated Employer during any Limitation Year:
(a) The Annual Additions which may be credited to a
Participant's Accounts under this Plan for any such Limitation
Year will not exceed the Maximum Annual Additions reduced by
the Annual Additions credited to a Participant's accounts
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 an Affiliated Employer are less
than the Maximum Annual Additions, and the Employer
contribution that would otherwise be contributed or allocated
to the Participant's Accounts 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 Plan Year will equal the Maximum Annual
Additions. 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 Annual Additions, no amount will be
contributed or allocated to the Participant's Accounts under
this Plan for the Limitation Year.
(b) Before determining a Participant's actual Section
415 Compensation for a Limitation Year, the Employer may
determine the Maximum Annual Additions for the Participant in
the manner described in Section 6.1(b).
(c) As soon as is administratively feasible after the
end of the Plan Year, the Maximum Annual Additions for the
Plan Year will be determined on the basis of the Participant's
actual Section 415 Compensation for the Plan Year.
(d) If, pursuant to Section 6.2(c) or as a result of the
allocation of Forfeitures, or of a reasonable error in
determining the amount of Elective Deferrals that may be made
by him, 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 under any qualified
Master or Prototype defined contribution plan, except that
Annual Additions to any 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 X and Y, where (X) is the
total Excess Amount allocated as of such date, and (Y) is 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 attributed to this Plan will be
disposed of in the manner described in Section 6.1(d).
49..3 Additional Non-Master or Non-Prototype Plan. If the
Participant is covered under another qualified defined contribution
plan maintained by an Affiliated Employer which is not a Master or
Prototype plan, Annual Additions which may be credited to the
Participant's Accounts 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 Plan Agreement.
49..4 Additional Defined Benefit Plan. If an Affiliated
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 Plan Fraction and Defined
Contribution Plan Fraction will not exceed 1.0 in any Limitation
Year. The Annual Additions which may be credited to the
Participant's Accounts under this Plan for any Limitation Year will
be limited in accordance with the Plan Agreement.
49..5 Definitions.
(a) Annual Additions means the sum of the following
amounts credited to a Participant's Accounts for the
Limitation Year:
(1) Employer contributions;
(2) For any Limitation Year beginning after
December 31, 1986, after-tax Employee contributions;
(3) Forfeitures;
(4) Amounts allocated after March 31, 1984, to any
individual medical account, as defined in Section
415(1)(2) of the Code, which is part of a pension or
annuity plan maintained by an Affiliated Employer;
(5) Amounts derived from contributions paid or
accrued after December 31, 1985, in taxable years ending
after such date, which are attributable to postretirement
medical benefits allocated to the separate account of a
key Employee, as defined in Section 419A(d)(3) of the
Code, under a welfare benefit fund as defined in Section
419(e) of the Code, maintained by an Affiliated Employer;
and
(6) In a Plan that includes a CODA, Excess Elective
Deferrals, Excess Contributions (including
recharacterized Elective Deferrals) and Excess Aggregate
Contributions.
For this purpose, any Excess Amount applied under
Sections 6.1(d) or 6.2(e) in the Limitation Year to reduce
Employer contributions will be considered Annual Additions for
such Limitation Year. Any rollover contribution will not be
considered an Annual Addition.
(b) Section 415 Compensation means, for a self-employed
person, his earned income; and for any other Participant, his
"Form W-2 earnings" as defined in Section 2.8, if the Employer
has elected in item 4 of the Plan Agreement a definition of
Compensation based on "Form W-2 earnings"; or if the Employer
has not so elected, his 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, bonuses, fringe benefits and reimbursements or
other expense allowances under a nonaccountable plan as
described in Income Tax Regulations Section 1.62-2(c)), and
excluding the following:
(1) Employer contributions to a plan of deferred
compensation which are not includible in the
Participant's gross income for the taxable year in which
contributed, or Employer contributions under a simplified
Employee pension plan to the extent such contributions
are deductible by the Employee, or any distributions from
a plan of deferred compensations;
(2) Amounts realized from the exercise of a non-
qualified stock option, or when restricted stock (or
property) held by the Participant either becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture;
(3) Amounts realized from the sale, exchange or
other disposition of stock acquired under a qualified
stock option; and
(4) 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 contract described in Section
403(b) of the Code (whether or not the contributions are
actually excludable from the gross income of the
Participant).
For purposes of applying the limitations of this Article 6,
Section 415 Compensation for a Limitation Year is the Section
415 Compensation actually paid or made available during such
Limitation Year.
(c) Defined Benefit Fraction means 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 Affiliated Employers, and
the denominator of which is the lesser of 125% of the dollar
limitation in effect for the Limitation Year under Sections
415(b) and (d) of the Code, or 140% of the Participant's
Highest Average Compensation including any adjustments under
Section 415(b) of the Code. Notwithstanding the foregoing, 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 an Affiliated
Employer which were in existence on May 6, 1986, the
denominator of this fraction will not be less than 125% 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 change
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 means $30,000
or if greater, one-fourth 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 means a fraction, the
numerator of which is the sum of the Annual Additions to the
Participant's accounts under all the defined contribution
plans (whether or not terminated) maintained by Affiliated
Employers for the current and all prior Limitation Years
(including the Annual Additions attributable to the
Participant's nondeductible Employee contributions to all
defined benefit plans, whether or not terminated, maintained
by the Affiliated Employers, 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), and the
denominator of which is the sum of the Maximum Annual
Additions for the current and all prior Limitation Years of
service with the Affiliated Employers (regardless of whether
a defined contribution plan was maintained by any Affiliated
Employer). The Maximum Annual Additions in any Plan Year is
the lesser of 125% of the dollar limitation determined under
Sections 415(b) and (d) of the Code in effect under Section
415(c)(1)(A) of the Code, or 35% of the Participant's Section
415 Compensation for such year. If the Employee 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 an Affiliated
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 product of the excess of the sum of the fractions
over 1.0, multiplied by 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 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 100% of
nondeductible Employee contributions as Annual Additions.
(f) Excess Amount means, with respect to any
Participant, the amount by which Annual Additions exceed the
Maximum Annual Additions.
(g) Highest Average Compensation means the average
compensation for the three consecutive Years of Service with
the Employer that produces the highest average. A Year of
Service with the Employer is the period of 12 consecutive
months specified as the Limitation Year in the Plan Agreement.
(h) Limitation Year means the period of 12 consecutive
months specified in the Plan Agreement. All qualified plans
maintained by the Employer must use the same Limitation Year.
If the Limitation Year is amended to a different period of 12
consecutive months, the new Limitation Year must begin on a
date within the Limitation Year in which the amendment is
made.
(i) Master or Prototype plan means a plan the form of
which is the subject of a favorable opinion letter from the
Internal Revenue Service.
(j) Maximum Annual Additions, which is the maximum
annual addition that may be contributed or allocated to a
Participant's account under the plan for any Limitation Year,
means an amount not exceeding the lesser of (a) the Defined
Contribution Dollar Limitation or (b) 25% of the Participant's
Section 415 Compensation for the Limitation Year. The
compensation limitation referred to in (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 period
of 12 consecutive months, the Maximum Annual Additions will
not exceed the Defined Contribution Dollar Limitation
multiplied by the following fraction:
number of months in the
short Limitation Year
12
(k) Projected Annual Benefit means 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:
(1) The Participant will continue employment until
normal retirement age under the Plan (or current age, if
later), and
(2) The Participant's Section 415 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.
<PAGE>
ARTICLE 50. ELIGIBILITY FOR DISTRIBUTION OF BENEFITS
50..1 Retirement. After his Retirement, the amount credited
to a Participant's Accounts will be distributed to him in
accordance with Article 9. The termination of a Participant's
employment with the Affiliated Employers after he has (i) attained
the normal retirement age specified in the Plan Agreement, (ii)
fulfilled the requirements for early retirement (if any) specified
in the Plan Agreement, or (iii) become Disabled will constitute his
Retirement. Upon a Participant's Retirement (or, if earlier, his
attainment of the normal retirement age specified in the Plan
Agreement or fulfillment of the requirements for early retirement,
if any, specified in the Plan Agreement) the Participant's Accounts
shall become fully vested, regardless of the vesting schedule
specified by the Employer in the Plan Agreement. A Participant who
separates from service with any vested balance in his Accounts,
after satisfying the service requirements for early retirement (if
any is specified in the Plan Agreement) but before satisfying the
age requirement for early retirement (if any is specified in the
Plan Agreement), shall be entitled to a fully vested early
retirement benefit upon his satisfaction of such age requirement.
50..2 Death. If a Participant dies before the distribution
of his Accounts has been completed, his Beneficiary will be
entitled to distribution of benefits in accordance with Article 9.
A Participant's Accounts will become fully vested upon his death
before termination of his employment with the Affiliated Employers,
regardless of the vesting schedule specified by the Employer in the
Plan Agreement.
A Participant may designate a Beneficiary by completing and
returning to the Plan Administrator a form provided for this
purpose. The form most recently completed and returned to the Plan
Administrator before the Participant's death shall supersede any
earlier form. If a Participant has not designated any Beneficiary
before his death, or if no Beneficiary so designated survives the
Participant, his Beneficiary shall be his surviving spouse, or if
there is no surviving spouse, his estate. A married Participant
may designate a Beneficiary other than his spouse only if his
spouse consents in writing to the designation, and the spouse's
consent acknowledges the effect of the consent and is witnessed by
a notary public or a representative of the Plan. The beneficiary
or beneficiaries named in the designation to which the spouse has
so consented may not be changed without further written spousal
consent unless the terms of the spouse's original written consent
expressly permit such a change, and acknowledge that the spouse
voluntarily relinquishes the right to limit the consent to a
specific beneficiary. The marriage of a Participant shall nullify
any designation of a beneficiary previously executed by the
Participant. If it is established to the satisfaction of the Plan
Administrator that the Participant has no spouse or that the spouse
cannot be located, the requirement of spousal consent shall not
apply. Any spousal consent, or establishment that spousal consent
cannot be obtained, shall apply only to the particular spouse
involved.
50..3 Other Termination of Employment. A Participant whose
employment terminates for any reason other than his Retirement or
death will be entitled to distribution, in accordance with Article
9, of benefits equal to the amount of the vested balance of his
Accounts as determined under Article 8.<PAGE>
ARTICLE 51. VESTING
51..1 Vested Balance. The vested balance of a Participant's
Accounts will be determined as follows:
(a) General Rule. A Participant's Participant
Contribution Account and Rollover Account shall be fully
vested at all times. The vested portion of his Employer
Contribution Account shall be equal to the percentage that
corresponds, in the vesting schedule specified in the Plan
Agreement, to the number of Years of Service credited to the
Participant as of the end of the Year of Service in which his
employment terminates. The vesting schedule specified in the
Plan Agreement applies to all benefits within the meaning of
Section 411(a)(7) of the Code, except those attributable to
Employee contributions.
(b) Special Rules for CODA. In a Plan that includes a
CODA, a Participant's Elective Deferral Account, Qualified
Nonelective Account, and Qualified Matching Account shall be
fully vested at all times. The vested portion of his Employer
Matching Account shall be equal to the percentage that
corresponds, in the vesting schedule specified in the Plan
Agreement, to the number of Years of Service credited to the
Participant as of the end of the Year of Service in which his
employment terminates.
(c) Retirement. All of a Participant's Accounts shall
become fully vested upon his Retirement or his earlier
attainment of early retirement age (if any) or the normal
retirement age elected by the Employer in the Plan Agreement.
For so long as a former Employee does not receive a
distribution (or a deemed distribution) of the vested portion of
his Accounts, the undistributed portion shall be held in a separate
account which shall be invested pursuant to Section 13.3 and shall
share in earnings and losses of the Trust Fund pursuant to Section
13.4 in the same manner as the Accounts of active Participants.
51..2 Vesting of Accounts of Returned Former Employees. The
following rules apply in determining the vested portion of the
Accounts of a Participant who incurs one or more consecutive One-
Year Vesting Breaks and then returns to employment with an
Affiliated Employer:
(a) If the Participant incurred fewer than five
consecutive One-Year Vesting Breaks, then all of his Years of
Service will be taken into account in determining the vested
portion of his Accounts, as soon as he has completed one Year
of Service following his return to employment.
(b) If the Participant incurred five or more consecutive
One-Year Vesting Breaks, then:
(1) No Year of Service completed after his return
to employment will be taken into account in determining
the vested portion of his Accounts as of any time before
he incurred the first One-Year Vesting Break;
(2) Years of Service completed before he incurred
the first One-Year Vesting Break will not be taken into
account in determining the vested portion of his Accounts
as of any time after his return to employment (i) unless
some portion of his Employer Contribution Account or
Employer Matching Account had become vested before he
incurred the first One-Year Vesting Break, and (ii) until
he has completed one Year of Service following his return
to employment; and
(3) Separate sub-accounts will be maintained for
the Participant's pre-break and post-break Employer
Contribution Account and Employer Matching Account, until
both sub-accounts become fully vested. Both sub-accounts
will share in the earnings and losses of the Trust Fund.
51..3 Forfeiture of Non-Vested Amounts. The portion of a
former Employee's Accounts that has not become vested under Section
8.1 shall become a Forfeiture in accordance with the following
rules, and shall be reallocated in accordance with Section 4.2 or
Article 5 (whichever applies) no later than the end of the Plan
Year in which it becomes a Forfeiture.
(a) If Distribution Is Made. If any or all of the
vested portion of a Participant's Accounts is distributed in
accordance with Section 9.1 or 9.2 before the Participant
incurs five consecutive One-Year Vesting Breaks, the nonvested
portion of his Accounts shall become a Forfeiture in the Plan
Year in which the distribution occurs. For purposes of this
Section 8.3, if the value of the vested portion of a
Participant's Accounts is zero, he shall be deemed to have
received a distribution of the entire vested balance of his
Accounts on the day his employment terminates. If the
Participant elects to have distributed less than the entire
vested portion of his Employer Contribution Account or
Employer Matching Accounts, the part of the nonvested portion
that will become a Forfeiture is the total nonvested portion
multiplied by a fraction, the numerator of which is the amount
of the distribution and the denominator of which is the total
value of the entire vested portion of such Accounts.
(b) Right of Repayment. If a Participant who receives
a distribution pursuant to paragraph (a) returns to employment
with an Affiliated Employer, the balance of his Employer
Contribution Account and Employer Matching Account will be
restored to the amount of such balance on the date of
distribution, if he repays to the Plan the full amount of the
distribution, before the earlier of (i) the fifth anniversary
of his return to employment or (ii) the date he incurs five
consecutive One-Year Vesting Breaks following the date of
distribution. If an Employee is deemed to receive a
distribution pursuant to this Section 8.3, and he resumes
employment covered under this Plan before the date he incurs
five consecutive One-Year Vesting Breaks, upon his
reemployment the Employer-derived account balance of the
Employee will be restored to the amount on the date of such
deemed distribution. Such restoration will be made, first,
from the amount of any Forfeitures available for reallocation
as of the last day of the Plan Year in which repayment is
made, to the extent thereof; and to the extent that
Forfeitures are not available or are insufficient to restore
the balance, from contributions made by the Employer pursuant
to Section 4.1(f).
(c) If No Distribution Is Made. If no distribution (or
deemed distribution) is made to a Participant before he incurs
five consecutive One-Year Vesting Breaks, the nonvested
portion of his Accounts shall become a Forfeiture at the end
of the Plan Year that constitutes his fifth consecutive One-
Year Vesting Break.
(d) Adjustment of Accounts. Before a Forfeiture is
incurred, a Participant's Accounts shall share in earnings and
losses of the Trust Fund pursuant to Section 13.4 in the same
manner as the Accounts of active Participants.
(e) Accumulated Deductible Contributions. For Plan
Years beginning before January 1, 1989, a Participant's vested
Account balance shall not include accumulated deductible
contributions within the meaning of Section 72(o)(5)(B) of the
Code.
51..4 Special Rule in the Event of a Withdrawal. If a
withdrawal pursuant to Section 12.2 or 12.3 is made from a
Participant's Employer Contribution Account or Employer Matching
Account before the Account is fully vested, and the Participant may
increase the vested percentage in the Account, then a separate
account will be established at the time of the withdrawal, and at
any relevant time after the withdrawal the vested portion of the
separate account will be equal to the amount "X" determined by the
following formula:
X = P(AB + D) - D
For purposes of the formula, P is the Participant's vested
percentage at the relevant time, AB is the account balance at the
relevant time, and D is the amount of the withdrawal.
51..5 Vesting Election. If the Plan is amended to change any
vesting schedule, or is amended in any way that directly or
indirectly affects the computation of a Participant's vested
percentage, each Participant who has completed not less than three
Years of Service may elect, within a reasonable period after the
adoption of the amendment or change, in a writing filed with the
Employer to have his vested percentage computed under the Plan
without regard to such amendment. For a Participant who is not
credited with at least one Hour of Service in a Plan Year beginning
after December 31, 1988, the preceding sentence shall be applied by
substituting "five Years of Service" for "three Years of Service."
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 (a) 60 days after the amendment is
adopted; (b) 60 days after the amendment becomes effective; or (c)
60 days after the Participant is issued written notice of the
amendment by the Employer.<PAGE>
ARTICLE 52. PAYMENT OF BENEFITS
52..1 Distribution of Accounts. A Participant or Beneficiary
who has become eligible for a distribution of benefits pursuant to
Article 7 may elect to receive such benefits at any time, subject
to the terms and conditions of this Article 9, Article 10 and
Article 11. Unless a Participant or Beneficiary elects otherwise,
distribution of benefits will begin no later than the 60th day
after the end of the Plan Year in which the latest of the following
events occurs:
(a) The Participant attains age 65 (or if earlier, the
normal retirement age specified by the Employer in the Plan
Agreement); or
(b) The tenth anniversary of the year in which the
Participant commenced participation in the Plan; or
(c) The Participant's employment with the Affiliated
Employers terminates.
A Beneficiary who is the surviving spouse of a Participant may
elect to have distribution of benefits begin within the 90-day
period following the Participant's death.
For purposes of this Section 9.1, the failure of a Participant
(and his spouse, if spousal consent is required pursuant to Article
10) to consent to a distribution while a benefit is "immediately
distributable" within the meaning of Section 9.2 shall be
considered an election to defer commencement of payment. If the
Employer has so specified in the Plan Agreement, the vested portion
of a Participant's Accounts will be distributed in a lump sum in
cash no later than 60 days after the end of the Plan Year in which
his employment terminates, if at the time the Participant first
became entitled to a distribution the value of such vested portion
derived from Employer and Employee contributions does not exceed
$3,500. Commencement of distributions in any case shall be subject
to Section 9.4.
52..2 Restriction on Immediate Distributions. A
Participant's account balance is considered "immediately
distributable" if any part of the account balance could be
distributed to the Participant (or his surviving spouse) before the
Participant attains, or would have attained if not deceased, the
later of the normal retirement age specified in the Plan Agreement
or age 62.
(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)
$3,500, and the account balance is immediately distributable,
the Participant and his spouse (or where either the
Participant or the spouse has died), the survivor must consent
to any such distribution, unless an exception described in
paragraph (b) applies. The consent of the Participant and his
spouse shall be obtained in writing within the 90-day period
ending on the annuity starting date, which 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 spouse, no less than 30 days and no more
than 90 days before the annuity starting date, 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
of the optional forms of benefit available under the Plan and
an explanation of their relative values, in a manner that
would satisfy the notice requirements of Section 417(a)(3) of
the Code. If a distribution is one to which Sections
401(a)(11) and 417 of the Code do not apply, such distribution
may commence less than 30 days after the required notification
is given, provided that:
(1) the Plan Administrator clearly informs the
Participant that the Participant has a right to a period
of at least 30 days after receiving the notice to
consider the decision of whether or not to elect a
distribution (and, if applicable, a particular
distribution option); and
(2) the Participant, after receiving the notice,
affirmatively elects a distribution.
(b) Notwithstanding paragraph (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
10.1(b) 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
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 the Plan, if the Plan
does not offer an annuity option purchased from a commercial
provider), and no Affiliated Employer maintains another
defined contribution plan (other than an employee stock
ownership plan as defined in Section 4975(e)(7) of the Code),
a Participant's account balance shall be distributed to the
Participant without his consent. If any Affiliated Employer
maintains another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7)
of the Code), a Participant's account balance shall be
transferred to that defined contribution plan without his
consent, unless he consents to an immediate distribution. 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.
52..3 Optional Forms of Distribution. Provided that the
Employer has so elected in the Plan Agreement, if at the time a
Participant first becomes entitled to a distribution the value of
his vested Account balance derived from Employer and Employee
contributions does not exceed $3,500, distribution shall be made in
a lump sum in cash. Subject to the preceding sentence and to the
rules of Article 10 concerning joint and survivor annuities, a
Participant or Beneficiary may elect to receive benefits in any of
the following optional forms:
(a) A lump sum payment in cash or in kind or in a
combination of both;
(b) A series of installments over a period certain that
meets the requirements of Article 11; or
(c) A nontransferable annuity contract, purchased from
a commercial provider, with terms complying with the
requirements of Article 11; provided, however, that an annuity
for the life of any person shall be available as an optional
form of distribution only if the Employer has so elected in
the Plan Agreement.
(d) In the event that the Plan is adopted as an
amendment to an existing plan, each optional form of
distribution available under the existing plan shall be made
available under the Plan, and may be made available where
necessary through the purchase of an appropriate annuity
contract in accordance with paragraph (c).
52..4 Distribution Procedure. The Trustee shall make or
commence distributions to or for the benefit of Participants only
on receipt of an order from the Employer in writing or by such
other means unable as shall be acceptable to the Trustee,
certifying that a distribution of a Participant's benefits is
payable pursuant to the Plan, and specifying the time and manner of
payment. The amount to be distributed shall be determined as of
the Valuation Date coincident with or next following the Employer's
order. The Trustee shall be fully protected in acting upon the
directions of the Employer in making benefit distributions, and
shall have no duty to determine the rights or benefits of any
person under the Plan or to inquire into the right or power of the
Employer to direct any such distribution. The Trustee shall be
entitled to assume conclusively that any determination by the
Employer with respect to a distribution meets the requirements of
the Plan. The Trustee shall not be required to make any payment
hereunder in excess of the net realizable value of the assets of
the Account in question at the time of such payment, nor to make
any payment in cash unless the Employer has furnished instructions
as to the assets to be converted to cash for the purposes of making
payment.
52..5 Lost Distributee. In the event that the Plan
Administrator is unable with reasonable effort to locate a person
entitled to distribution under the Plan, the Accounts distributable
to such a person shall become a Forfeiture at the end of the third
Plan Year after the Plan Administrator's efforts to locate such
person began; provided, however, that the amount of the Forfeiture
shall be restored in the event that such person thereafter submits
a claim for benefits under the Plan. Such restoration will be
made, first, from the amount of Forfeitures available for
reallocation as of the last day of the Plan Year in which the claim
is made, to the extent thereof; and to the extent that Forfeitures
are not available or are insufficient to restore the balance, from
contributions made by the Employer pursuant to Section 4.1(f). A
Forfeiture occurring under this Section 9.5 shall be reallocated as
though it were an Employer contribution.
52..6 Direct Rollovers. This Section 9.6 applies to
distributions made on or after January 1, 1993. Notwithstanding
any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Section, 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. For purposes of this
Section 9.6, the following definitions shall apply:
(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 distributees and the distributee's Designated Beneficiary,
or for a specified period of ten 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 includible 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 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.
52..7 Distributions Required by a Qualified Domestic
Relations Order. To the extent required by a Qualified Domestic
Relations Order, the Plan Administrator shall make distributions
from a Participant's Accounts to any alternate payee named in such
order in a manner consistent with the distribution options
otherwise available under the Plan, regardless of whether the
Participant is otherwise entitled to a distribution at such time
under the Plan.<PAGE>
ARTICLE 53. JOINT AND SURVIVOR ANNUITY REQUIREMENTS
53..1 Applicability.
(a) Generally. The provisions of Sections 10.2 through
10.5 shall generally apply to a Participant who is credited
with at least one Hour of Service on or after August 23, 1984,
and such other Participants as provided in Section 10.6.
(b) Exception for Certain Plans. The provisions of
Sections 10.2 through 10.5 shall not apply to a Participant
if: (i) the Participant does not or cannot elect payment of
benefits in the form of a life annuity, and (ii) on the death
of the Participant, his Vested Account Balance will be paid to
his surviving spouse (unless there is no surviving spouse, or
the surviving spouse has consented to the designation of
another Beneficiary in a manner conforming to a Qualified
Election) and the surviving spouse may elect to have
distribution of the Vested Account Balance (adjusted in
accordance with Section 13.4 for gains or losses occurring
after the Participant's death) commence within the 90-day
period following the date of the Participant's death. The
Participant may waive the spousal death benefit described in
this paragraph (b) at any time, provided that no such waiver
shall be effective unless it satisfies the conditions
applicable under Section 10.4(c) to a Participant's waiver of
a Qualified Preretirement Survivor Annuity. The exception in
this paragraph (b) shall not be operative with respect to a
Participant in a profit sharing plan if the Plan:
(1) Is a direct or indirect transferee of a defined
benefit plan, money purchase pension plan, target benefit
plan, stock bonus plan, or profit sharing plan which is
subject to the survivor annuity requirements of Sections
401(a)(11) and 417 of the Code; or
(2) Is adopted as an amendment of a plan that did
not qualify for the exception in this paragraph (b)
before the amendment was adopted.
For purposes of this paragraph (b), Vested Account
Balance shall have the meaning provided in Section 10.4(f).
The provisions of Sections 10.2 through 10.6 set forth the
survivor annuity requirements of Sections 401(a)(11) and 417
of the Code.
(c) Exception for Certain Amounts. The provisions of
Sections 10.2 through 10.5 shall not apply 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 or a target benefit plan, provided that the
exceptions applicable to certain profit sharing plans under
paragraph (b) are applicable with respect to the separate
account (for this purpose, Vested Account Balance means 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).
53..2 Qualified Joint and Survivor Annuity. Unless an
optional form of benefit is selected pursuant to a Qualified
Election within the 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. In either case, the Participant may elect
to have such an annuity distributed upon his attainment of the
Earliest Retirement Age under the Plan.
53..3 Qualified Preretirement Survivor Annuity. Unless an
optional form of benefit has been selected within the Election
Period pursuant to a Qualified Election, the Vested Account Balance
of a Participant who dies before the Annuity Starting Date shall be
applied toward the purchase of an annuity for the life of his
surviving spouse (a "Qualified Preretirement Survivor Annuity").
The surviving spouse may elect to have such an annuity distributed
within a reasonable period after the Participant's death. For
purposes of this Article 10, the term "spouse" means the current
spouse or surviving spouse of a Participant, except 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.
53..4 Definitions. The following definitions apply:
(a) Election Period means the period beginning on the
first day of the Plan Year in which a Participant attains age
35 and ending on the date of the Participant's death. If a
Participant separates from service before the first day of the
Plan Year in which he reaches age 35, the Election Period with
respect to his account balance as of the date of separation
shall begin on the date of separation. A Participant who will
not attain age 35 as of the end of a 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 35. Such an
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 10.5. Qualified Preretirement Survivor
Annuity coverage will be automatically reinstated as of the
first day of the Plan Year in which the Participant attains
age 35. Any new waiver on or after that date shall be subject
to the full requirements of this article.
(b) Earliest Retirement Age means the earliest date on
which the Participant could elect to receive Retirement
benefits under the Plan.
(c) Qualified Election means a waiver of a Qualified
Joint and Survivor Annuity or a Qualified Preretirement
Survivor Annuity. Any such waiver shall not be effective
unless: (1) the Participant's spouse consents in writing to
the waiver; (2) the waiver designates a specific Beneficiary,
including any class of beneficiaries or any contingent
beneficiaries, which may not be changed without spousal
consent (unless the spouse's consent expressly permits
designations by the Participant without any further spousal
consent); (3) the spouse's consent acknowledges the effect of
the waiver; and (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 waiver designates a
form of benefit payment which may not be changed without
spousal consent (unless the spouse's consent 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. Any consent by a spouse obtained under these
provisions (and any establishment that the consent of a spouse
may not be obtained) shall be effective only with respect to
the particular spouse involved. A consent that permits
designations by the Participant without any requirement of
further consent by the spouse must acknowledge that the spouse
has the right to limit the 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
those 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 10.5.
(d) Qualified Joint and Survivor Annuity means an
immediate annuity for the life of a Participant, with a
survivor annuity for the life of the spouse which is not less
than 50% and not more than 100% 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 that can be
purchased with the Participant's Vested Account Balance. The
percentage of the survivor annuity under the Plan shall be
50%.
(e) Annuity Starting Date means the first day of the
first period for which an amount is paid as an annuity (or any
other form).
(f) Vested Account Balance means the aggregate value of
the Participant's vested account balance derived from Employer
and Employee contributions (including rollovers), whether
vested before or upon death, including the proceeds of
insurance contracts, if any, on the Participant's life. The
provisions of this Article 10 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.
53..5 Notice Requirements. In the case of a Qualified Joint
and Survivor Annuity, no less than 30 days and no more than 90 days
before a Participant's Annuity Starting Date the Plan Administrator
shall provide to him 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 the 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.
In the case of a Qualified Preretirement Survivor Annuity,
within the applicable period for a Participant the Plan
Administrator shall provide to him a written explanation of the
Qualified Preretirement Survivor Annuity, in terms and manner
comparable to the requirements applicable to the explanation of a
Qualified Joint and Survivor Annuity as described in the preceding
paragraph. 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 32
and ending with the close of the Plan Year preceding the Plan Year
in which the Participant attains age 35; (ii) a reasonable period
ending after an individual becomes a Participant; (iii) a
reasonable period ending after this Article 10 first applies to the
Participant. Notwithstanding the foregoing, in the case of a
Participant who separates from service before attaining age 35,
notice must be provided within a reasonable period ending after his
separation from service.
For purposes of applying the preceding paragraph, a reasonable
period ending after the enumerated events described in (ii) and
(iii) is the end of the two-year period beginning one year before
the date the applicable event occurs, and ending one year after
that date. In the case of a Participant who separates from service
before the Plan Year in which he reaches age 35, notice shall be
provided within the two-year period beginning one year before the
separation and ending one year after the separation. If such a
Participant thereafter returns to employment with the Employer, the
applicable period for the Participant shall be redetermined.
53..6 Transitional Rules.
(a) Any living Participant not receiving benefits on
August 23, 1984, who would otherwise not receive the benefits
prescribed by the preceding Sections of this Article 10, must
be given the opportunity to elect to have those Sections apply
if the Participant is credited with at least one Hour of
Service under the Plan or a predecessor plan in a Plan Year
beginning on or after January 1, 1976, and the Participant had
at least ten 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 Hour of
Service under the 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 benefits paid in
accordance with paragraph (d) of this Section 10.6.
(c) The respective opportunities to elect (as described
in paragraphs (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 be paid to those Participants.
(d) Any Participant who has so elected pursuant to
paragraph (b) of this Section 10.6, and any Participant who
does not elect under paragraph (a), or who meets the
requirements of paragraph (a) except that he does not have at
least ten years of vesting service when he separates from
service, shall have his benefits distributed in accordance
with all of the following requirements, if his benefits would
otherwise have been payable in the form of a life annuity:
(1) Automatic joint and survivor annuity. If
benefits in the form of a life annuity become payable to
a married Participant who:
(i) begins to receive payments under the Plan
on or after normal retirement age; or
(ii) dies on or after normal retirement age
while still working for the Employer; or
(iii) begins to receive payments on or after
the qualified early retirement age; or
(iv) 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 the Plan in the
form of a Qualified Joint and Survivor Annuity, unless
the Participant has elected otherwise during the election
period, which must begin at least six months before the
Participant attains qualified early retirement age and
end not more than 90 days before the commencement of
benefits. Any election hereunder will be in writing and
may be changed by the Participant at any time.
(2) 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 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 (i) the 90th day
before the Participant attains the qualified early
retirement age, or (ii) the date on which participation
begins, and ends on the date the Participant terminates
employment.
(3) For purposes of this Section 10.6, qualified
early retirement age is the latest of the earliest date
under the Plan on which the Participant may elect to
receive Retirement benefits, the first day of the 120th
month beginning before the Participant reaches normal
retirement age, or the date the Participant begins
participation.<PAGE>
ARTICLE 54. MINIMUM DISTRIBUTION REQUIREMENTS
54..1 General Rules. Subject to Article 10, Joint and
Survivor Annuity Requirements, the requirements of this Article 11
shall apply to any distribution of a Participant's interest and
will take precedence over any inconsistent provisions of the Plan.
Unless otherwise specified, the provisions of this Article 11 apply
to calendar years beginning after December 31, 1984. All
distributions required under this Article 11 shall be determined
and made in accordance with the Income Tax Regulations issued under
Section 401(a)(9) of the Code (including proposed regulations,
until the adoption of final regulations), including the minimum
distribution incidental benefit requirement of Section 1.401(a)(9)-
2 of the proposed regulations.
54..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, determined as
follows.
(a) 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 70 1/2.
(b) Transitional Rules. The required beginning date of
a Participant who attains age 70 1/2 before January 1, 1988,
shall be determined in accordance with (1) or (2) below:
(1) Non-5% owners. The required beginning date of
a Participant who is not a 5% owner is the first day of
April of the calendar year following the calendar year in
which the later of his Retirement or his attainment of
age 70 1/2 occurs.
(2) 5% owners. The required beginning date of a
Participant who is a 5% owner during any year beginning
after December 31, 1979, is the first day of April
following the later of:
(i) the calendar year in which the Participant
attains age 70 1/2, or
(ii) the earlier of the calendar year with or
within which ends the Plan Year in which the
Participant becomes a 5% owner, or the calendar
year in which the Participant retires.
The required beginning date of a Participant who is not
a 5% owner, who attains age 70 1/2 during 1988 and who has not
retired as of January 1, 1989, is April 1, 1990.
(c) Rules for 5% Owners. A Participant is treated as a
5% owner for purposes of this Section 11.2 if he is a 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 he attains age 66 1/2,
or any subsequent Plan Year. Once distributions have begun to
a 5% owner under this Section 11.2, they must continue, even
if the Participant ceases to be a 5% owner in a subsequent
year.
54..3 Limits on Distribution Periods. As of the first
Distribution Calendar Year, distributions not made in a single sum
may be made only over one or a combination of the following
periods:
(a) the life of the Participant,
(b) the life of the Participant and his 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 his Designated
Beneficiary.
Designated Beneficiary means the individual who is designated
as the Beneficiary under the Plan in accordance with Section
401(a)(9) of the Code and the regulations issued thereunder
(including proposed regulations, until the adoption of final
regulations) and Section 7.2.
Distribution Calendar Year means a calendar year for which a
minimum distribution is required under Section 401(a)(9) of the
Code and this Section 11.3. 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.
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. Unless otherwise
elected by the Participant (or his spouse, in the case of
distributions described in Section 11.5(b)) by the time
distributions are required to begin, Life Expectancies shall be
recalculated annually. Any such election shall be irrevocable as
to the Participant (or spouse) and shall apply to all subsequent
years. The Life Expectancy of a nonspouse beneficiary may not be
recalculated.
54..4 Determination of Amount to Be Distributed Each Year.
If the Participant's interest is to be distributed in other than a
single sum, the following minimum distribution rules shall apply on
or after the required beginning date. Paragraphs (a) through (d)
apply to distributions in forms other than the purchase of an
annuity contract.
(a) 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 his 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 Year, must at least equal the
quotient obtained by dividing the Participant's Benefit by the
Applicable Life Expectancy.
(b) 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
50% of the present value of the amount available for
distribution is paid within the Life Expectancy of the
Participant.
(c) 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 Income Tax Regulations. Distributions after the
death of the Participant shall be distributed using the
Applicable Life Expectancy in paragraph (a) above as the
relevant divisor, without regard to Proposed Regulations
Section 1.401(a)(9)-2.
(d) 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.
(e) If the Participant's Benefit is distributed in the
form of an annuity contract 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
regulations issued thereunder (including proposed regulations,
until the adoption of final regulations).
Applicable Life Expectancy means 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 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(e) 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 in the Plan, the applicable
calendar year is the year of purchase.
Participant's Benefit means 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. For purposes of
the preceding sentence, 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.
54..5 Death Distribution Provisions.
(a) Distribution Beginning before Death. If the
Participant dies after distribution of his interest has begun,
the remaining portion of his interest will continue to be
distributed at least as rapidly as under the method of
distribution being used before the Participant's death.
(b) Distribution Beginning after Death. If the
Participant dies before distribution of his interest begins,
distribution of his 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 (1) or (2) below:
(1) If any portion of the Participant's interest is
payable to a Designated Beneficiary, distributions may be
made over the Designated Beneficiary's 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; or
(2) If the Designated Beneficiary is the
Participant's surviving spouse, the date distributions
are required to begin in accordance with (1) above shall
not be earlier than the later of (i) December 31 of the
calendar year immediately following the calendar year in
which the Participant died, and (ii) December 31 of the
calendar year in which the Participant would have
attained age 70 1/2.
If the Participant has not made an election pursuant to
this Section 11.5 by the time of his death, the Participant's
Designated Beneficiary must elect the method of distribution
no later than the earlier of (i) December 31 of the calendar
year in which distributions would be required to begin under
this Section 11.5, or (ii) 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.
(c) For purposes of paragraph (b), if the surviving
spouse dies after the Participant, but before payments to the
spouse begin, the provisions of paragraph (b), with the
exception of subparagraph (2) therein, shall be applied as if
the surviving spouse were the Participant.
(d) For purposes of this Section 11.5, any amount paid
to a child of the Participant will be treated as if it had
been paid to the surviving spouse of the Participant if the
amount becomes payable to the surviving spouse when the child
reaches the age of majority.
(e) For the purposes of this Section 11.5, distribution
of a Participant's interest is considered to begin on the
Participant's required beginning date (or, if paragraph (c)
above is applicable, the date distribution is required to
begin to the surviving spouse pursuant to paragraph (b)
above). If distribution in the form of an annuity contract
described in Section 11.4(e) irrevocably commences to the
Participant before the required beginning date, the date
distribution is considered to begin is the date distribution
actually commences.
54..6 Transitional Rule. Notwithstanding the other
requirements of this Article 11, and subject to the requirements of
Article 10, Joint and Survivor Annuity Requirements, distribution
on behalf of any Participant, including a 5% owner, may be made in
accordance with all of the following requirements (regardless of
when such distribution commences):
(a) The distribution is one which would not have
disqualified the Trust under Section 401(a)(9) of the Internal
Revenue Code of 1954 as in effect before its amendment by the
Deficit Reduction Act of 1984.
(b) 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 the Employee.
(c) The designation specified in paragraph (b) was in
writing, was signed by the Employee or the Beneficiary, and
was made before January 1, 1984.
(d) The Employee had accrued a benefit under the Plan as
of December 31, 1983.
(e) The method of distribution designated by the
Employee or the Beneficiary specifies the time at which
distribution will commence, the period over 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.
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. 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
paragraphs (a) and (e).
If a designation is revoked, any subsequent distribution must
satisfy the requirements of Section 401(a)(9) of the Code and the
regulations thereunder. If a designation is revoked after 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 designation described in paragraphs (b) through (e). 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 Income Tax
Regulations. Any changes in the designation generally will be
considered to be a revocation of the designation, but 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 the 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 of an amount
transferred or rolled over from one plan to another plan, the rules
in Q&A J-2 and Q&A J-3 of Section 1.401(a)(9)-l of the Proposed
Income Tax Regulations shall apply.<PAGE>
ARTICLE 55. WITHDRAWALS AND LOANS
55..1 Withdrawals from Participant Contribution Accounts.
Subject to the requirements of Article 10, a Participant may upon
written notice to the Employer withdraw any amount from his
Participant Contribution Account. A withdrawn amount may not be
repaid to the Plan. No forfeiture will occur solely as a result of
an Employee's withdrawal of Participant contributions.
55..2 Withdrawals on Account of Hardship. If the Employer
has so elected in the Plan Agreement, upon a Participant's written
request the Plan Administrator may permit a withdrawal of funds
from the vested portion of the Participant's Accounts (excluding
the amount credited to a Rollover Account) on account of the
Participant's financial hardship, which must be demonstrated to the
satisfaction of the Plan Administrator. In considering such
requests, the Plan Administrator shall apply uniform standards that
do not discriminate in favor of Highly Compensated Employees. In
a Plan with a CODA, if hardship withdrawals are permitted from both
the Employer Contribution Account and the Elective Deferral
Account, they shall be made first from a Participant's Employer
Contribution Account and thereafter from a Participant's Elective
Deferral Account, subject to the additional requirements set forth
in Section 5.14. The requirements of Section 5.14(b), (c), (d)(1)
and (d)(2) shall also apply to hardship distributions from a
Participant's Employer Contribution Account and Employer Matching
Account. In a Plan with a CODA, if hardship withdrawals are
permitted from more than one of the Elective Deferral Account,
Employer Matching Account, and Employer Contribution Account, they
shall be made first from a Participant's Employer Contribution
Account, and thereafter from the Employer Matching Account, and
finally from the Elective Deferral Account, subject to the
additional requirements of Section 5.14. A withdrawn amount may
not be repaid to the Plan.
55..3 Withdrawals After Reaching Age 59 1/2. If so specified by
the Employer in the Plan Agreement, a Participant who has reached
age 59 1/2 may upon written request to the Employer withdraw during
his employment any amount not exceeding the vested balance of his
Accounts. A withdrawn amount may not be repaid to the Plan.
55..4 Loans. If the Employer has so elected in the Plan
Agreement, the Employer may direct the Trustee to make a loan to a
Participant or Beneficiary from the vested portion of his Accounts,
subject to the following terms and conditions and to such
reasonable additional rules and regulations as the Plan
Administrator may establish for the orderly operation of the
program:
(a) The Plan Administrator shall administer the loan
program subject to the terms and conditions of this Section
12.4.
(b) A Participant's or Beneficiary's request for a loan
shall be submitted to the Plan Administrator by means of a
written application on a form supplied by the Plan
Administrator. Applications shall be approved or denied by
the Plan Administrator on the basis of its assessment of the
borrower's ability to collateralize and repay the loan, as
revealed in the loan application.
(c) Loans shall be made to all Participants and
Beneficiaries on a reasonably equivalent basis. Loans shall
not be made available to highly compensated Employees (as
defined in Section 414(q) of the Code) in amounts greater than
the amounts made available to other Employees (relative to the
borrower's Account balance).
(d) Loans must be evidenced by the Participant's
promissory note for the amount of the loan payable to the
order of the Trustee, and adequately secured by assignment of
not more than fifty percent (50%) of the Participant's entire
right, title and interest in and to the Trust Fund, exclusive
of any asset as to which Putnam is not the Trustee.
(e) Loans must bear a reasonable interest rate
comparable to the rate charged by commercial lenders in the
geographical area for similar loans. The Plan Administrator
shall not discriminate among Participants in the matter of
interest rates, but loans may bear different interest rates
if, in the opinion of the Plan Administrator, the difference
in rates is justified by conditions that would customarily be
taken into account by a commercial lender in the Employer's
geographical area.
(f) The Period for repayment for any loan shall not
exceed five years, except in the case of a loan used to
acquire a dwelling unit which within a reasonable time is to
be used as the principal residence of the Participant, in
which case the repayment period shall not exceed ten years.
The terms of a loan shall require that it be repaid in level
payments of principal and interest not less frequently then
quarterly throughout the repayment period, except that
alternative arrangements for repayment may apply in the event
that the borrower is on unpaid leave of absence for a period
not to exceed one year.
(g) To the extent that a Participant would be required
under Article 10 to obtain he consent of his spouse to a
distribution of an immediately distributable benefit other
than a Qualified Joint and Survivor Annuity, the consent of
the Participant's spouse shall be required for the use of his
Account as security for a loan. The spouse's consent must be
obtained no earlier than the beginning of the 90-day period
that ends on the date on which the loan is to be so secured,
and obtained in accordance with the requirements of Section
10.4(c) for a Qualified Election. Any such consent shall
thereafter be binding on the consenting spouse and any
subsequent spouse of the Participant. A new consent shall be
required for use of the Account as security for any extension,
renewal, renegotiation or revision of the original loan.
(h) If valid spousal consent has been obtained in
accordance with Section 12.4(g), then notwithstanding any
other provision of the Plan the portion of the Participant's
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 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.
(i) In the event of default on a loan by a Participant
who is an active Employee, foreclosure on the Participant's
Account as security will not occur until the Employer has
reported to the Trustee the occurrence of an event permitting
distribution from the Plan in accordance with Article 9 or
Section 5.13.
(j) No loan shall be made to an Owner-Employee or a
Shareholder-Employee.
(k) No loan to any Participant or Beneficiary can be
made to the extent that the amount of the loan, when added to
the outstanding balance of all other loans to the Participant
or Beneficiary, would exceed the lesser of (a) $50,000 reduced
by the excess (if any) of the highest outstanding balance of
loans during the one 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 the value
of the vested account balance of the Participant. For the
purpose of the above limitation, all loans from all qualified
plans of the Affiliated Employers are aggregated.
(1) Loans shall be considered investments directed by a
Participant pursuant to Section 13.3. The amount loaned shall
be charged solely against the Accounts of the Participant, and
repaid amounts and interest shall be credited solely thereto.
55..5 Procedure; Amount Available. Withdrawals and loans
shall be made subject to the terms and conditions applicable to
distributions pursuant to Section 9.4, except that the amount of
any withdrawal or loan shall be determined by reference to the
vested balance of the Participant's Account as of the most recent
Valuation Date preceding the withdrawal or loan, and shall not
exceed the amount of the vested account balance.
<PAGE>
ARTICLE 56. TRUST FUND AND INVESTMENTS
56..1 Establishment of Trust Fund. The Employer and the
Trustee hereby agree to the establishment of a Trust Fund
consisting of all amounts as shall be contributed or transferred
from time to time to the Trustee pursuant to the Plan, and all
earnings thereon. The Trustee shall hold the assets of the Trust
Fund for the exclusive purpose of providing benefits to
Participants and Beneficiaries and defraying the reasonable
expenses of administering the Plan, and no such assets shall ever
revert to the Employer, except that:
(a) contributions made by the Employer by mistake of
fact, as determined by the Employer, may be returned to the
Employer within one (1) year of the date of payment,
(b) contributions that are conditioned on their
deductibility under Section 404 of the Code may be returned to
the Employer, to the extent disallowed, within one (1) year of
the disallowance of the deduction,
(c) contributions that are conditioned on the initial
qualification of the Plan under the Code, and all investment
gains attributable to them, may be returned to the Employer
within one (1) year after such qualification is denied by
determination of the Internal Revenue Service, but only if an
application for determination of such qualification is made
within the time prescribed by law for filing the Employer's
federal income tax return for its taxable year in which the
Plan is adopted, or such later date as the Secretary of the
Treasury may prescribe, and
(d) amounts held in a suspense account may be returned
to the Employer on termination of the Plan, to the extent that
they may not then be allocated to any Participant's Account in
accordance with Article 6.
All Employer contributions under the Plan other than those
made pursuant to Section 4.1(f) are hereby expressly conditioned on
the initial qualification of the Plan and their deductibility under
the Code. Investment gains attributable to contributions returned
pursuant to subSections (a) and (b) shall not be returned to the
contributing Employer, and investment losses attributable to such
contributions shall reduce the amount returned.
56..2 Management of Trust Fund. Except to the extent of any
investment in Policies pursuant to Article 14, the assets of the
Trust Fund shall be held in trust by the Trustee and accounted for
in accordance with this Article 13, and shall be invested in
accordance with Section 13.3 in the Investment Products specified
by the Employer in the Plan Agreement and from time to time
thereafter in writing. The Employer shall have the exclusive
authority and discretion to select the Investment Products
available under the Plan. In making that selection, the Employer
shall use the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in a
like capacity and familiar with such matters would use in the
conduct of an enterprise of like character and with like aims. The
Employer shall cause the available Investment Products to be
diversified sufficiently to minimize the risk of large losses,
unless under the circumstances it is clearly prudent not to do so.
It is especially intended that the Trustee shall have no
discretionary authority to determine the investment of Trust
assets. Notwithstanding the foregoing, assets of the Trust Fund
shall also be invested in Employer Stock if so elected by the
Employer and agreed to by Putnam under the service agreement
executed by the Employer and Putnam pursuant to the establishment
of the Plan.
56..3 Investment Instructions. Except as Article 14 may
apply, all amounts held in the Trust Fund under the Plan shall be
invested in Investment Products. If the Employer has elected in
the Plan Agreement to make investment decisions with respect to
Employer contributions to the Plan, investment instructions as to
Employer Contribution Accounts, Employer Matching Accounts,
Qualified Matching Accounts and Qualified Nonelective Contribution
Accounts shall be the fiduciary responsibility of the Employer, and
each of such Accounts shall have a pro rata interest in all assets
of the Trust (other than Policies under Article 14) to which the
Employer's instructions apply. If the Employer has not elected to
make investment decisions for the Plan, then assets of the Trust
shall be invested solely in accordance with the instructions of the
Participant to whose Accounts they are allocable, as delivered to
Putnam in accordance with its service agreement with the Employer.
Instructions shall apply to future contributions, past
accumulations, or both, according to their terms, and shall be
communicated by the Employer to Putnam in accordance with
procedures prescribed in the service agreement between the Employer
and Putnam. Instructions shall be effective prospectively,
coincident with or within a reasonable time after their receipt in
good order by Putnam. An instruction once received shall remain in
effect until it is changed by the provision of a new instruction.
New instructions shall be accepted by Putnam at the time and in the
manner provided in the Plan Agreement. To the extent the assets of
the Trust are to be invested solely in accordance with the
instructions of the Participants, the Plan is intended to
constitute a plan described in section 404(c) of ERISA and Title 29
of the Code of Federal Regulations section 2550.404c-1. In such
case, the Employer shall be the Plan fiduciary responsible for
providing the Participants with all information required to be
given pursuant to ERISA section 404(c) and Title 29 of the Code of
Federal Regulations section 2550.404c-1.
In the event that the Employer adopts a Putnam prototype plan
as an amendment to or restatement of an existing plan, the Employer
shall specify one or more Investment Products to serve as the sole
investments for all Participants' Accounts during the period in
which existing records of the Plan are transferred to the
Recordkeeper. During that period, new investment instructions as
to existing assets of the Plan cannot be carried out, nor can
distributions be made from the Plan except to the extent permitted
under the terms of the service agreement between the Employer and
Putnam. The Employer and the Recordkeeper shall use their best
efforts to minimize the duration of the period to which the
preceding sentence applies.
To the extent specifically authorized and provided in the
service agreement between the Employer and Putnam, the Employer may
direct the Trustee to establish as an Investment Product a fund all
of the assets of which shall be invested in shares of stock of the
Employer that constitute "qualifying employer securities" within
the meaning of section 407(d)(5) of ERISA ("Employer Stock"). The
Plan Administrator as named fiduciary shall continually monitor the
suitability of acquiring and holding Employer Stock under the
fiduciary duty rules of section 404(a)(1) of ERISA (as modified by
section 404(a)(2) of ERISA) and the requirements of section 404(c)
of ERISA, and shall be responsible for ensuring that the procedures
relating to the purchase, holding and sale of Employer Stock, and
the exercise of any and all rights with respect to such Employer
Stock shall be in accordance with section 404(c) of ERISA. The
Trustee shall not be liable for any loss, or by reason of any
breach, which arises from the direction of the Plan Administrator
with respect to the acquisition and holding of Employer Stock. The
Employer shall be responsible for determining whether, under the
circumstances prevailing at a given time, its fiduciary duty to
Plan Participants and Beneficiaries under the Plan and ERISA
requires that the Employer follow the advice of independent counsel
as to the voting and tender or retention of Employer Stock.
Putnam shall be under no duty to question or review the
investment directions given by the Employer or to make suggestions
to the Employer in connection therewith. Putnam shall not be
liable for any loss, or by reason of any breach, that arises from
the Employer's exercise or non-exercise of rights under this
Article 13, or from any direction of the Employer unless it is
clear on the face of the direction that the actions to be taken
under the direction are prohibited by the fiduciary duty rules of
Section 404(a) of ERISA. All interest, dividends and other income
received with respect to, and any proceeds received from the sale
or other disposition of, securities or other property held in an
investment fund shall be credited to and reinvested in such
investment fund, and all expenses of the Trust that are properly
allocated to a particular investment fund shall be so allocated and
charged. The Employer may at any time direct Putnam to eliminate
any investment fund or funds, and Putnam shall thereupon dispose of
the assets of such investment fund and reinvest the proceeds
thereof in accordance with the directions of the Employer.
Neither the Employer nor the Trustee nor Putnam shall be
responsible for questioning any instructions of a Participant or
for reviewing the investments selected therein, or for any loss
resulting from instructions of a Participant or from the failure of
a Participant to provide or to change instructions. Neither Putnam
nor the Trustee shall have any duty to question any instructions
received from the Employer or a Participant or to review the
investments selected thereby, nor shall Putnam or the Trustee be
responsible for any loss resulting from instructions received from
the Employer or a Participant or from the failure of the Employer
or a Participant to provide or to change instructions. In the
event that Putnam or the Trustee receives a contribution under the
Plan as to which no instructions are delivered, or such
instructions as are delivered are unclear to Putnam or the Trustee,
such contribution shall be invested until clear instructions are
received in the default investment option set forth in the service
agreement between the Employer and Putnam, or if no such option is
so set forth, in Putnam Daily Dividend Trust. Neither Putnam nor
the Trustee shall have any discretionary authority or
responsibility in the investment of the assets of the Trust Fund.
56..4 Valuation of the Trust Fund. As of each Valuation
Date, the Trustee shall determine the fair market value of the
Trust Fund, and the net earnings or losses and expenses of the
Trust Fund for the period elapsed since the most recent previous
Valuation Date shall be allocated among the Accounts of
Participants. Earnings, losses and expenses which pertain to
investments which are specifically held for a given Participant's
Account shall be allocated solely to that Account. In the event
that an investment is not specifically held for a given
Participant's Account, the earnings, losses and expenses pertaining
to that investment shall be allocated among all Participants'
Accounts in the ratio that each such Account bears to the total of
all Accounts of all Participants. Each Participant's Accounts
shall be adjusted pursuant to this Section 13.4 until such time as
they are either fully distributed or forfeited, regardless of
whether the Participant continues to be an Employee.
56..5 Distributions on Investment Company Shares. Subject to
Section 9.3, all dividends and capital gains or other distributions
received on any Investment Company Shares credited to Participant's
Account will (unless received in additional Investment Company
Shares) be reinvested in full and fractional shares of the same
Investment Company at the price determined as provided in the then
current prospectus of the Investment Company. The shares so
received or purchased upon such reinvestment will be credited to
such accounts. If any dividends or capital gain or other
distributions may be received on such Investment Company Shares at
the election of the shareholder in additional shares or in cash or
other property, the Trustee will elect to receive such dividends or
distributions in additional Investment Company Shares.
56..6 Registration and Voting of Investment Company Shares.
All Investment Company Shares shall be registered in the name of
the Trustee or its nominee. Subject to any requirements of
applicable law, the Trustee will transmit to the Employer copies of
any notices of shareholders' meetings, proxies and proxy-soliciting
materials, prospectuses and the annual or other reports to share
holders, with respect to Investment Company Shares held in the
Trust Fund. The Trustee shall act in accordance with directions
received from Participants or the Employer, as the case may be,
with respect to matters to be voted upon by the shareholders of the
Investment Company. Such directions must be in writing on a form
approved by the Trustee, signed by the addressee and delivered to
the Trustee within the time prescribed by it. The Trustee will not
vote Investment Company Shares as to which it receives no written
directions.
56..7 Investment Manager. The Employer, with the consent of
Putnam, may appoint an investment manager, as defined in Section
3(38) of the Employee Retirement Income Security Act of 1974, with
respect to all or a portion of the assets of the Trust Fund. The
Trustee shall have no liability in connection with any action or
nonaction pursuant to directions of such an investment manager.
56..8 Employer Stock.
(a) Voting Rights. Notwithstanding any other provision
of the Plan, the provisions of this Section 13.8(a) shall
govern the voting of Employer Stock held by Putnam as Trustee
under the Plan. The Trustee shall vote Employer Stock in
accordance with the directions of the Employer unless the
Employer has elected in the Plan Agreement that Participants
shall be appointed named fiduciaries as to the voting of
Employer Stock and shall direct the Trustee as to the voting
of Employer Stock in accordance with the provisions of this
Section 13.8(a). In either case, the Employer shall be
responsible for determining whether, under the circumstances
prevailing at a given time, its fiduciary duty to Participants
and Beneficiaries under the Plan and ERISA requires that the
Employer follow the advice of independent counsel as to the
voting of Employer Stock. The remainder of this Section
13.8(a) applies only if the Employer elects in the Plan
Agreement that Participants shall direct the Trustee as to the
voting of Employer Stock.
When the issuer of Employer Stock files preliminary proxy
solicitation materials with the Securities and Exchange
Commission, the Employer shall cause a copy of all the
materials to be simultaneously sent to the Trustee, and the
Trustee shall prepare a voting instruction form based upon
these materials. At the time of mailing of notice of each
annual or special stockholders' meeting of the issuer of
Employer Stock, the Employer shall cause a copy of the notice
and all proxy solicitation materials to be sent to each
Participant, together with the foregoing voting instruction
form to be returned to the Trustee or its designee. The form
shall show the number of full and fractional shares of
Employer Stock credited to the Participant's accounts, whether
or not vested. For purposes of this Section 13.8(a), the
number of shares of Employer Stock deemed credited to a
Participant's accounts shall be determined as of the last
preceding Valuation Date for which an allocation has been
completed and Employer Stock has actually been credited to
Participant's accounts. The Employer shall provide the
Trustee with a copy of any materials provided to Participants
and shall certify to the Trustee that the materials have been
mailed or otherwise sent to Participants.
Each Participant shall have the right to direct the
Trustee as to the manner in which to vote that number of
shares of Employer Stock held under the Plan (whether or not
vested) equal to a fraction, of which the numerator is the
number of shares of Employer Stock credited to his account and
the denominator is the number of shares of Employer Stock
credited to all Participants' accounts. Such directions shall
be communicated in writing or by facsimile or similar means
and shall be held in confidence by the Trustee and not
divulged to the Employer, or any officer or employee thereof,
or any other persons. Upon its receipt of directions, the
Trustee shall vote the shares of Employer Stock as directed by
the Participant. The Trustee shall not vote those shares of
Employer Stock credited to the accounts of Participants for
which no voting directions are received. With respect to
shares of Employer Stock held in the Trust which are not
credited to a Participant's account, the Plan Administrator
shall retain the status of named fiduciary and shall direct
the voting of such Employer Stock.
(b) Tendering Rights. Notwithstanding any other
provision of the Plan, the provisions of this Section 13.8(b)
shall govern the tendering of Employer Stock by Putnam as
Trustee under the Plan. In the event of a tender offer, the
Trustee shall tender Employer Stock in accordance with the
directions of the Employer unless the Employer has elected in
the Plan Agreement that Participants shall be appointed name
fiduciaries as to the tendering of Employer Stock in
accordance with the provisions of this Section 13.8(b). The
remainder of this Section 13.8(b) applies only if the Employer
elects in the Plan Agreement that Participants shall direct
the Trustee as to the tendering of Employer stock.
Upon commencement of a tender offer for any Employer
Stock, the Employer shall notify each Plan Participant, and
use its best efforts to distribute timely or cause to be
distributed to Participants the same information that is
distributed to shareholders of the issuer of Employer Stock in
connection with the tender offer, and after consulting with
the Trustee shall provide at the Employer's expense a means by
which Participants may direct the Trustee whether or not to
tender the Employer Stock credited to their accounts (whether
or not vested). The Employer shall provide to the Trustee a
copy of any material provided to Participants and shall
certify to the Trustees that the materials have been mailed or
otherwise sent to Participants.
Each Participant shall have the right to direct the
Trustee to tender or not to tender some or all of the shares
of Employer Stock credited to his accounts. Directions from
a Participant to the Trustee concerning the tender of Employer
Stock shall be communicated in writing or by facsimile or such
similar means as is agreed upon by the Trustees and the
Employer. The Trustee shall tender or not tender shares of
Employer Stock as directed by the Participant. A Participant
who has directed the Trustee to tender some or all of the
shares of Employer Stock credited to his accounts may, at any
time before the tender offer withdrawal date, direct the
Trustee to withdraw some or all of the tendered shares, and
the Trustee shall withdraw the directed number of shares from
the tender offer before the tender offer withdrawal deadline.
A Participant shall not be limited as to the number of
directions to tender or withdraw that he may give to the
Trustee. The Trustee shall not tender shares of Employer
Stock credited to a Participant's accounts for which it has
received no directions from the Plan Participant. The Trustee
shall tender that number of shares of Employer Stock not
credited to Participants' accounts determined by multiplying
the total number of such shares by a fraction, the numerator
of which is the number of shares of Employer Stock credited to
Participants' accounts for which the Trustee has received
directions from Participants to tender (which directions have
not been withdrawn as of the date of this determination), and
the denominator of which is the total number of shares of
Employer Stock credited to Participants' accounts.
A direction by a Participant to the Trustee to tender
shares of Employer Stock credited to his accounts shall not be
considered a written election under the Plan by the
Participant to withdraw or to have distributed to him any or
all of such shares. The Trustee shall credit to each account
of the Plan Participant from which the tendered shares were
taken the proceeds received by the Trustee in exchange for the
shares of Employer Stock tendered from that account. Pending
receipt of directions through the Administrator from the
Participant as to the investment of the proceeds of the
tendered shares, the Trustee shall invest the proceeds as the
Administrator shall direct. To the extent that any
Participant gives no direction as to the tendering of Employer
stock that he has the right to direct under this Section
13.8(a), the Trustee shall not tender such Employer Stock.
(c) Other Rights. With respect to all rights in connection
with Employer Stock other than the right to vote and the right
to tender, Participants are hereby appointed named fiduciaries
to the same extent (if any) as provided in the foregoing
paragraphs of this Section 13.8 with regard to the right to
vote, and the Trustee shall follow the directions of
Participants and the Plan Administrator with regard to the
exercise of such rights to the same extent as with regard to
the right to vote.
56..9 Insurance Contracts. If so provided in the Plan
Agreement, the Plan Administrator may direct the Trustee to receive
and hold or apply assets of the Trust to the purchase of individual
or group insurance or annuity contracts ("policies" or "contracts")
issued by any insurance company and in a form approved by the Plan
Administrator (including contracts under which the contract holder
is granted options to purchase insurance or annuity benefits), or
financial agreements which are backed by group insurance or annuity
contracts ("financial agreements"). If such investments are to be
made, the Plan Administrator shall direct the Trustee to execute
and deliver such applications and other documents as are necessary
to establish record ownership, to value such policies, contracts or
financial agreements under the method of valuation selected by the
Plan Administrator, and to record or report such values to the Plan
Administrator or any investment manager selected by the Plan
Administrator, in the form and manner agreed to by the Plan
Administrator.
The Plan Administrator may direct the Trustee to exercise or
may exercise directly the powers of contract holder under any
policy, contract or financial agreement, and the Trustee shall
exercise such powers only upon direction of the Plan Administrator.
The Trustee shall have no authority to act in its own discretion,
with respect to the terms, acquisition, valuation, continued
holding and/or disposition of any such policy, contract or
financial agreement or any asset held thereunder. The Trustee
shall be under no duty to question any direction of the Plan
Administrator or to review the form of any such policy, contract or
financial agreement or the selection of the issuer thereof, or to
make recommendations to the Plan Administrator or to any issuer
with respect to the form of any such policy, contract or financial
agreement.
The Trustee shall be fully protected in acting in accordance
with written directions of the Plan Administrator, and shall be
under no liability for any loss of any kind which may result by
reason of any action taken or omitted by it in accordance with any
direction of the Plan Administrator, or by reason of inaction in
the absence of written directions from the Plan Administrator. In
the event that the Plan Administrator directs that any monies or
property be paid or delivered to the contract holder other than for
the benefit of specific individual beneficiaries, the Trustee
agrees to accept such monies or property as assets of the Trust
subject to all the terms hereof.
<PAGE>
ARTICLE 57. INSURANCE POLICIES
57..1 Purchase of Insurance Products. At the time of
establishment of the Plan, if elected by the Employer and agreed to
by Putnam under the service agreement executed by the Employer and
Putnam pursuant to the establishment of the Plan, the Employer
shall purchase for each Participant such Policy or Policies, if
any, as a Participant shall request and annually thereafter such
additional Policies as a Participant shall request, subject to the
limitations of Section 14.2. All Policies shall have the same day
and month of issue, insofar as reasonably possible. The premiums
on all Policies shall be paid at the same intervals (for example,
annually, semi-annually, quarterly or monthly), but the interval
may be changed with respect to all Policies from time to time.
57..2 Limitation on Premiums. The premiums paid for Policies
in respect of any Participants shall be limited so that premiums
paid on any ordinary insurance Policies (that is, Policies with
both nonincreasing premiums and nondecreasing death benefits) on
the life of the Participant shall be 49% or less of the Employer's
total contributions for the Participant (and Forfeitures allocated
and amounts reapplied to his Employer Contribution Account), and
premiums paid on term insurance Policies on the life of the
Participant shall be less than 25% of such amount; provided that if
both ordinary life insurance Policies and term Policies are
purchased for any Participant, the total premiums on term Policies
plus one-half the premiums on ordinary life Policies shall be less
than 25% of such amount. If at any time the total premiums to be
paid by the Employer for a Participant shall equal or exceed the
above limitations, then the life insurance coverage of that
Participant shall be reduced so that the total premiums shall not
equal or exceed the limitations. The required reduction shall be
made by changing all or a portion of the life insurance on the
Participant to paid-up life insurance or by cancelling all or a
portion of any term life insurance.
57..3 Policy Options. At the election of the Participant
covered hereunder, a Policy may contain a waiver of premium
disability benefit provision or a provision for additional
indemnity in the event of accidental death, or both, if available
on the type of Policy selected and if permitted by the insurer.
57..4 Insurability. If any Participant who has elected that
a Policy be purchased is found by the insurer not to be insurable
at standard rates, the Employer shall, if permitted by the rules of
the insurer, purchase a similar Policy which provides a lesser
death benefit and which can be purchased for the same premium.
57..5 Dividends on Policies. Dividends and other credits
payable on any Policy shall be applied to the purchase of
additional benefits under the Policy unless the Participant
requests that they be applied in reduction of premiums.
57..6 Trustee of Policy. Upon direction by the Plan
Administrator, the Insurance Trustee shall apply for and be the
owner of each Policy purchased under the terms of the Plan. Each
Policy must provide that proceeds will be payable to the Insurance
Trustee; however, the Insurance Trustee shall be required to pay
over all such proceeds to the Participant's Designated Beneficiary
in accordance with the distribution provisions of the Plan
including, without limitation, Section 10.3. Under no
circumstances shall the Trust retain any part of the proceeds. In
the event of any conflict between the terms of the Plan and the
terms of any Policy purchased hereunder, the Plan provisions shall
control. The Insurance Trustee shall be fully protected in acting
in accordance with written instructions of the Plan Administrator
and shall be under no liability for any loss of any kind which may
result by reason of any action taken or omitted by it in accordance
with any direction of the Plan Administrator, or by reason of
inaction in the absence of written directions from the Plan
Administrator.
57..7 Obligations with Respect to Policies. Except as may be
otherwise provided in any conditional or binding receipt issued by
an insurer, there shall be no coverage and no death benefit payable
under any Policy to be purchased from such insurer until such
Policy shall have been delivered and the premium therefor shall
have been paid. The Employer and the Insurance Trustee shall not
have any responsibility as to the effectiveness of any Policy
purchased from an insurer, nor shall either of them have any
liability or obligation to pay any amount to any Participant or his
beneficiary by reason of any failure or refusal by the insurer to
make such payment.
57..8 Distribution of Proceeds on Participant's Death. In
the event of the death of a Participant before the conversion
provided for in Section 14.9, there shall be payable to the
beneficiary named in any Policy on his life the benefits provided
by the terms of such Policy.
57..9 Conversion of Policies. Except as provided in Section
19.3, if any Policies of a Participant (other than retirement
income, endowment or annuity Policies) are held for his benefit at
the time distribution is to commence, the Policies may be converted
by the Insurance Trustee into cash, paid to the Trustee, credited
to the Employer Contribution Account of the Participant, invested
in accordance with the written instructions of the Employer (and if
no such instructions have been given or if such instructions are
not clear, invested in Investment Company Shares in the same
proportion as the most recent contributions to the Participant's
Accounts) and distributed pursuant to Article 9, subject to the
terms and conditions of Article 10. Retirement income, endowment
or annuity Policies will be distributed directly to the Participant
at the time distribution is to commence.
57..10 Conflict with Policies. In the event of any conflict
between the terms of the Plan and the terms of any Policies
hereunder, the Plan provisions shall control.
57..11 Insurance Loans to Owner-Employees. If an Owner-
Employee or Shareholder-Employee receives, either directly or
indirectly, any amount from an Insurer as a loan under a Policy,
the amount so received shall be considered a distribution under the
Plan. Any assignment or pledge (or agreement to assign or pledge)
by an Owner-Employee or Shareholder-Employee of any interest in the
Plan shall be considered a distribution of such interest.
<PAGE>
ARTICLE 58. TOP-HEAVY PLANS
58..1 Superseding Effect. For any Plan Year beginning after
December 31, 1983, in which Plan is determined to be a Top-Heavy
Plan under Section 15.2(b), the provisions of this Article 15 will
supersede any conflicting provisions in the Plan or the Plan
Agreement.
58..2 Definitions. For purposes of this Article 15, the
terms below shall be defined as follows:
(a) Key Employee means any Employee or former Employee
(and the Beneficiaries of such Employee) who at any time
during the determination period was: (1) an officer of the
Employer having annual compensation greater than 50% of the
amount in effect under Section 415(b)(1)(A) of the Code; (2)
an owner (or considered an owner under Section 318 of the
Code) of one of the ten largest interests in the Employer
having annual compensation exceeding the dollar limitation
under Section 415(c)(1)(A) of the Code; (3) a 5% owner of the
Employer; or (4) a 1% owner of the Employer having annual
compensation of more than $150,000. Annual compensation means
compensation satisfying the definition elected by the Employer
in item 4 of the Plan Agreement, but including amounts
contributed by the Employer pursuant to a salary reduction
agreement which are excludable from the Employee's gross
income under Section 125, Section 402(a)(8), Section 402(h) or
Section 403(b) of the Code. The determination period is the
Plan Year containing the Determination Date and the four
preceding Plan Years. The determination of who is a Key
Employee will be made in accordance with Section 416(i)(1) of
the Code and the Regulations thereunder.
(b) Top-Heavy: The Plan is Top-Heavy for any Plan Year
beginning after December 31, 1983, if any of the following
conditions exists:
(1) If the Top-Heavy Ratio for this Plan exceeds
60% and this Plan is not part of any Required Aggregation
Group or Permissive Aggregation Group of plans.
(2) If this Plan is a part of a Required
Aggregation Group of plans but not part of a Permissive
Aggregation Group and the Top-Heavy Ratio for the group
of plans exceeds 60%.
(3) If this plan is part of a Required Aggregation
Group and part of a Permissive Aggregation Group of Plans
and the Top-Heavy Ratio for the Permissive Aggregation
group exceeds 60%.
(c) Top-Heavy Ratio means the following:
(1) If the Employer maintains one or more qualified
defined contribution plans (or any simplified employee
pension plan) and the Employer has not maintained any
qualified defined benefit plan which during the 5-year
period ending on the Determination Date(s) has or has had
accrued benefits, the Top-Heavy ratio for this Plan alone
or for the Required or Permissive Aggregation Group as
appropriate is a fraction, the numerator of which is the
sum of the account balances of all Key Employees as of
the Determination Date(s) (including any part of any
account distributed in the 5-year period ending on the
Determination Date(s)), and the denominator of which is
the sum of all account balances (including any part of
any account balance distributed in the 5-year period
ending on the Determination Date(s)), both computed in
accordance with Section 416 of the Code and the
regulations thereunder. Both the numerator and
denominator of the Top-Heavy Ratio are increased to
reflect any contribution not actually made as of the
Determination Date, but which is required to be taken
into account on that date under Section 416 of the Code
and the regulations thereunder.
(2) If the Employer maintains one or more qualified
defined contribution plans (or any simplified employee
pension plan) and the Employer maintains or has
maintained one or more qualified defined benefit plans
which during the 5-year period ending on the
Determination Date(s) has or has had any accrued
benefits, the Top-Heavy Ratio for any Required or
Permissive Aggregation Group as appropriate is a
fraction, the numerator of which is the sum of account
balances under the aggregated qualified defined
contribution plan or plans for all Key Employees,
determined in accordance with (1) above, and the Present
Value of accrued benefits under the aggregated qualified
defined benefit plan or plans for all Key Employees as of
the Determination Date(s), and the denominator of which
is the sum of the account balances under the aggregated
qualified defined contributions plan or plans for all
Participants, determined in accordance with (1) above,
and the Present Value of accrued benefits under the
qualified defined benefit plan or plans for all
Participants as of the Determination Date(s), all
determined in accordance with Section 416 of the Code and
the regulations thereunder. The accrued benefits under
a defined benefit plan in both the numerator and
denominator of the Top-Heavy Ratio are increased for any
distribution of an accrued benefit made in the 5-year
period ending on the Determination Date.
(3) For purposes of (1) and (2) above, the value of
account balances and the Present Value of accrued
benefits will be determined as of the most recent
Valuation Date that falls within or ends with the 12-
month period ending on the Determination Date; except as
provided in Section 416 of the Code and the regulations
thereunder for the first and second Plan Years of a
defined benefit plan. The account balances and accrued
benefits of a Participant (A) who is not a Key Employee
but who was a Key Employee in a prior Plan Year, or (B)
who has not been credited with at least one Hour of
Service for the Employer during the 5-year period ending
on the Determination Date, will be disregarded. The
calculation of the Top-Heavy Ratio, and the extent to
which distributions, rollovers and transfers are taken
into account will be made in accordance with Section 416
of the Code and the regulations thereunder. Deductible
Employee contributions will not be taken into account for
purposes of computing the Top-Heavy Ratio. When
aggregating plans, the value of account balances and
accrued benefits will be calculated with reference to the
Determination Dates that fall within the same calendar
year.
The accrued benefit of a Participant other than a
Key Employee shall be determined under (a) the method, if
any, that uniformly applies for accrual purposes under
all defined benefit plans maintained by the Employer, or
(b) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate
permitted under the fractional rule of Section
411(b)(1)(C) of the Code.
(d) Permissive Aggregation Group means the Required
Aggregation Group of plans plus any other qualified plan or
plans (or simplified employee pension plan) of the Employer
which, when considered as a group with the Required
Aggregation Group, would continue to satisfy the requirements
of Sections 401(a)(4) and 410 of the Code.
(e) Required Aggregation Group means (i) each qualified
plan of the Employer in which at least one Key Employee
participates or participated at any time during the
determination period (regardless of whether the Plan has
terminated) and (ii) any other qualified plan of the Employer
which enables a plan described in (i) to meet the requirements
of Section 401(a)(4) or 410 of the Code.
(f) Determination Date means, for 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
Determination Date is the last day of that Plan Year.
(g) Valuation Date means the last day of the Plan Year.
(h) Present Value means present value based only on the
interest and mortality rates specified by the Employer in the
Plan Agreement.
58..3 Minimum Allocation.
(a) Except as otherwise provided in paragraphs (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 3% of such
Participant's Earnings, 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
$200,000 of the Key Employee's Earnings, 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 of the Employer's contributions and
Forfeitures for the Plan Year because of (1) the Participant's
failure to be credited with at least 1,000 Hours of Service,
or (2) the Participant's failure to make mandatory Employee
contributions to the Plan, or (3) the Participant's receiving
Earnings less than a stated amount. Neither Elective
Deferrals, Employer Matching Contributions nor Qualified
Matching Contributions for non-Key Employees shall be taken
into account for purposes of satisfying the requirement of
this Section 15.3(a).
(b) For purposes of computing the minimum allocation,
Earnings will mean Section 415 Compensation as defined in
Section 6.5(b) of the Plan.
(c) The provision in paragraph (a) above shall not apply
to any Participant who was not employed by the Employer on the
last day of the Plan Year.
(d) The provision in paragraph (a) above shall not apply
to any Participant to the extent he is covered under any other
plan or plans of the Employer, and the Employer has provided
in the Plan Agreement that the minimum allocation 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) of the
Code) may not be forfeited under Sections 411(a)(3)(B) or (D)
of the Code.
58..4 Adjustment of Fractions. For any Plan Year in which
the Plan is Top-Heavy, the Defined Benefit Fraction and the Defined
Contribution Fraction in Article 6 shall each be computed using
100% of the dollar limitations specified in Sections 415(b)(1)(A)
and 415(c)(1)(A) instead of 125%. The foregoing requirement shall
not apply if the Top-Heavy Ratio does not exceed 90% and the
Employer has elected in the Plan Agreement to provide increased
minimum allocations or benefits satisfying Section 416(h)(2) of the
Code.<PAGE>
ARTICLE 59. ADMINISTRATION OF THE PLAN
59..1 Plan Administrator. The Plan shall be administered by
the Employer, as Plan Administrator and Named Fiduciary within the
meaning of ERISA, under rules of uniform application; provided,
however, that the Plan Administrator's duties and responsibilities
may be delegated to a person appointed by the Employer or a
committee established by the Employer for that purpose, in which
case the committee shall be the Plan Administrator and Named
Fiduciary. The members of such a committee shall act by majority
vote, and may by majority vote authorize any one or ones of their
number to act for the committee. The person or committee (if any)
initially appointed by the Employer may be named in the Plan
Agreement, but the Employer may remove any such person or committee
member by written notice to him, and any such person or committee
may resign by written notice to the Employer, without the necessity
of amending the Plan Agreement. To the extent permitted under
applicable law, the Plan Administrator shall have the sole
authority to enforce the terms hereof on behalf of any and all
persons having or claiming any interest under the Plan, and shall
be responsible for the operation of the Plan in accordance with its
terms. The Plan Administrator shall have discretionary authority
to determine all questions arising out of the administration,
interpretation and application of the Plan, all of which
determinations shall be conclusive and binding on all persons. The
Plan Administrator, in carrying out its responsibilities under the
Plan, may rely upon the written opinions of its counsel and on
certificates of physicians. Subject to the provisions of the Plan
and applicable law, the Plan Administrator shall have no liability
to any person as a result of any action taken or omitted hereunder
by the Plan Administrator.
59..2 Claims Procedure. Claims for participation in or
distribution under the Plan shall be made in writing to the Plan
Administrator, or an agent designated by the Plan Administrator
whose name shall have been communicated to all Participants and
other persons as required by law. If any claim so made is denied
in whole or in part, the claimant shall be furnished promptly by
the Plan Administrator with a written notice:
(a) setting forth the reason for the denial,
(b) making reference to pertinent Plan provisions,
(c) describing any additional material or information
from the claimant which is necessary and why, and
(d) explaining the claim review procedure set forth
herein.
Within 60 days after denial of any claim for participation or
distribution under the Plan, the claimant may request in writing a
review of the denial by the Plan Administrator. Any claimant
seeking review hereunder shall be entitled to examine all pertinent
documents and to submit issues and comments in writing. The Plan
Administrator shall render a decision on review hereunder;
provided, that if the Plan Administrator determines that a hearing
would be appropriate, its decision on review shall be rendered
within 120 days after receipt of the request for review. The
decision on review shall be in writing and shall state the reason
for the decision, referring to the Plan provisions upon which it is
based.
59..3 Employer's Responsibilities. The Employer shall be
responsible for:
(a) Keeping records of employment and other matters
containing all relevant data pertaining to any person affected
hereby and his eligibility to participate, allocations to his
Accounts, and his other rights under the Plan;
(b) Periodic, timely filing of all statements, reports
and returns required to be filed by ERISA;
(c) Timely preparation and distribution of disclosure
materials required by ERISA;
(d) Providing notice to interested parties as required
by Section 7476 of the Code;
(e) Retention of records for periods required by law;
and
(f) Seeing that all persons required to be bonded on
account of handling assets of the Plan are bonded.
59..4 Recordkeeper. The Recordkeeper is hereby designated as
agent of the Employer under the Plan to perform directly or through
agents certain ministerial duties in connection with the Plan, in
particular:
(a) To keep and regularly furnish to the Employer a
detailed statement of each Participant's Accounts, showing
contributions thereto by the Employer and the Participant,
Investment Products purchased therewith, earnings thereon and
Investment Products purchased therewith, and each redemption
or distribution made for any reason, including fees or
benefits; and
(b) To the extent agreed between the Employer and the
Recordkeeper, to prepare for the Employer or to assist the
Employer to prepare such returns, reports or forms as the
Employer shall be required to furnish to Participants and
Beneficiaries or other interested persons and to the Internal
Revenue Service or the Department of Labor; all as may be more
fully set forth in a service agreement executed by the
Employer and the Recordkeeper. If the Employer does not
appoint another person or entity as Recordkeeper, the Employer
itself shall be the Recordkeeper.
59..5 Prototype Plan. Putnam is the sponsor of the Putnam
Basic Plan Document, a prototype plan approved as to form by the
Internal Revenue Service. Provided that an Employer's adoption of
the Plan is made known to and accepted by Putnam in accordance with
the Plan Agreement, Putnam will inform the Employer of amendments
to the prototype plan and provide such other services in connection
with the Plan as may be agreed between Putnam and the Employer.
Putnam may impose for its services as sponsor of the prototype plan
such fees as it may establish from time to time in a fee schedule
addressed to the Employer. Such fees shall, unless paid by the
Employer, be paid from the Trust Fund, and shall in that case be
charged pro rata against the Accounts of all Participants. The
Trustee is expressly authorized to cause Investment Products to be
sold or redeemed for the purpose of paying such fees.
<PAGE>
ARTICLE 60. TRUSTEE AND INSURANCE TRUSTEE
60..1 Powers and Duties of the Trustee. The Trustee shall
have the authority, in addition to any authority given by law, to
exercise the following powers in the administration of the Trust:
(a) To invest all or a part of the Trust Fund in
Investment Products in accordance with the investment
instructions delivered by the Employer pursuant to Section
13.3, without restriction to investments authorized for
fiduciaries, including without limitation any common,
collective or commingled trust fund maintained by the Trustee
(or any other such fund, acceptable to Putnam and the Trustee,
that qualifies for exemption from federal income tax pursuant
to Revenue Ruling 81-100). Any investment in, and any terms
and conditions of, any such common, collective or commingled
trust fund available only to employee trusts which meet the
requirements of the Code, or corresponding provisions of
subsequent income tax laws of the United States, shall
constitute an integral part of this Agreement;
(b) If Putnam and the Trustee have consented thereto in
writing, to invest without limit in stock of the Employer or
any affiliated company;
(c) To dispose of all or part of the investments,
securities or other property which may from time to time or at
any time constitute the Trust Fund in accordance with the
written directions furnished by the Employer for the
investment of Participants' separate Accounts or the payment
of benefits or expenses of the Plan, and to make, execute and
deliver to the purchasers thereof good and sufficient deeds of
conveyance therefore, and all assignments, transfers and other
legal instruments, either necessary or convenient for passing
the title and ownership thereto, free and discharged of all
trusts and without liability on the part of such purchasers to
see to the application of the purchase money;
(d) To hold cash uninvested to the extent necessary to
pay benefits or expenses of the Plan;
(e) To follow the directions of an investment manager
appointed pursuant to Section 13.7;
(f) To cause any investment of the Trust Fund to be
registered in the name of the Trustee or the name of its
nominee or nominees or to retain such investment unregistered
or in a form permitting transfer by delivery; provided that
the books and records of the Trustee shall at all times show
that all such investments are part of the Trust Fund;
(g) Upon written direction of or through the Employer,
to vote in person or by proxy (in accordance with Section 13.6
and, in the case of stock of the Employer, at the direction of
the Employer or Participants) with respect to all securities
that are part of the Trust Fund;
(h) To consult and employ any suitable agent to act on
behalf of the Trustee and to contract for legal, accounting,
clerical and other services deemed necessary by the Trustee to
manage and administer the Trust Fund according to the terms of
the Plan;
(i) Upon the written direction of the Employer, to make
loans from the Trust Fund to Participants in amounts and on
terms approved by the Plan Administrator in accordance with
the provisions of the Plan; provided that the Employer shall
have the sole responsibility for computing and collecting all
loan repayments required to be made under the Plan; and
(j) To pay from the Trust Fund all taxes imposed or
levied with respect to the Trust Fund or any part thereof
under existing or future laws, and to contest the validity or
amount of any tax assessment, claim or demand respecting the
Trust Fund or any part thereof.
60..2 Limitation of Responsibilities. Except as may
otherwise be required under applicable law, neither the Trustee nor
the Insurance Trustee nor any of their respective agents shall have
any responsibility for:
(a) Determining the correctness of the amount of any
contribution for the sole collection or payment of
contributions, which shall be the sole responsibility of the
Employer;
(b) Loss or breach caused by any Participant's exercise
of control over his Accounts, which shall be the sole
responsibility of the Participant;
(c) Loss or breach caused by the Employer's exercise of
control over Accounts pursuant to Section 13.3, which shall be
the sole responsibility of the Employer;
(d) Sums paid to an insurer or the validity of any
Policy or the accuracy of information provided by an insurer,
which shall be the sole responsibility of the insurer;
(e) Performance of any other responsibilities not
specifically allocated to them under the Plan.
60..3 Fees and Expenses. The Trustee's fees for performing
its duties hereunder shall be such reasonable amounts as shall be
established by the Trustee from time to time in a fee schedule
addressed to the Employer. Such fees, any taxes of any kind which
may be levied or assessed upon or in respect of the Trust Fund and
any and all expenses reasonably incurred by the Trustee shall,
unless paid by the Employer, be paid from the Trust Fund and shall,
unless allocable to the Accounts of specific Participants, be
charged pro rata against the Accounts of all Participants. The
Trustee is expressly authorized to cause Investment Products to be
sold or redeemed for the purpose of paying such amounts. Charges
and expenses incurred in connection with a specific Investment
Product, unless allocable to the Accounts of specific Participants,
shall be charged pro rata against the Accounts of all Participants
for whose benefit amounts have been invested in the specific
Investment Product.
60..4 Reliance on Employer. The Trustee and its agents (and
the Insurance Trustee, if any) shall rely upon any decision of the
Employer, or of any person authorized by the Employer, purporting
to be made pursuant to the terms of the Plan, and upon any
information or statements submitted by the Employer or such person
(including those relating to the entitlement of any Participant to
benefits under the Plan), and shall not inquire as to the basis of
any such decision or information or statements, and shall incur no
obligation or liability for any action taken or omitted in reliance
thereon. The Trustee and its agents shall be entitled to rely on
the latest written instructions received from the Employer as to
the person or persons authorized to act for the Employer hereunder,
and to sign on behalf of the Employer any directions or
instructions, until receipt from the Employer of written notice
that such authority has been revoked.
60..5 Action Without Instructions. If the Trustee receives
no instructions from the Employer in response to communications
sent by registered or certified mail to the Employer at its last
known address as shown on the books of the Trustee, then the
Trustee may make such determinations with respect to administrative
matters arising under the Plan as it considers reasonable,
notwithstanding any prior instructions or directions given by or on
behalf of the Employer, but subject to any instruction or direction
given by or on behalf of the Participants. To the extent permitted
by applicable law, any determination so made will be binding on all
persons having or claiming any interest under the Plan or Trust,
and the Trustee will incur no obligation or responsibility for any
such determination made in good faith or for any action taken
pursuant thereto. In making any such determination the Trustee may
require that it be furnished with such relevant documents as it
reasonable considers necessary.
60..6 Advice of Counsel. The Trustee and the Insurance
Trustee may each consult with legal counsel (who may, but need not
be, counsel for the Employer) concerning any questions which may
arise with respect to their respective rights and duties under the
Plan, and the opinion of such counsel shall be full and complete
protection to the extent permitted by applicable law in the respect
of any action taken or omitted by the Trustee or the Insurance
Trustee, as the case may be, hereunder in accordance with the
opinion of such counsel.
60..7 Accounts. The Trustee shall keep full accounts of all
receipts and disbursements which pertain to investments in
Investment Products, and the Trustee and the Insurance Trustee
shall each keep accounts of such other transactions as it is
required to perform hereunder. Within a reasonable time following
the close of each Plan Year, or upon its removal or resignation or
upon termination of the Trust and at such other times as may be
appropriate, each shall render to the Employer and any other
persons as may be required by law an account of its administration
of the Plan and Trust during the period since the last previous
such accounting, including such information as may be required by
law. The written approval of any account by the Employer and all
other persons to whom an account is rendered shall be final and
binding as to all matters and transactions stated or shown therein,
upon the Employer and Participants and all persons who then are or
thereafter become interested in the Trust. The failure of the
Employer or any other person to whom an account is rendered to
notify the party rendering the account within 60 days after the
receipt of any account of his or its objection to the account shall
be the equivalent of written approval. If the Employer or any
other person to whom an account is rendered files any objections
within such 60-day period with respect to any matters or
transactions stated or shown in the account and the Employer or
such other person and the party rendering the account cannot
amicably settle the questions raised by such objections, the party
rendering the account and the Employer or such person shall have
the right to have such questions settled by judicial proceedings,
although the Employer or such other person to whom an account is
rendered shall have, to the extent permitted by applicable law,
only 60 days from filing of written objection to the account to
commence legal proceedings. Nothing herein contained shall be
construed so as to deprive the Trustee or the Insurance Trustee of
the right to have a judicial settlement of its accounts. In any
proceeding for a judicial settlements of any account or for
instructions, the only necessary parties shall be the Trustee, the
Insurance Trustee, the Employer and persons to whom an account is
required by law to be rendered.
60..8 Access to Records. The Trustee and the Insurance
Trustee shall give access to their respective records with respect
to the Plan at reasonable times and on reasonable notice to any
person required by law to have access to such records.
60..9 Successors. Any corporation into which the Trustee may
merge or with which it may consolidate or any corporation resulting
from any such merger or consolidation shall be the successor of the
Trustee without the execution or filing of any additional
instrument or the performance of any further act.
60..10 Persons Dealing with Trustee or Insurance Trustee. No
person dealing with the Trustee or the Insurance Trustee shall be
bound to see to the application of any money or property paid or
delivered to such party or to inquire into the validity or
propriety of any transactions.
60..11 Resignation and Removal; Procedure. The Trustee or
the Insurance Trustee may resign at any time by giving 60 days'
written notice to the Employer and to Putnam. The Employer may
remove the Trustee or the Insurance Trustee at any time by giving
60 days' written notice to the party removed and to Putnam. In any
case of resignation or removal hereunder, the period of notice may
be reduced to such shorter period as is satisfactory to the
Trustee, the Insurance Trustee and the Employer. Notwithstanding
anything to the contrary herein, any resignation hereunder shall
take effect at the time notice thereof is given if the Employer may
no longer participate in the prototype Plan and is deemed to have
an individually designed plan at the time notice is given.
60..12 Action of Trustee Following Resignation or Removal.
When the resignation or removal of the Trustee becomes effective,
the Trustee shall perform all acts necessary to transfer the Trust
Fund to its successor. However, the Trustee may reserve such
portion of the Trust Fund as it may reasonably determine to be
necessary for payment of its fees and any taxes and expenses, and
any balance of such reserve remaining after payment of such fees,
taxes and expenses shall be paid over to its successor. The
Trustee shall have no responsibility for acts or omissions
occurring after its resignation becomes effective.
60..13 Action of Insurance Trustee Following Resignation or
Removal. When the Insurance Trustee's resignation or removal
becomes effective, the Insurance Trustee shall perform all acts
necessary to transfer ownership of the Policies to its successor.
If no successor has accepted appointment, the Policies shall be
held and owned by the Employer acting as Insurance Trustee until a
successor is appointed.
60..14 Effect of Resignation or Removal. Resignation or
removal of the Trustee or the Insurance Trustee shall not terminate
the Trust. In the event of any vacancy in the position of Trustee
(or, in a Plan having amounts invested in Policies, the position of
Insurance Trustee), whether the vacancy occurs because of the
resignation or removal of the Trustee (or the Insurance Trustee)
the Employer shall appoint a successor to fill the vacant position.
If the Employer does not appoint such a successor who accepts
appointment by the later of 60 days after notice of resignation or
removal is given or by such later date as the Trustee or the
Insurance Trustee, as the case may be, and Employer may agree in
writing to postpone the effective date of the Trustee's or the
Insurance Trustee's resignation or removal, the Trustee or
Insurance Trustee may apply to a court of competent jurisdiction
for such appointment or cause the Trust to be terminated, effective
as of the date specified by the Trustee or Insurance Trustee, as
the case may be, in writing delivered to the Employer. Each
successor Trustee so appointed and accepting a trusteeship
hereunder shall have all of the rights and powers and all of the
duties and obligations of the original Trustee or Insurance
Trustee, as the case may be, under the provisions hereof, but shall
have no responsibility for acts or omissions before he becomes a
Trustee or Insurance Trustee.
60..15 Fiscal Year of Trust. The fiscal year of the Trust
will coincide with the Plan Year.
60..16 Limitation of Liability. Except as may otherwise be
required by law and other provisions of the Plan, no fiduciary of
the Plan, within the meaning of Section 3(21) of ERISA, shall be
liable for any losses incurred with respect to the management of
the Plan, nor shall he or it be liable for any acts or omissions
except those caused by his or its own negligence or bad faith in
failing to carry out his or its duties under the terms contained in
the Plan.
60..17 Indemnification. Subject to the limitations of
applicable law, the Employer agrees to indemnify and hold harmless
(i) all fiduciaries, within the meaning of ERISA Sections 3(21) and
404, and (ii) Putnam, for all liability occasioned by any act of
such party or omission to act, in good faith and without gross
negligence, and for all expenses incurred by any such party in
determining its duty or liability under ERISA with respect to any
question under the Plan.<PAGE>
ARTICLE 61. AMENDMENT
61..1 General. The Employer reserves the power at any time
or times to amend the provisions of the Plan and the Plan Agreement
to any extent and in any manner that it may deem advisable. If,
however, the Employer makes any amendment (including an amendment
occasioned by a waiver of the minimum funding requirement under
Section 412(d) of the Code) other than
(a) a change in an election made in the Plan Agreement,
(b) amendments stated in the Plan Agreement which allow
the Plan to satisfy Section 415 and to avoid duplication of
minimums under Section 416 of the Code because of the required
aggregation of multiple plans, or
(c) 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,
the Employer shall cease to participate in this prototype Plan and
will be considered to have an individually designed plan. In that
event, Putnam shall have no further responsibility to provide to
the Employer any amendments or other material incident to the
prototype plan, and Putnam may resign immediately as Trustee and as
Recordkeeper. Any amendment shall be made by delivery to the
Trustee (and the Recordkeeper, if any) of a written instrument
executed by the Employer providing for such amendment. Upon the
delivery of such instrument to the Trustee, such instrument shall
become effective in accordance with its terms as to all
Participants and all persons having or claiming any interest
hereunder, provided, that the Employer shall not have the power:
(1) To amend the Plan in such a manner as would
cause or permit any part of the assets of the Trust to be
diverted to purposes other than the exclusive benefit of
Participants or their Beneficiaries, or as would cause or
permit any portion of such assets to revert to or become
the property of the Employer.
(2) To amend the Plan retroactively in such a
manner as would have the effect of decreasing a
Participant's accrued benefit, except that 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 (2), an amendment shall be
treated as reducing a Participant's accrued benefit if it
has the effect of reducing his Account balance, or of
eliminating an optional form of benefit with respect to
amounts attributable to contributions made performed
before the adoption of the amendment; or
(3) To amend the Plan so as to decrease the portion
of a Participant's Account balance that has become
vested, as compared to the portion that was vested, under
the terms of the Plan without regard to the amendment, as
of the later of the date the amendment is adopted or the
date it becomes effective.
(4) To amend the Plan in such a manner as would
increase the duties or liabilities of the Trustee or the
Recordkeeper unless the Trustee or the Recordkeeper
consents thereto in writing.
61..2 Delegation of Amendment Power. The Employer and all
sponsoring organizations of the Putnam Basic Plan Document delegate
to Putnam Mutual Funds Corp., the power to amend the Plan
(including the power to amend this Section 18.2 to name a successor
to which such power of amendment shall be delegated), for the
purpose of adopting amendments which are certified to Putnam Mutual
Funds Corp., by counsel satisfactory to it, as necessary or
appropriate under applicable law, including any regulation or
ruling issued by the United States Treasury Department or any other
federal or state department or agency; provided that Putnam Mutual
Funds Corp., or such successor may amend the Plan only if it has
mailed a copy of the proposed amendment to the Employer at its last
known address as shown on its books by the date on which it
delivers a written instrument providing for such amendment, and
only if the same amendment is made on said date to all plans in
this form as to which Putnam Mutual Funds Corp., or such successor
has a similar power of amendment. If a sponsoring organization
does not adopt any amendment made by Putnam Mutual Funds Corp.,
such sponsoring organization shall cease to participate in this
prototype Plan and will be considered to have an individually
designed plan.<PAGE>
ARTICLE 62. TERMINATION OF THE PLAN AND TRUST
62..1 General. The Employer has established the Plan and the
Trust with the bona fide intention and expectation that
contributions will be continued indefinitely, but the Employer
shall have no obligation or liability whatsoever to maintain the
Plan for any given length of time and may discontinue contributions
under the Plan or terminate the Plan at any time by written notice
delivered to the Trustee and the Insurance Trustee, without any
liability whatsoever for any such discontinuance or termination.
62..2 Events of Termination. The Plan will terminate upon
the happening of any of the following events:
(a) Death of the Employer, if a sole proprietor, or
dissolution or termination of the Employer, unless within 60
days thereafter provision is made by the successor to the
business with respect to which the Plan was established for
the continuation of the Plan, and such continuation is
approved by the Trustee;
(b) Merger, consolidation or reorganization of the
Employer into one or more corporations or organizations,
unless the surviving corporations or organizations adopt the
Plan by an instrument in writing delivered to the Trustee
within 60 days after such a merger, consolidation and
reorganization;
(c) Sale of all or substantially all of the assets of
the Employer, unless the purchaser adopts the Plan by an
instrument in writing delivered to the Trustee within 60 days
after the sale;
(d) The institution of bankruptcy proceedings by or
against the Employer, or a general assignment by the Employer
to or for the benefit of its creditors; or
(e) Delivery of notice as provided in Section 19.1.
62..3 Effect of Termination. Notwithstanding any other
provisions of this Plan, other than Section 19.4, upon termination
of the Plan or complete discontinuance of contributions thereunder,
each Participant's Accounts will become fully vested and
nonforfeitable, and upon partial termination of the Plan, the
Accounts of each Participant affected by the partial termination
will become fully vested and nonforfeitable. The Employer shall
notify the Trustee and the Insurance Trustee in writing of such
termination, partial termination or complete discontinuance of
contributions. In the event of the complete termination of the
Plan or discontinuance of contributions, the Trustee will, after
payment of all expenses of the Trust Fund, make distribution of the
Trust asses to the Participants or other persons entitled thereto,
in such form as the Employer may direct pursuant to Article 10 or,
in the absence of such direction, in a single payment in cash or in
kind. Upon completion of such distributions under this Article,
the Trust will terminate, the Trustee and the Insurance Trustee
will be relieved from their obligations under the Trust, and no
Participant or other person will have any further claim thereunder.
62..4 Approval of Plan. Notwithstanding any other provision
of the Plan, if the Employer fails to obtain or to retain the
approval by the Internal Revenue Service of the Plan as a qualified
plan under Section 401(a) of the Code, then (i) the Employer shall
promptly notify the Trustee, and (ii) the Employer may no longer
participate in the Putnam prototype plan, but will be deemed to
have an individually designed plan. If it is determined by the
Internal Revenue Service that the Plan upon its initial adoption
does not qualify under Section 401(a) of the Code, all assets then
held under the Plan will be returned within one year of the denial
of initial qualification to the Participants and the Employer to
the extent attributable to their respective contributions and any
income earned thereon, but only if the application for
qualification is made by the time prescribed by law for filing the
Employer's federal income tax return for the taxable year in which
the Plan is adopted, or such later date as the Secretary of the
Treasury may prescribe. Upon such distribution, the Plan will be
considered to be rescinded and to be of no force or effect.
<PAGE>
ARTICLE 63. TRANSFERS TO OR FROM OTHER QUALIFIED PLANS; MERGERS
63..1 General. Notwithstanding any other provision hereof,
subject to the approval of the Trustee there may be transferred to
the Trustee all or any of the assets held (whether by a trustee,
custodian or otherwise) in respect of any other plan which
satisfies the applicable requirements of Section 401(a) of the Code
and which is maintained for the benefit of any Employee (provided,
however, that the Employee is not a member of a class of Employees
excluded from eligibility to participate in the Plan) except that
insurance policies held in respect of such other plan shall be
transferred to the Insurance Trustee as trustee if the Employer so
determines. Any such assets so transferred shall be accompanied by
written instructions from the Employer naming the persons for whose
benefit such assets have been transferred and showing separately
the respective contributions made by the Employer and by the
Participants and the current value of the assets attributable
thereto. Notwithstanding the foregoing, if a Participant's
employment classification changes under Section 3.5 such that he
begins participation in another plan of the Employer, his Account,
if any, shall, upon the Administrator's direction, be transferred
to the plan in which he has become eligible to participate, if such
plan permits receipt of such Account.
63..2 Amounts Transferred. The Employer shall credit any
assets transferred pursuant to Section 20.1 or Section 3.5 to the
appropriate Accounts of the persons for whose benefit such assets
have been transferred. Any amounts credited as contributions
previously made by an employer or by such persons under such other
plan shall be treated as contributions previously made under the
Plan by the Employer or by such persons, as the case may be.
63..3 Merger or Consolidation. The Plan shall not be merged
or consolidated with any other plan, nor shall any assets or
liabilities of the Trust Fund be transferred to any other plan,
unless each Participant would receive a benefit immediately after
the transaction, if the Plan then terminated, which is equal to or
greater than the benefit he would have been entitled to receive
immediately before the transaction if the Plan had then terminated.
<PAGE>
ARTICLE 64. MISCELLANEOUS
64..1 Notice of Plan. The Plan shall be communicated to all
Participants by the Employer on or before the last day on which
such communication may be made under applicable law.
64..2 No Employment Rights. Neither the establishment of the
Plan and the Trust, nor any amendment thereof, nor the creation of
any fund or account, nor the purchase of Policies, nor the payment
of any benefits shall be construed as giving to any Participant or
any other person any legal or equitable right against the Employer,
the Trustee, or the Insurance Trustee, except as provided herein or
by ERISA; and in no event shall the terms of employment or service
of any Participant be modified or in any way be affected hereby.
64..3 Distributions Exclusively From Plan. Participants and
Beneficiaries shall look solely to the assets held in the Trust and
any Policies purchased pursuant to the Plan for the payment of any
benefits under the Plan.
64..4 No Alienation. The benefits provided hereunder shall
not be subject to alienation, assignment, garnishment, attachment,
execution or levy of any kind, and any attempt to cause such
benefits to be so subjected shall not be recognized, except as
provided in Section 12.4 or in accordance with a Qualified Domestic
Relations Order. The Plan Administrator shall determine whether a
domestic relations order is qualified in accordance with written
procedures adopted by the Plan Administrator. Notwithstanding the
foregoing, an order shall not fail to be a Qualified Domestic
Relations Order merely because it requires a distribution to an
alternate payee (or the segregation of accounts pending
distribution to an alternate payee) before the Participant is
otherwise entitled to a distribution under the Plan.
64..5 Provision of Information. The Employer, Trustee and
Insurance Trustee shall furnish to each other such information
relating to the Plan and Trust as may be required under the Code or
ERISA and any regulations issued or forms adopted by the Treasury
Department or the Labor Department or otherwise thereunder.
64..6 No Prohibited Transactions. The Employer, Trustee, and
Insurance Trustee shall, to the extent of their respective powers
and authority under the Plan, prevent the Plan from engaging in any
transaction known by that person to constitute a transaction
prohibited by Section 4975 of the Code and any rules or regulations
with respect thereto.
64..7 Governing Law. The Plan shall be construed,
administered, regulated and governed in all respects under and by
the laws of the United States, and to the extent permitted by such
laws, by the laws of the Commonwealth of Massachusetts
64..8 Gender. Whenever used herein, a pronoun in the
masculine gender includes the feminine gender unless the context
clearly indicates otherwise.
<PAGE>
PUTNAM BASIC PLAN DOCUMENT #05
TABLE OF CONTENTS
PAGE
ARTICLE 1. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Affiliated Employer . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Authorized Leave of Absence . . . . . . . . . . . . . . . . . . 2
2.4 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 CODA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 Date of Employment. . . . . . . . . . . . . . . . . . . . . . . 3
2.9 Disabled. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 Earned Income. . . . . . . . . . . . . . . . . . . . . . . . . 3
2.11 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . 4
2.13 Eligibility Period . . . . . . . . . . . . . . . . . . . . . . 4
2.14 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 Employer Contribution Account. . . . . . . . . . . . . . . . . 5
2.17 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.18 Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.19 Hour of Service. . . . . . . . . . . . . . . . . . . . . . . . 5
2.20 Insurance Trustee. . . . . . . . . . . . . . . . . . . . . . . 7
2.21 Investment Company . . . . . . . . . . . . . . . . . . . . . . 7
2.22 Investment Company Shares. . . . . . . . . . . . . . . . . . . 7
2.23 Investment Products. . . . . . . . . . . . . . . . . . . . . . 7
2.24 Leased Employee. . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 One-Year Eligibility Break . . . . . . . . . . . . . . . . . . 8
2.26 One-Year Vesting Break . . . . . . . . . . . . . . . . . . . . 8
2.27 Owner-Employee . . . . . . . . . . . . . . . . . . . . . . . . 8
2.28 Participant. . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.29 Participant Contribution Account. . . . . . . . . . . . . . . 8
2.30 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.31 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . 9
2.32 Plan Agreement . . . . . . . . . . . . . . . . . . . . . . . . 9
2.33 Plan Year. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.34 Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.35 Putnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.36 Qualified Participant. . . . . . . . . . . . . . . . . . . . . 9
2.37 Recordkeeper . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.38 Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.39 Rollover Account . . . . . . . . . . . . . . . . . . . . . . . 10
2.40 Self-Employed Individual . . . . . . . . . . . . . . . . . . . 10
2.41 Shareholder-Employee . . . . . . . . . . . . . . . . . . . . . 10
2.42 Trust and Trust Fund . . . . . . . . . . . . . . . . . . . . . 10
2.43 Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.44 Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . 10
2.45 Year of Service. . . . . . . . . . . . . . . . . . . . . . . . 10
2.46 Deferral Agreement . . . . . . . . . . . . . . . . . . . . . . 11
2.47 Elective Deferral. . . . . . . . . . . . . . . . . . . . . . . 11
2.48 Elective Deferral Account. . . . . . . . . . . . . . . . . . . 11
2.49 Employer Matching Contribution . . . . . . . . . . . . . . . . 11
2.50 Employer Matching Account. . . . . . . . . . . . . . . . . . . 11
2.51 Highly Compensated Employee. . . . . . . . . . . . . . . . . . 11
2.52 Non-Highly Compensated Employee. . . . . . . . . . . . . . . . 13
2.53 Qualified Matching Contribution. . . . . . . . . . . . . . . . 13
2.54 Qualified Matching Account . . . . . . . . . . . . . . . . . . 13
2.55 Qualified Nonelective Contribution . . . . . . . . . . . . . . 13
2.56 Qualified Nonelective Contribution Account . . . . . . . . . . 13
ARTICLE 3. PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 Initial Participation . . . . . . . . . . . . . . . . . . . . . 14
3.2 Special Participation Rule. . . . . . . . . . . . . . . . . . . 14
3.3 Resumed Participation . . . . . . . . . . . . . . . . . . . . . 15
3.4 Benefits for Owner-Employees. . . . . . . . . . . . . . . . . . 15
ARTICLE 4. CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . 16
4.1 Payment and Crediting of Employer Contributions . . . . . . . . 16
4.2 Amount and Allocation of Annual Contribution. . . . . . . . . . 17
4.3 Rollover Contributions. . . . . . . . . . . . . . . . . . . . . 18
4.4 No Deductible Employee Contributions. . . . . . . . . . . . . . 18
ARTICLE 5. CASH OR DEFERRED ARRANGEMENT UNDER
SECTION 401(k) (CODA) . . . . . . . . . . . . . . . . . . . . 19
5.1 Applicability; Allocations. . . . . . . . . . . . . . . . . . . 19
5.2 CODA Participation. . . . . . . . . . . . . . . . . . . . . . . 19
5.3 Annual Limit on Elective Deferrals. . . . . . . . . . . . . . . 19
5.4 Distribution of Certain Elective Deferrals. . . . . . . . . . . 20
5.5 Satisfaction of ADP and ACP Tests . . . . . . . . . . . . . . . 21
5.6 Actual Deferral Percentage Test Limit . . . . . . . . . . . . . 21
5.7 Distribution of Excess Contributions. . . . . . . . . . . . . . 23
5.8 Matching Contributions. . . . . . . . . . . . . . . . . . . . . 24
5.9 Average Contribution Percentage Test Limit and
Aggregate Limit . . . . . . . . . . . . . . . . . . . . . . . . 25
5.10 Distribution of Excess Aggregate Contributions . . . . . . . . 28
5.11 Restriction on Distributions . . . . . . . . . . . . . . . . . 29
5.12 Hardship Distributions . . . . . . . . . . . . . . . . . . . . 30
5.13 Special Effective Dates. . . . . . . . . . . . . . . . . . . . 32
ARTICLE 6. LIMITATIONS ON ALLOCATIONS . . . . . . . . . . . . . . . . . 33
6.1 No Additional Plan. . . . . . . . . . . . . . . . . . . . . . . 33
6.2 Additional Master or Prototype Plan . . . . . . . . . . . . . . 34
6.3 Additional Non-Master or Non-Prototype Plan . . . . . . . . . . 35
6.4 Additional Defined Benefit Plan . . . . . . . . . . . . . . . . 35
6.5 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 7. ELIGIBILITY FOR DISTRIBUTION OF BENEFITS . . . . . . . . . . 41
7.1 Retirement. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.2 Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.3 Other Termination of Employment . . . . . . . . . . . . . . . . 42
ARTICLE 8. VESTING. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.1 Vested Balance. . . . . . . . . . . . . . . . . . . . . . . . . 43
8.2 Vesting of Accounts of Returned Former Employees. . . . . . . . 43
8.3 Forfeiture of Non-Vested Amounts. . . . . . . . . . . . . . . . 44
8.4 Special Rule in the Event of a Withdrawal. . . . . . . . . . . 45
8.5 Vesting Election. . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 9. PAYMENT OF BENEFITS. . . . . . . . . . . . . . . . . . . . . 47
9.1 Distribution of Accounts. . . . . . . . . . . . . . . . . . . . 47
9.2 Restriction on Immediate Distributions. . . . . . . . . . . . . 47
9.3 Optional Forms of Distribution. . . . . . . . . . . . . . . . . 49
9.4 Distribution Procedure. . . . . . . . . . . . . . . . . . . . . 49
9.5 Lost Distributee. . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 10. JOINT AND SURVIVOR ANNUITY REQUIREMENTS . . . . . . . . . . 51
10.1 Applicability. . . . . . . . . . . . . . . . . . . . . . . . . 51
10.2 Qualified Joint and Survivor Annuity . . . . . . . . . . . . . 52
10.3 Qualified Preretirement Survivor Annuity . . . . . . . . . . . 52
10.4 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.5 Notice Requirements. . . . . . . . . . . . . . . . . . . . . . 54
10.6 Transitional Rules . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 11. MINIMUM DISTRIBUTION REQUIREMENTS . . . . . . . . . . . . . 58
11.1 General Rules. . . . . . . . . . . . . . . . . . . . . . . . . 58
11.2 Required Beginning Date. . . . . . . . . . . . . . . . . . . . 58
11.3 Limits on Distribution Periods . . . . . . . . . . . . . . . . 59
11.4 Determination of Amount to be Distributed Each
Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.5 Death Distribution Provisions. . . . . . . . . . . . . . . . . 61
11.6 Transitional Rule. . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 12. WITHDRAWALS AND LOANS . . . . . . . . . . . . . . . . . . . 65
12.1 Withdrawals from Participant Contribution
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.2 Withdrawals on Account of Hardship . . . . . . . . . . . . . . 65
12.3 Withdrawals After Reaching Age 59 1/2 . . . . . . . . . . . . . 65
12.4 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.5 Procedure; Amount Available. . . . . . . . . . . . . . . . . . 68
ARTICLE 13. TRUST FUND AND INVESTMENTS. . . . . . . . . . . . . . . . . 69
13.1 Establishment of Trust Fund. . . . . . . . . . . . . . . . . . 69
13.2 Management of Trust Fund . . . . . . . . . . . . . . . . . . . 69
13.3 Investment Instructions. . . . . . . . . . . . . . . . . . . . 70
13.4 Valuation of the Trust Fund. . . . . . . . . . . . . . . . . . 71
13.5 Distributions on Investment Company Shares . . . . . . . . . . 72
13.6 Registration and Voting of Investment Company
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
13.7 Investment Manager . . . . . . . . . . . . . . . . . . . . . . 72
13.8 Employer Stock . . . . . . . . . . . . . . . . . . . . . . . . 73
<PAGE>
ARTICLE 14. INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . 75
14.1 Purchase of Insurance Products . . . . . . . . . . . . . . . . 75
14.2 Limitation on Premiums . . . . . . . . . . . . . . . . . . . . 75
14.3 Policy Options . . . . . . . . . . . . . . . . . . . . . . . . 75
14.4 Insurability . . . . . . . . . . . . . . . . . . . . . . . . . 75
14.5 Dividends on Policies. . . . . . . . . . . . . . . . . . . . . 75
14.6 Trustee of Policy. . . . . . . . . . . . . . . . . . . . . . . 76
14.7 Obligations with Respect to Policies . . . . . . . . . . . . . 76
14.8 Distribution of Proceeds on Participant's Death. . . . . . . . 76
14.9 Conversion of Policies . . . . . . . . . . . . . . . . . . . . 76
14.10 Conflict with Policies. . . . . . . . . . . . . . . . . . . . 76
14.11 Insurance Loans to Owner-Employees. . . . . . . . . . . . . . 76
ARTICLE 15. TOP-HEAVY PLANS . . . . . . . . . . . . . . . . . . . . . . 78
15.1 Superseding Effect . . . . . . . . . . . . . . . . . . . . . . 78
15.2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 78
15.3 Minimum Allocation . . . . . . . . . . . . . . . . . . . . . . 81
15.4 Adjustment of Fractions. . . . . . . . . . . . . . . . . . . . 82
ARTICLE 16. ADMINISTRATION OF THE PLAN. . . . . . . . . . . . . . . . . 83
16.1 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . 83
16.2 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . 83
16.3 Employer's Responsibilities. . . . . . . . . . . . . . . . . . 84
16.4 Recordkeeper . . . . . . . . . . . . . . . . . . . . . . . . . 84
16.5 Prototype Plan . . . . . . . . . . . . . . . . . . . . . . . . 85
ARTICLE 17. TRUSTEE AND INSURANCE TRUSTEE . . . . . . . . . . . . . . . 86
17.1 Powers and Duties of the Trustee . . . . . . . . . . . . . . . 86
17.2 Limitation of Responsibilities . . . . . . . . . . . . . . . . 87
17.3 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . 88
17.4 Reliance on Employer . . . . . . . . . . . . . . . . . . . . . 88
17.5 Action Without Instructions. . . . . . . . . . . . . . . . . . 88
17.6 Advice of Counsel. . . . . . . . . . . . . . . . . . . . . . . 89
17.7 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
17.8 Access to Records. . . . . . . . . . . . . . . . . . . . . . . 90
17.9 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . 90
17.10 Persons Dealing with Trustee or Insurance
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
17.11 Resignation and Removal; Procedure. . . . . . . . . . . . . . 90
17.12 Action of Trustee Following Resignation or
Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
17.13 Action of Insurance Trustee Following
Resignation or Removal. . . . . . . . . . . . . . . . . . . . 90
17.14 Effect of Resignation or Removal. . . . . . . . . . . . . . . 90
17.15 Fiscal Year of Trust. . . . . . . . . . . . . . . . . . . . . 91
17.16 Limitation of Liability . . . . . . . . . . . . . . . . . . . 91
17.17 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 91
ARTICLE 18. AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . 92
18.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
18.2 Delegation of Amendment Power. . . . . . . . . . . . . . . . . 93
ARTICLE 19. TERMINATION OF THE PLAN AND TRUST . . . . . . . . . . . . . 94
19.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
19.2 Events of Termination. . . . . . . . . . . . . . . . . . . . . 94
19.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . . 94
19.4 Approval of Plan . . . . . . . . . . . . . . . . . . . . . . . 95
ARTICLE 20. TRANSFERS FROM OTHER QUALIFIED PLANS; MERGERS . . . . . . . 96
20.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
20.2 Amounts Transferred. . . . . . . . . . . . . . . . . . . . . . 96
20.3 Merger or Consolidation. . . . . . . . . . . . . . . . . . . . 96
ARTICLE 21. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 97
21.1 Notice of Plan . . . . . . . . . . . . . . . . . . . . . . . . 97
21.2 No Employment Rights . . . . . . . . . . . . . . . . . . . . . 97
21.3 Distributions Exclusively From Plan. . . . . . . . . . . . . . 97
21.4 No Alienation. . . . . . . . . . . . . . . . . . . . . . . . . 97
21.5 Provision of Information . . . . . . . . . . . . . . . . . . . 97
21.6 No Prohibited Transactions . . . . . . . . . . . . . . . . . . 97
21.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 97
21.8 Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
<PAGE>
PUTNAM BASIC PLAN DOCUMENT #05
ARTICLE 65. INTRODUCTION
By executing the Plan Agreement, the Employer has established
a retirement plan (the "Plan") according to the terms and
conditions of the Plan Agreement and this Putnam Basic Plan
Document #05, for the purpose of providing a retirement fund for
the benefit of Participants and Beneficiaries. The Plan is a
profit sharing plan for purposes of section 401(a)(27) of the Code.
<PAGE>
ARTICLE 66. DEFINITIONS
The terms defined in Sections 2.1 through 2.45 appear
generally throughout the document. Sections 2.46 through 2.56 and
Article 5 contain definitions of terms used only in a CODA and
Section 10.4 contains additional definitions related to
distributions from the Plan. Articles 6 and 11 contain additional
definitions of terms used only in those Articles.
66..1 Account means any of, and Accounts means all of, a
Participant's Employer Contribution Account, Participant
Contribution Account, Rollover Account, and if the Plan contains a
CODA, the accounts maintained for the Participant pursuant to
Article 5.
66..2 Affiliated Employer, for purposes of the Plan other
than Article 6, means the Employer and a trade or business, whether
or not incorporated, which is any of the following:
(a) A member of a group of controlled corporations
(within the meaning of section 414(b) of the Code) which
includes the Employer; or
(b) A trade or business under common control (within the
meaning of section 414(c) of the Code) with the Employer; or
(c) A member of an affiliated service group (within the
meaning of section 414(m) of the Code) which includes the
Employer; or
(d) An entity otherwise required to be aggregated with
the Employer pursuant to section 414(o) of the Code.
In determining an Employee's service for vesting and for
eligibility to participate in the Plan, all employment with
Affiliated Employers will be treated as employment by the Employer.
For purposes of Article 6 only, the definitions in paragraphs
(a) and (b) of this Section 2.2 shall be modified by adding at the
conclusion of the parenthetical phrase in each such paragraph the
words "as modified by section 415(h) of the Code."
66..3 Authorized Leave of Absence means a leave of absence
from employment granted in writing by an Affiliated Employer.
Authorized Leave of Absence shall be granted on account of military
service for any period during which an Employee's right to
re-employment is guaranteed by law, and for such other reasons and
periods as an Affiliated Employer shall consider proper, provided
that Employees in similar situations shall be similarly treated.
66..4 Beneficiary means a person entitled to receive benefits
under the Plan upon the death of a Participant, in accordance with
Section 7.2 and Articles 10 and 11.
66..5 CODA means a cash or deferred arrangement that meets
the requirements of section 401(k) of the Code, adopted as part of
a profit sharing plan.
66..6 Code means the Internal Revenue Code of 1986, as
amended.
66..7 Compensation means all of an Employee's compensation
determined in accordance with the definition elected by the
Employer in the Plan Agreement. For purposes of that election,
"Form W-2 earnings" means "wages" as defined in section 3401(a) of
the Code in connection with income tax withholding at the source,
and all other compensation paid to the Employee by the Employer in
the course of its trade or business, for which the Employer is
required to furnish the Employee with a written statement under
sections 6041(d), 6051(a)(3) and 6052 of the Code, determined
without regard to exclusions based on the nature or location of the
employment or the services performed (such as the exception for
agricultural labor in section 3401(a)(2) of the Code).
Compensation shall include only amounts actually paid to the
Employee during the Plan Year, except that if the Employer so
elects in the Plan Agreement, Compensation shall include any amount
which is contributed to an employee benefit plan for the Employee
by the Employer pursuant to a salary reduction agreement, and which
is not includible in the gross income of the Employee under section
125, 402(a)(8), 402(h) or 403(b) of the Code. (For a self-employed
person, the relevant term is Earned Income, as defined in Section
2.10.)
66..8 Date of Employment means the first date on which an
Employee performs an Hour of Service; or, in the case of an
Employee who has incurred one or more One-Year Eligibility Breaks
and who is treated as a new Employee under the rules of Section
3.3, the first date on which he performs an Hour of Service after
his return to employment.
66..9 Disabled means unable to engage in any substantial
gainful activity by reason of any medically determinable physical
or mental impairment that can be expected to result in death or
which has lasted or can be expected to last for a continuous period
of not less than 12 months. The permanence and degree of such
impairment shall be supported by medical evidence.
66..10 Earned Income means a Self-Employed individual's net
earnings from self-employment in the trade or business with respect
to which the Plan is established, excluding items not included in
gross income and the deductions allocable to such items, and
reduced by (i) contributions by the Employer to qualified plans, to
the extent deductible under section 404 of the Code, and (ii) the
deduction allowed to the taxpayer under section 164(f) of the Code
for taxable years beginning after December 31, 1989.
66..11 Earnings, for determining all benefits provided under
the Plan for all Plan Years beginning after December 31, 1988,
means the first $200,000 (as adjusted by the Secretary of the
Treasury at the same time and in the same manner as under section
415(d) of the Code, except that the dollar increase effective on
any January 1 is effective for all Plan Years beginning in the
calendar year in which that January 1 occurs, and the first such
dollar increase is effective on January 1, 1990) of the sum of the
Compensation and the Earned Income received by an Employee during
a Plan Year. To calculate an allocation to a Participant's Account
for any Plan Year shorter than 12 months, the dollar limit
described in the preceding sentence must be multiplied by a
fraction of which the denominator is 12 and the numerator is the
number of months in the Plan Year. In determining the Earnings of
a Participant, the rules of section 414(q)(6) of the Code shall
apply, except that in applying those rules the term "family" shall
include only the Participant's spouse and the Participant's lineal
descendant who have not reached age 19 by the last day of the Plan
Year. If as a result of the application of such rules the adjusted
$200,000 limitation is exceeded, then the limitation shall be
prorated among the affected individuals in proportion to each such
individual's Earnings as determined under this section prior to the
application of this limitation.
66..12 Effective Date means the date so designated in the
Plan Agreement. If the Plan Agreement indicates that the Employer
is adopting the Plan as an amendment of an existing plan, the
provisions of the existing plan apply to all events preceding the
Effective Date, except as to specific provisions of the Plan which
set forth a retroactive effective date in accordance with Section
1140 of the Tax Reform Act of 1986.
66..13 Eligibility Period means a period of 12 consecutive
months beginning on an Employee's most recent Date of Employment or
any anniversary thereof, in which he is credited with at least
1,000 Hours of Service; provided that if the Employer has elected
in the Plan Agreement to establish a number less than 1,000 as the
requisite for crediting an Eligibility Period, that number shall be
substituted for 1,000, and provided further that in the case of an
Employee in a seasonal industry (as defined under regulations
prescribed by the Secretary of Labor) in which the customary extent
of employment during a calendar year is fewer than 1,000 Hours of
Service, the number specified in any regulations prescribed by the
Secretary of Labor dealing with years of service shall be
substituted for 1,000. If the Employer so elects in the Plan
Agreement, an Employee's most recent Date of Employment for
purposes of this Section 2.13 shall be the first date on which he
performed services for a business acquired by the Employer.
66..14 Employee means a common law Employee of an Affiliated
Employer; in the case of an Affiliated Employer which is a sole
proprietorship, the sole proprietor thereof; in the case of an
Affiliated Employer which is a partnership, a partner thereof; and
a Leased Employee of an Affiliated Employer. The term "Employee"
includes an individual on Authorized Leave of Absence, a Self-
Employed Individual and an Owner-Employee.
66..15 Employer means the Employer named in the Plan
Agreement and any successor to all or the major portion of its
assets or business which assumes the obligations of the Employer
under the Plan Agreement.
66..16 Employer Contribution Account means an account
maintained on the books of the Plan on behalf of a Participant, in
which are recorded the amounts allocated for his benefit from
contributions by the Employer (other than contributions pursuant to
Article 5), Forfeitures by former Participants (if the Plan
provides for reallocation of Forfeitures), amounts reapplied under
Section 6.1(d), and the income, expenses, gains and losses incurred
thereon.
66..17 ERISA means the Employee Retirement Income Security
Act of 1974, as amended.
66..18 Forfeiture means a nonvested amount forfeited by a
former Participant, pursuant to Section 8.3, or an amount forfeited
by a former Participant or Beneficiary who cannot be located,
pursuant to Section 9.5.
66..19 Hour of Service means each hour described in
paragraphs (a), (b), (c), (d) or (e) below, subject to paragraphs
(f) and (g) below.
(a) Each hour for which an Employee is paid, or entitled
to payment, for the performance of duties for an Affiliated
Employer. These hours shall be credited to the Employee for
the computation period or periods in which the duties are
performed.
(b) Each hour for which an Employee is paid, or entitled
to payment, by an Affiliated 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 501 Hours of Service shall be credited under this
paragraph for any single continuous period of absence (whether
or not such period occurs in a single computation period)
unless the Employee's absence is not an Authorized Leave of
Absence. Hours under this paragraph shall 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 an
Affiliated Employer. The same Hours of Service shall not be
credited under both paragraph (a) or paragraph (b), as the
case may be, and under this paragraph (c); and no more than
501 Hours of Service shall be credited under this paragraph
(c) with respect yo payments of back pay, to the extent that
such pay is agreed to or awarded for a period of time
described in paragraph (b) during which the Employee did not
perform or would not have performed any duties. 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) Each hour during an Authorized Leave of Absence.
Such hours shall be credited at the rate of a customary full
work week for an Employee.
(e) Solely for purposes of determining whether a OneYear
Vesting Break or a One-Year Eligibility Break has occurred,
each hour which otherwise would have been credited to an
Employee but for an absence from work by reason of: the
pregnancy of the Employee, the birth of a child of the
Employee, the placement of a child with the Employee in
connection with the adoption of the child by the Employee, or
caring for a child for a period beginning immediately after
its birth or placement. If the Plan Administrator cannot
determine the hours which would normally have been credited
during such an absence, the Employee shall be credited with
eight Hours of Service for each day of absence. No more than
501 Hours of Service shall be credited under this paragraph by
reason of any pregnancy or placement. Hours credited under
this paragraph shall be treated as Hours of Service only in
the PLan Year or Eligibility Period or both, as the case may
be, in which the absence from work begins, if necessary to
prevent the Participant's incurring a One-Year Vesting Break
or One-Year Eligibility Break in that period, or, if not, in
the period immediately following that in which the absence
begins. The Employee must timely furnish to the Employer
information reasonably required to establish (i) that an
absence from work is for a reason specified above, and (ii)
the number of days for which the absence continued.
(f) Hours of Service shall be determined on the basis of
actual hours for which an Employee is paid or entitled to
payment, or as otherwise specified in the Plan Agreement.
(g) If the Employer maintains the plan of a predecessor
employer, service for the predecessor Employer shall be
treated as service for the Employer. If the Employer does not
maintain the plan of a predecessor employer, service for the
predecessor employer shall be treated as service for the
Employer only to the extent that the Employer so elects in the
Plan Agreement.
(h) Hours of Service shall be credited to a Leased
Employee as though he were an Employee.
66..20 Insurance Trustee means the person named in the Plan
Agreement as Insurance Trustee, and any successor thereto.
66..21 Investment Company means an open-end registered
investment company for which Putnam Financial Services, Inc., or
its affiliate acts as principal underwriter, or for which The
Putnam Management Company, Inc., or its affiliate serves as an
investment adviser; provided that its prospectus offers its shares
under the Plan.
66..22 Investment Company Shares means shares issued by an
Investment Company.
66..23 Investment Products means any of the investment
products specified by the Employer in accordance with Section 13.2,
from the group of those products sponsored, underwritten or managed
by Putnam as shall be made available by Putnam under the Plan, and
such other products as shall be expressly agreed to in writing by
Putnam for availability under the Plan. The term "Investment
Products" does not include any Policy selected pursuant to Article
14.
66..24 Leased Employee means any person (other than an
Employee of the recipient) who pursuant to an agreement between the
recipient and any other person ("leasing organization") has
performed services for the recipient (or for the recipient 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 year, and such services are of a type historically
performed by Employees in the business field of the recipient
Employer. The compensation of a Leased Employee for purposes of
the Plan means the Compensation (as defined in Section 2.7) of the
Leased Employee attributable to services performed for the
recipient Employer. Contributions or benefits provided to a leased
Employee by the leasing organization which are attributable to
services performed for the recipient Employer shall be treated as
provided by the recipient Employer. Provided that leased Employees
do not constitute more than 20% of the recipient's nonhighly
compensate workforce, a leased Employee shall not be considered an
Employee of the recipient if he is covered by a money purchase
pension plan providing: (1) a nonintegrated Employer contribution
rate of at least 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 section 125, section 402(a)(8),
section 402(h) or section 403(b) of the Code), (2) immediate
participation, and (3) full and immediate vesting.
66..25 One-Year Eligibility Break means an Eligibility Period
during which an individual is not credited with more than 500 Hours
of Service; provided, however, that in the case of an Employee in
a seasonal industry, there shall be substituted for 500 the number
of Hours of Service specified in any regulations of the Secretary
of Labor dealing with breaks in service, and provided further that
if the Employer has elected in the Plan Agreement to establish a
number less than 500 as the requisite Hours of Service for
crediting an Eligibility Period, that number shall be substituted
for 500.
66..26 One-Year Vesting Break means a Year of Service
measuring period, as elected by the Employer in the Plan Agreement,
during which an individual is not credited with more than 500 Hours
of Service; provided, however, that in the case of an Employee in
a seasonal industry, there shall be substituted for 500 the number
of Hours of Service specified in any regulations for the Secretary
of Labor dealing with breaks in service, and provided further that
if the Employer has elected in the Plan Agreement to establish a
number less than 500 as the requisite Hours of Service for
crediting a Year of Service, that number shall be substituted for
500.
66..27 Owner-Employee means the sole proprietor of an
Affiliated Employer that is a sole proprietorship, or a partner
owning more than 10% of either the capital or profits interest of
an Affiliated Employer that is a partnership. The Plan
Administrator shall be responsible for identifying Owner-Employees
to the Recordkeeper.
66..28 Participant means each Employee who has met the
requirement for participation in Article 3. An Employee is not a
Participant for any period before the entry date applicable to him.
66..29 Participant Contribution Account means an account
maintained on the books of the Plan, in which are recorded
nondeductible contributions by a Participant pursuant to Section
4.2(d), and any income, expenses, gains or losses incurred thereon.
66..30 Plan means the form of defined contribution retirement
plan and trust agreement adopted by the Employer, consisting of the
Plan Agreement and the Putnam Basic Plan Document #05 as set forth
herein, together with any and all amendments and supplements
thereto.
66..31 Plan Administrator means the Employer or its appointee
pursuant to Section 16.1.
66..32 Plan Agreement means the separate agreement entered
into between the Employer and the Trustee (and the Insurance
Trustee, if any) and accepted by Putnam, under which the Employer
adopts the Plan and selects among its optional provisions.
66..33 Plan Year means the period of 12 consecutive months
specified by the employer in the Plan Agreement; provided that if
the Effective Date is not the first day of the Employer's taxable
year, the initial Plan Year shall begin on the Effective Date and
end on the last day of the Employer's taxable year.
66..34 Policy means an ordinary life insurance, term
insurance, retirement income or endowment policy or an individual
or group annuity contract issued by a life insurance company in
connection with the Plan, or an interest therein. An ordinary life
insurance policy within the meaning of this definition provides
non-decreasing death benefits and non-increasing premiums.
66..35 Putnam means Putnam Financial Services, Inc., or a
company affiliated with it which Putnam Financial Services, Inc.
has designated as its agent to perform specified actions or
procedures in connection with the prototype Plan.
66..36 Qualified Participant means any Participant who is an
active Employee on the last day of the Plan Year in question or who
is credited with more than 500 Hours of Service during the Plan
Year in question or whose Retirement or death occurred during the
Plan Year in question. If the Plan is not adopted to replace an
existing plan, this Section 2.36 is effective on the Effective
Date. If the Plan replaces an existing plan, this Section 2.36 is
effective on the first day of the first Plan Year that begins after
December 31, 1988, or if later, on the Effective Date, and the
provision of the existing plan that this Section 2.36 replaces
shall continue to apply until that time.
66..37 Recordkeeper means the person or entity designated by
the Employer in the Plan Agreement to perform the duties described
in Section 16.4, and any successor thereto. If Putnam is the
Recordkeeper, the terms and conditions of its service will be as
specified in a service agreement between the Employer and Putnam.
66..38 Retirement means ceasing to be an Employee in
accordance with Section 7.1.
66..39 Rollover Account means an account established for an
Employee who makes a rollover contribution to the Plan pursuant to
Section 4.3.
66..40 Self-Employed Individual means an individual whose
personal services are a material income-producing factor in the
trade or business for which the Plan is established, and who has
Earned Income for the taxable year from that trade or business, or
would have Earned Income but for the fact that the trade or
business had no net profits for the taxable year.
66..41 Shareholder-Employee means any officer or Employee of
an electing small business corporation, within the meaning of
section 1362 of the Code, who on any day during a taxable year of
the Employer owns (or is considered as owning under section
318(a)(1) of the Code) more than 5% of the outstanding stock of the
Employer. The Plan administrator shall be responsible for
identifying Shareholder-Employees to the Recordkeeper.
66..42 Trust and Trust Fund mean the trust fund established
under Section 13.1.
66..43 Trustee means the person, or the entity with trustee
powers, named in the Plan Agreement as trustee, and any successor
thereto.
66..44 Valuation Date means each day when the New York Stock
Exchange is open, or such other date or dates as the Employer may
designate by written agreement with the Recordkeeper.
66..45 Year of Service means a Plan Year or an Eligibility
Period, as elected by the Employer in the Plan Agreement, in which
an Employee is credited with at least 1,000 Hours of Service;
provided, however, that if the Employer has elected in the Plan
Agreement to establish a number less than 1,000 as the requisite
for crediting a Year of Service, that number shall be substituted
for 1,000, and provided further that in the case of an Employee in
a seasonal industry (as defined under regulations prescribed by the
Secretary of Labor) in which the customary extent of employment
during a calendar year is fewer than 1,000 Hours of Service, the
number specified in any regulations prescribed by the Secretary of
Labor dealing with years of service shall be substituted for 1,000.
An Employee's Years of Service shall include service credited prior
to the Effective Date under any predecessor plan. If the initial
Plan Year is shorter than 12 months, each Employee who is credited
with at least 1,000 Hours of Service in the 12-month period ending
on the last day of the initial Plan Year shall be credited with a
Year of Service with respect to the initial Plan Year.
If the Employer has so elected in the Plan Agreement, Years of
Service for vesting shall not include:
(a) Service in any Plan Year (or comparable period prior
to the Effective Date) completed before the Employee reached
age 18;
(b) Service completed during a period in which the
Employer did not maintain the Plan or any predecessor plan (as
defined under regulations prescribed by the Secretary of the
Treasury).
If the Employer has so elected in the Plan Agreement, Years of
Service for vesting shall include employment by a business acquired
by the Employer, before the date of the acquisition.
The following definitions apply only to cash or deferred
arrangements under section 401(k) (CODA):
66..46 Deferral Agreement means an Employee's agreement to
make one or more Elective Deferrals in accordance with Section 5.2.
66..47 Elective Deferral means any contribution made to the
Plan by the Employer at the election of a Participant, in lieu of
cash compensation, including contributions made pursuant to a
Deferral Agreement or other deferral mechanism.
66..48 Elective Deferral Account means an account maintained
on the books of the Plan, in which are recorded a Participant's
Elective Deferrals and the income, expenses, gains and losses
incurred thereon.
66..49 Employer Matching Contribution means a contribution
made by the Employer (i) to the Plan pursuant to Section 5.8, or
(ii) to another defined contribution plan on account of a
Participant's "elective deferrals" or "employee contributions," as
those terms are used in section 401(m) (4) of the Code.
66..50 Employer Matching Account means an account maintained
on the books of the Plan, in which are recorded the Employer
Matching Contributions made on behalf of a Participant and the
income, expenses, gains and losses incurred thereon.
66..51 Highly Compensated Employee means any highly
compensated active Employee or highly compensated former Employee,
as defined in this Section 2.51. For this purpose, the
"determination year" shall be the Plan Year, and the "look-back
year" shall be the 12-month period immediately preceding the
determination year; provided, however, that in a Plan for which the
Plan Year is the calendar year, the current Plan Year shall be both
the "determination year" and the "look-back year" if the Employer
so elects in the Plan Agreement.
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 $75,000 (as adjusted pursuant to section
415(d) of the Code); (ii) received compensation from the Employer
in excess of $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 50% of the dollar limitation
in effect under section 415(b)(1)(A) of the Code. The term also
includes (i) Employees who are both described in the preceding
sentence if the term "determination year" is substituted for the
term "look-back year," and among the 100 Employees who received the
most compensation from the Employer during the determination year;
and (ii) Employees who are 5% owners at any time during the
look-back year or determination year. If no officer has satisfied
the compensation requirement of (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.
A highly compensated former Employee includes any Employee who
separated from service (or was deemed to have separated) before the
determination year, performed no service for the Employer during
the determination year, and was a highly compensated active
Employee for either the year of separation from service or any
determination year ending on or after the Employee's 55th birthday.
If during a determination year or look-back year an Employee
is a family member of either a 5% owner who is an active or former
Employee, or a Highly Compensated Employee who is one of the 10
most highly paid Highly Compensated Employees ranked on the basis
of compensation paid by the Employer during the year, then the
family member and the 5% owner or top-ten Highly Compensate
Employee shall be treated as a single Employee receiving
compensation and plan contributions or benefits equal to the sum of
the compensation and contributions or benefits of the family member
and the 5% owner or top-ten highly compensated
Employee. For purposes of this Section 2.51, family members
include the spouse, lineal ascendants and descendants of the
Employee or former Employee and the spouses of such lineal
ascendants and descendants.
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of mployees
in the top-paid group, the top 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.
66..52 Non-Highly Compensated Employee means an Employee who
is not a Highly Compensated Employee.
66..53 Qualified Matching Contribution means a contribution
made by the Employer that: (i) is allocated in proportion to a
Participant's Elective Deferrals, (ii) is fully vested at all times
and (iii) is distributable only in accordance with Section 5.11.
66..54 Qualified Matching Account means an account maintained
on the books of the Plan, in which are recorded the Qualified
Matching Contributions on behalf of a Participant and the income,
expense, gain and loss attributable thereto.
66..55 Qualified Nonelective Contribution means a
contribution (other than an Employer Matching Contribution or
Qualified Matching Contribution) made by the Employer, that: (i)
a Participant may not elect to receive in cash until it is
distributed from the Plan; (ii) is fully vested at all times; and
(iii) is distributable only in accordance with Section 5.11.
66..56 Qualified Nonelective Contribution Account means an
account maintained on the books of the Plan, in which are recorded
the Qualified Nonelective Contributions on behalf of a Participant
and the income, expense, gain and loss attributable thereto.
<PAGE>
ARTICLE 67. PARTICIPATION
67..1 Initial Participation. An Employee shall begin
participation in the Plan as of the entry date specified in the
Plan Agreement, or as of the Effective Date, whichever is later;
provided, however, that:
(a) if the Plan is adopted as an amendment of a
predecessor plan of the Employer, every Employee who was
participating under the predecessor plan when it was so
amended shall become a Participant in the Plan as of the
Effective Date, whether or not he has satisfied the age and
service requirements specified in the Plan Agreement; and
(b) Unless the Employer specifies otherwise in the Plan
Agreement, any individual who is (i) a nonresident alien
receiving no earned income from an Affiliated Employer which
constitutes income from sources within the United States, or
(ii) included in a unit of Employees covered by a collective
bargaining agreement between the Employer and Employee
representatives (excluding from the term "Employee
representatives" any organization of which more than half of
the members are Employees who are owners, officers, or
executives of an Affiliated Employer), if retirement benefits
were the subject of good faith bargaining and no more than 2%
of the Employees covered by the collective bargaining
agreement are professionals as defined in Section 1.410(b)-9
of the Income Tax Regulations, shall not participate in the
Plan until the later of the date on which he ceases to be
described in clause (i) or (ii), whichever is applicable, or
the entry date specified by the Employer in the Plan
Agreement; and
(c) If the Plan is not adopted as an amendment of a
predecessor plan of the Employer, all Employees on the
Effective Date shall begin participation on the Effective
Date, if the Employer so elects in the Plan Agreement.
(d) A Participant shall cease to participate in the Plan
when he becomes a member of a class of Employees ineligible to
participate in the Plan, and shall resume participation
immediately upon his return to a class of Employees eligible
to participate in the Plan.
67..2 Special Participation Rule. With respect to a Plan in
which the Employer has specified full and immediate vesting in the
Plan Agreement, an Employee who incurs a One-Year Eligibility Break
before completing the number of Eligibility Periods required under
Section 3.1 shall not thereafter be credited with any Eligibility
Period completed before the One-Year Eligibility Break.
67..3 Resumed Participation. A former Employee who incurs a
One-Year Eligibility Break after having become a Participant shall
participate in the Plan as of the date on which he again becomes an
Employee, if (i) his Employer Contribution Account or Employer
Matching Account had become partially or fully vested before he
incurred a One-Year Vesting Break, or (ii) he incurred fewer than
five consecutive One-Year Eligibility Breaks. In any other case,
when he again becomes an Employee he shall be treated as a new
Employee under Section 3.1.
67..4 Benefits for Owner-Employees. If the Plan provides
contributions or benefits for one or more Owner-Employees who
control both the trade or business with respect to which the Plan
is established and one or more other trades or businesses, the Plan
and plans established with respect to such other trades or
businesses must, when looked at as a single plan, satisfy sections
401(a) and (d) of the Code with respect to the Employees of this
and all such other trades or businesses. 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
each such other trade or business must be included in a plan which
satisfies sections 401(a) and (d) of the Code and which provides
contributions and benefits not less favorable than those provided
for such Owner-Employees under the Plan. If an individual is
covered as an Owner-Employee under the plans of two or more trades
or businesses which he does not control and such individual
controls a trade or business, then the contributions or benefits of
the Employees under the plan of the trade or business which he does
control must be as favorable as those provided for him under the
most favorable plan of the trade or business which he does not
control. For purposes of this Section 3.4, an Owner-Employee, or
two or more Owner-Employees, shall be considered to control a trade
or business if such Owner-Employee, or such two or more Owner-
Employees together:
(a) own the entire interest in an unincorporated trade
or business, or
(b) in the case of a partnership, own more than 50% of
either the capital interest or the profits interest in such
partnership.
For purposes of the preceding sentence, an Owner-Employee or
two or more Owner-Employees shall be treated as owning any interest
in a partnership which is owned, directly 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.<PAGE>
ARTICLE 68. CONTRIBUTIONS
68..1 Payment and Crediting of Employer Contributions. The
Employer shall pay to the order of the Trustee the aggregate
contribution to the Trust Fund (other than the premium payments on
any Policy) for each Plan Year. Each contribution shall be
accompanied by written instructions from the Employer, in the
manner prescribed by Putnam. Neither the Trustee nor Putnam shall
be under any duty to inquire into the correctness of the amount or
the timing of any contribution, or to collect any amount if the
Employer fails to make a contribution as provided in the Plan.
(a) Responsibility for Premium Payments. Contributions
to be applied to the payment of the premiums on any Policy
shall be paid by the Employer directly to the insurer in cash.
In determining the amount of any premium due under any Policy
with respect to any Participant, the Employer and the
Insurance Trustee may rely conclusively upon information
furnished by the provider of the Policy. For purposes of
Section 4.2 and Article 5, all Employer contributions used to
pay premiums on Policies shall be treated as contributions
made to the appropriate Participant's Employer Contribution
Account. If the employer omits any premium payment or makes
any mistake concerning a premium payment, neither the Employer
nor the Insurance Trustee shall have any liability in excess
of the premium to be paid.
(b) Time for Payment. The aggregate of all
contributions with respect to a Plan Year shall be transferred
to the Trustee or the insurer no later than the due date
(including extensions) for filing the Employer's federal
income tax return for that Plan Year.
(c) Limitations on Allocations. All allocations shall
be subject to the limitations in Article 6.
(d) Establishment of Accounts. The Employer will
establish and maintain (or cause to be established and
maintained) for each Participant individual accounts adequate
to disclose his interest in the Trust Fund, including such of
the following separate accounts as shall apply to the
Participant: Employer Contribution Account, Participant
Contribution Account, and Rollover Account; and in a Plan with
a CODA, Elective Deferral Account, Qualified Nonelective
Account, Qualified Matching Account and Employer Matching
Account. The maintenance of such accounts shall be only for
recordkeeping purposes, and the assets of separate accounts
shall not be required to be segregated for purposes of
investment.
(e) Restoration of Accounts. Notwithstanding any other
provision od the Plan, for any Plan Year in which it is
necessary to restore any portion of a Participant's Account
pursuant to Section 8.3(b) or 9.5, to the extent that the
amount of Forfeitures available is insufficient to accomplish
such restoration, the Employer shall contribute the amount
necessary to eliminate the insufficiency, regardless of
whether the contribution is currently deductible by the
Employer under section 404 of the Code. Forfeitures shall be
considered available for allocation pursuant to Sections 4.2
and 5.8 in a Plan Year only after all necessary restoration of
Accounts has been accomplished.
68..2 Amount and Allocation of Annual Contribution. The
Employer will contribute for each Plan Year an amount determined in
accordance with the formula specified by the Employer in the Plan
Agreement, less any amounts reapplied for the Plan Year under
Section 6.1(d), not to exceed the amount deductible under section
404 of the Code. If the Employer so elects in the Plan Agreement,
the amount of Forfeitures occurring in a Plan Year shall be applied
to reduce the Employer's contribution by a like amount, and such
Forfeitures shall be treated as a portion of the Employer
contribution for purposes of paragraphs (a) and (b).
(a) Allocation of Contributions: General Rule. As of
the last day of each Plan Year, the Employer's contribution
(and any amounts reapplied under Section 6.1(d)) for the Plan
Year shall be allocated among the Employer Contribution
Accounts of Qualified Participants in proportion to their
Earnings, unless the Employer elects in the Plan Agreement to
allocate contributions in a uniform dollar amount to the
Account of each Qualified Participant. This rule does not
apply to allocations in a CODA.
(b) Per Capita Allocation. An Employer may elect in the
Plan Agreement to allocate Employer Contributions and any
amounts reapplied under Section 6.1(d) (but not allocations in
a CODA) in a uniform dollar amount to the Account of each
Qualified Participant.
(c) Allocation of Forfeitures. Forfeitures shall be
allocated among the Employer Contribution Accounts of all
Qualified Participants in accordance with paragraph (a) or
(b), whichever applies to Employer Contributions.
(d) Participant Contributions. The Plan will accept no
nondeductible Participant contributions for any Plan Year
beginning after the Plan Year in which the Employer adopts
this Plan. Nevertheless, a Participant Contribution Account
shall be maintained in any Plan that accepted nondeductible
Participant contributions for any Plan Year, and such
contributions, together with any matching contributions (as
defined in section 401(m)(4) of the Code), shall be limited so
as to meet the nondiscrimination test of section 401(m) of the
Code, as set forth in Section 5.9 of the Plan. All
Participant Contribution Accounts will be fully vested at all
times.
68..3 Rollover Contributions. An Employee in an eligible
class may contribute at any time cash or other property (which is
not a collectible within the meaning of section 408(m) of the Code)
acceptable to the Trustee representing qualified rollover amounts
under sections 402, 403, or 408 of the Code. Amounts so
contributed shall be credited to a Rollover Account for the
Participant.
68..4 No Deductible Employee Contributions. The Plan
Administrator shall not accept deductible employee contributions.
<PAGE>
ARTICLE 69. CASH OR DEFERRED ARRANGEMENT UNDER SECTION 401(k)
(CODA)
69..1 Applicability; Allocations. This Article 5 applies to
any plan for which the Employer has elected in the Plan Agreement
to include a CODA. The Employer may specify in the Plan Agreement
that contributions will be made to the Plan only under the CODA, or
that contributions may be made under Section 4.2 as well as under
the CODA. Allocations to Participants' Accounts of contributions
made pursuant to this Article 5 shall be made as soon as
administratively feasible after their receipt by the Trustee, but
in any case no later than as of the last day of the Plan Year for
which the contributions were made.
69..2 CODA Participation. Each Employee who has met the
eligibility requirements of Article 3 may make Elective Deferrals
to the Plan by completing and returning to the Plan Administrator
a Deferral Agreement form which provides that the Participant's
cash compensation from the Employer will be reduced by the amount
indicated in the Deferral Agreement, and that the Employer will
contribute an equivalent amount to the Trust on behalf of the
Participant. The following rules will govern Elective Deferrals:
(a) Subject to the limits specified in the Plan
Agreement and set forth in Section 5.3, a Deferral Agreement
may apply to any amount or percentage of either or both of the
Earnings payable to a Participant in each regular payroll
period of the Employer, or one or more bonuses payable to a
Participant from time to time as specified by the Employer.
(b) In accordance with such reasonable rules as the Plan
Administrator shall specify, a Deferral Agreement will become
effective as soon as is administratively feasible after the
Deferral Agreement is returned to the Plan Administrator, and
will remain effective until it is modified or terminated. No
Deferral Agreement may become effective retroactively.
(c) A Participant may modify his Deferral Agreement by
completing and returning to the Plan Administrator a new
Deferral Agreement form as of any of the dates specified in
the Plan Agreement, and any such modification will become
effective as described in paragraph (b).
(d) A Participant may terminate his Deferral Agreement
at any time upon advance written notice to the Plan
Administrator, and any such Termination will become effective
as described in paragraph (b).
69..3 Annual Limit on Elective Deferrals. During any taxable
year of a Participant, his Elective Deferrals under the Plan and
any other qualified plan of an Affiliated Employer shall not exceed
the dollar limit contained in section 402(g) of the Code in effect
at the beginning of the taxable year. With respect to any taxable
year, a Participant's Elective Deferrals for purposes of this
Section 5.3 include all Employer contributions made on his behalf
pursuant to an election to defer under any qualified CODA as
described in section 401(k) of the Code, any simplified employee
pension cash or deferred arrangement (SARSEP) as described in
section 402(h)(1)(B) of the Code, any eligible deferred
compensation plan under section 457 of the Code, any plan described
under section 501(c)(18) of the Code, and any Employer
contributions made on behalf of the Participant for the purchase of
an annuity contract under section 403(b) of the Code pursuant to a
salary reduction agreement. The amount of Elective Deferrals of a
Participant who receives a hardship distribution pursuant to
Section 5.14 shall be reduced, for the taxable year next following
the distribution, by the amount of Elective Deferrals made in the
taxable year of the hardship distribution.
69..4 Distribution of Certain Elective Deferrals. "Excess
Elective Deferrals" means those Elective Deferrals described in
Section 5.3 that are includible in a Participant's gross income
under section 402(g) of the Code, to the extent that the
Participant's aggregate elective deferrals for a taxable year
exceed the dollar limitation under that Code section. Excess
Elective Deferrals shall be treated as Annual Additions under the
Plan, whether or not they are distributed under this Section 5.4.
A Participant may designate to the Plan any Excess Elective
Deferrals made during his taxable year by notifying the Employer on
or before the following March 15 of the amount of the Excess
Elective Deferrals to be so designated. A Participant who has
Excess Elective Deferrals for a taxable year, taking into account
only his Elective Deferrals under the Plan and any other plans of
the Affiliated Employers, shall be deemed to have designated the
entire amount of such Excess Elective Deferrals.
Notwithstanding any other provision of the Plan, Excess
Elective Deferrals, plus any income and minus any loss allocable
thereto, shall be distributed no later than April 15 to any
Participant to whose Account Excess Elective Deferrals were so
designated or deemed designated for the preceding year. The income
or loss allocable to Excess Elective Deferrals is the income or
loss allocable to the Participant's Elective Deferral Account for
the taxable year multiplied by a fraction, the numerator of which
is the 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 the year.
To the extent that the return to a Participant of his Elective
Deferrals would reduce an Excess Amount (as defined in Section
6.5(f)), such Excess Deferrals shall be distributed to the
Participant in accordance with Article 6.
69..5 Satisfaction of ADP and ACP Tests. In each Plan Year,
the Plan must satisfy the ADP test described in Section 5.6 and the
ACP test described in Section 5.9. The Employer may cause the Plan
to satisfy the ADP or ACP test or both tests for a Plan Year by any
of the following methods or by any combination of them:
(a) By the distribution of Excess Contributions in
accordance with Section 5.7, or the distribution of Excess
Aggregate Contributions in accordance with Section 5.10, or
both; or
(b) If the Employer has so elected in the Plan
Agreement, by making Qualified Nonelective Contributions or
Qualified Matching Contributions or both, in accordance with
the Plan Agreement and this Section 5.5.
69..6 Actual Deferral Percentage Test Limit. The Actual
Deferral Percentage (hereinafter "ADP") for Participants who are
Highly Compensated Employees for each Plan Year and the ADP for
Participants who are Non-Highly Compensated Employees for the same
Plan Year must satisfy one of the following tests:
(a) The ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
Participants who are Non-Highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
(b) The ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
Participants who are Non-Highly Compensated Employees for the
same Plan Year multiplied by 2.0, provided that the ADP for
Participants who are Highly Compensated Employees does not
exceed the ADP for Participants who are Non-Highly Compensated
Employees by more than two percentage points.
The following special rules shall apply to the computation of
the ADP:
(c) "Actual Deferral Percentage" means, for a specified
group of Participants for a Plan Year, the average of the
ratios (calculated separately for each Participant in the
group) of (1) the amount of Employer contributions actually
paid over to the Trust on behalf of the Participant for the
Plan Year to (2) the Participant's Earnings for the Plan Year
(or, provided that the Employer applies this method to all
Employees for a Plan Year, the Participant's Earnings for that
portion of the Plan Year during which he was eligible to
participate in the Plan). Employer contributions on behalf of
any Participant shall include: (i) his Elective Deferrals,
including Excess Elective Deferrals of Highly Compensated
Employees, but excluding (A) Excess Elective Deferrals of Non-
Highly Compensated Employees that arise solely from Elective
Deferrals made under the Plan or another plan maintained by an
Affiliated Employer, and (B) Elective Deferrals that are taken
into account in the Average Contribution Percentage test
described in Section 5.11 (provided the ADP test is satisfied
both with and without exclusion of these Elective Deferrals),
and excluding Elective Deferrals returned to a Participant to
reduce an Excess Amount as defined in Section 6.5(f); and (ii)
if the Employer has elected to make Qualified Nonelective
Contributions, such amount of Qualified Nonelective
Contributions, if any, as shall be necessary to enable the
Plan to satisfy the ADP test; and (iii) if the Employer has
elected to make Qualified Matching Contributions, such amount
of Qualified Matching Contributions, if any, as shall be
necessary to enable the Plan to satisfy the ADP test. For
purposes of computing Actual Deferral Percentages, an Employee
who would be a Participant but for his failure to make
Elective Deferrals shall be treated as a Participant on whose
behalf no Elective Deferrals are made.
(d) In the event that the 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 the Plan, then
this Section 5.6 shall be applied by determining the ADP 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.
(e) The ADP 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
these are treated as Elective Deferrals for purposes of the
ADP test) allocated to his Accounts under two or more CODAS
described in section 401(k) of the Code that are maintained by
the Affiliated Employers 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 CODA. If a Highly
Compensated Employee participates in two or more CODAs that
have different Plan Years, all CODAs ending with or within the
same calendar year shall be treated as a single CODA, except
that CODAs to which mandatory disaggregation applies in
accordance with regulations issued under section 401(k) of the
Code shall be treated as separate CODAS.
(f) For purposes of determining the ADP of a Participant
who is a 5% owner or one of the 10 most highly-paid Highly
Compensated Employees, the Elective Deferrals (and Qualified
Nonelective Contributions or Qualified Matching Contributions,
or both, if these are treated as Elective Deferrals for
purposes of the ADP test) and the Compensation of such a
Participant shall include the Elective Deferrals (and, if
applicable, Qualified Nonelective contributions and Qualified
Matching Contributions, or both) and Compensation for the Plan
Year of his Family Members (as defined in section 414(q)(6) of
the Code). Family Members of such Highly Compensated
Employees shall be disregarded as separate employees in
determining the ADP both for Participants who are Non-Highly
Compensated Employees and for Participants who are Highly
Compensated Employees.
(g) For purposes of the ADP test, Elective Deferrals,
Qualified Nonelective Contributions and Qualified Matching
Contributions must be made before the last day of the 12-month
period immediately following the Plan Year to which those
contributions relate.
(h) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ADP test and the amount of
Qualified Nonelective Contributions or Qualified Matching
Contributions, or both, used in satisfying the test.
(i) The determination and treatment of the ADP amounts
of any Participant shall satisfy such other requirements as
may be prescribed by the Secretary of the Treasury.
69..7 Distribution of Excess Contributions. "Excess
Contributions" means, with respect to any Plan Year, the excess of:
(a) The aggregate amount of Employer contributions
actually taken into account in computing the ADP of Highly
Compensated Employees for the Plan Year, over
(b) The maximum amount of Employer contributions
permitted by the ADP test, determined by reducing
contributions made on behalf of Highly Compensated Employees
in order of their ADPs, beginning with the highest of such
percentages.
Notwithstanding any other provision of the 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 Excess Contributions
were allocated for the preceding Plan Year. The income or loss
allocable to Excess Contributions is the income or loss allocable
to the Participant's Elective Deferral Account (and, if applicable,
his Qualified Nonelective Account or Qualified Matching Account or
both) for the Plan Year multiplied by a fraction, the numerator of
which is the 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 these are
included in the ADP test) without regard to any income or loss
occurring during the Plan Year. if such excess amounts are
distributed more than 2 1/2 months after the last day of the Plan Year
in which the excess amounts arose, an excise tax equal to 10% of
the excess amounts will be imposed on the Employer maintaining the
Plan. Such distributions shall be made to Highly Compensated
Employees on the basis of the respective portions of the Excess
Contributions attributable to each of them. Excess Contributions
shall be allocated to a Participant who is a family member subject
to the family member aggregation rules of section 414(q)(6) of the
Code in the proportion that the Participant's Elective Deferrals
(and other amounts treated as his Elective Deferrals) bear to the
combined Elective Deferrals (and other amounts treated as Elective
Deferrals) of all of the Participants aggregated to determine his
family members' combined ADP. Excess Contributions shall be
treated as Annual Additions under the Plan.
Excess Contributions shall be distributed from the
Participant's Elective Deferral Account and Qualified Matching
Account (if applicable) in proportion to the Participant's Elective
Deferrals and Qualified Matching Contributions (to the extent used
in the ADP test) for the Plan Year. Excess Contributions shall be
distributed from the Participant's Qualified Nonelective Account
only to the extent that such Excess Contributions exceed the
balance in the Participant's Elective Deferral Account and
Qualified Matching Account.
69..8 Matching Contributions. If so specified in the Plan
Agreement, the Employer will make Matching Contributions to the
Plan in accordance with the Plan Agreement, but no Matching
Contribution shall be made with respect to an Elective Deferral
that is returned to a Participant because it represents an Excess
Elective Deferral, an Excess Contribution or an Excess Amount (as
defined in Section 6.5(f)); and if a Matching Contribution has
nevertheless been made with respect to such an Elective Deferral,
the Matching Contribution shall be forfeited, notwithstanding any
other provision of the Plan.
(a) Employer Matching Contributions. Employer Matching
Contributions will be allocated among the Employer Matching
Accounts of Participants in proportion to their Elective
Deferrals. Employer Matching Accounts shall become vested
according to the vesting schedule specified in the Plan
Agreement, but regardless of that schedule shall be full
vested upon the Participant's Retirement (or, if earlier, his
fulfillment of the requirements for early retirement, if any,
or attainment of the normal retirement age specified in the
Plan Agreement), his death during employment with an
Affiliated Employer, and in accordance with Section 19.3.
Forfeitures of Employer Matching Contributions, other than
Excess Aggregate Contributions, shall be made in accordance
with Section 8.3. Forfeitures of Employer Matching Accounts
for a Plan Year shall be applied to reduce the total Employer
Matching Contribution for the Plan Year, or allocated among
the Employer Matching Accounts of Participants in addition to
the Employer Matching Contribution for the Plan Year, as
elected by the Employer in the Plan Agreement.
(b) Qualified Matching Contributions. Qualified
Matching Contributions will be allocated among the Qualified
Matching Contribution Accounts of Participants as specified by
the Employer in the Plan Agreement.
69..9 Average Contribution Percentage Test Limit and
Aggregate Limit. The Average Contribution Percentage (hereinafter
"ACP") for Participants who are Highly Compensated Employees for
each Plan Year and the ACP for Participants who are Non-Highly
Compensated Employees for the same Plan Year must satisfy one of
the following tests:
(a) The ACP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
Participants who are Non-Highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
(b) The ACP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
Participants who are Non-Highly Compensated Employees for the
same Plan Year multiplied by two (2), provided that the ACP
for Participants who are Highly Compensated Employees does not
exceed the ACP for Participants who are Non-Highly Compensated
Employees by more than two percentage points.
The following rules shall apply to the computation of the ACP:
(c) Average Contribution Percentage means the average of
the Contribution Percentages of the Eligible Participants in
a group.
(d) Contribution Percentage means the ratio (expressed
as a percentage) of a Participant's Contribution Percentage
Amounts to the Participant's Earnings for the Plan Year (or,
provided that the Employer applies this method to all
Employees for a Plan Year, the Participant's Earnings for that
portion of the Plan Year during which he was eligible to
participate in the Plan).
(e) Contribution Percentage Amounts means the sum of the
Participant Contributions, Employer Matching Contributions,
and Qualified Matching Contributions (to the extent not taken
into account for purposes of the ADP 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 Employer Matching
Contributions allocated to the Participant's Account, taken
into account in the year in which the allocation is made. If
the Employer has elected in the Plan Agreement to make
Qualified Nonelective Contributions, such amount of Qualified
Nonelective Contributions, if any, as shall be necessary to
enable the Plan to satisfy the ACP test shall be in the
Contribution Percentage Amounts. Elective Deferrals shall
also be included in the Contribution Percentage Amounts to the
extent, if any, needed to enable the Plan to satisfy the ACP
test, so long as the ADP test is met before the Elective
Deferrals are used in the ACP test, and continues to be met
following the exclusion of those Elective Deferrals that are
used to meet the ACP test.
(f) Eligible Participant means any Employee who is
eligible to make an Elective Deferral, if Elective Deferrals
are taken into account in the calculation of the Contribution
Percentage, or to receive an Employer Matching Contribution
(or a Forfeiture thereof) or a Qualified Matching
Contribution.
(g) Aggregate Limit means the sum of (i) 125% of the
greater of the ADP of the Non-Highly Compensated Employees for
the Plan Year, or the ACP 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 CODA, and
(ii) the lesser of 200% of, or two plus, the lesser of the ADP
or ACP. "Lesser" is substituted for "greater" in clause (i)
of the preceding sentence, and "greater" is substituted for
"lesser" after the phrase "two plus the" in clause (ii) of the
preceding sentence, if that formulation will result in a
larger Aggregate Limit.
(h) If one or more Highly Compensated Employees
participate in both a CODA and a plan subject to the ACP test
maintained by an Affiliated Employer, and the sum of the ADP
and ACP of those Highly Compensated Employees subject to
either or both tests exceeds the Aggregate Limit, then the ACP
of those Highly Compensated Employees who also participate in
a CODA will be reduced (beginning with the Highly Compensated
Employee whose ACP is the highest) so that the Aggregate Limit
is not exceeded. The amount by which each Highly Compensated
Employee's Contribution Percentage Amount is reduced shall be
treated as an Excess Aggregate Contribution. In determining
the Aggregate Limit, the ADP and ACP of Highly Compensated
Employees are determined after any corrections required to
meet the ADP and ACP tests. The Aggregate Limit will be
considered satisfied if both the ADP and ACP of the Highly
Compensated Employees does not exceed 1.25 multiplied by the
ADP and ACP of the Non-Highly Compensated Employees.
(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 account under two or more plans
described in section 401(a) of the Code, or CODAs described in
section 401(k) of the Code, that are maintained by an
Affiliated 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 or more
CODAs that have different plan years, all CODAs ending with or
within the same calendar year shall be treated as a single
CODA, except that CODAs to which mandatory disaggregation
applies in accordance with regulations issued under section
401(k) of the Code shall be treated as separate CODAs.
(j) In the event that the Plan satisfies the
requirements of sections 401(m), 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 the Plan, then
this section 5.9 shall be applied by determining the
Contribution 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(m) of the Code only if they have the same Plan Year.
(k) For purposes of determining the Contribution
Percentage of a Participant who is a 5% owner or one of the 10
most highly-paid Highly Compensated Employers, the
Contribution Percentage Amounts and Compensation of the
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 of
such highly Compensated Employees shall be disregarded as
separate employees in determining the Contribution Percentage
both for Participants who are Non-Highly Compensated Employees
and for Participants who are Highly Compensated Employees.
(l) For purposes of the ACP test, Matching Contributions
and Qualified Nonelective Contributions will be considered
made for a Plan Year if made no later than the end of the
12-month period beginning on the day after the close of the
Plan Year.
(m) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ACP test and the amount of
Qualified Nonelective Contributions or Qualified Matching
Contributions, or both, used in the ACP test.
(n) 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.
69..10 Distribution of Excess Aggregate Contributions.
Notwithstanding any other provision of the Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable
thereto, shall be forfeited if 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. The income or loss
allocable to Excess Aggregate Contributions is the income or loss
allocable to the Participant's Employer Matching Contribution
Account, Qualified Matching Contribution Account (if any, and if
all amounts therein are not used in the ADP test) and, if
applicable, Qualified Nonelective Account and Elective Deferral
Account for the Plan Year, multiplied by a fraction, the numerator
of which is the Participant's Excess Aggregate Contributions for
the year and the denominator of which is the Participant's account
balance(s) attributable to Contribution Percentage Amounts without
regard to any income or loss occurring during the Plan Year.
Excess Aggregate Contributions shall be allocated to a Participant
who is subject to the family member aggregation rules of section
414(q)(6) of the Code in the proportion that the Participant's
Employer Matching Contributions (and other amounts treated as his
Employer Matching Contributions) bear to the combined Employer
Matching Contributions (and other amounts treated as Employer
Matching Contributions) of all of the Participants aggregated to
determine its family members' combined ACP. If excess amounts
attributable to Excess Aggregate Contributions are distributed more
than 2 1/2 months after the last day of the Plan Year in which such
excess amounts arose, an excise tax equal to 10% of the excess
amounts will be imposed on the Employer maintaining the Plan.
Excess Aggregate Contributions shall be treated as Annual Additions
under the Plan.
Forfeitures of Excess Aggregate Contributions that are
Employer Matching Contributions shall either be reallocated to the
accounts of Non-Highly Compensated Employees or applied to reduce
Employer Contributions, as elected by the Employer in the Plan
Agreement. Other forfeitures of Excess Aggregate Contributions
shall be applied to reduce Employer contributions.
Excess Aggregate Contributions shall be forfeited if
forfeitable, or distributed on a pro-rata basis from the
Participant's Participant Contribution Account, Employer Matching
Account, and Qualified Matching Account (and, if applicable, the
Participant's Qualified Nonelective Account or Elective Deferral
Account, or, both).
Excess Aggregate Contributions means, with respect to any Plan
Year, the Excess of:
(a) The aggregate Contribution Percentage Amounts taken
into account in computing the numerator of the Contribution
Percentage and actually made on behalf of Highly Compensated
Employees for the Plan Year, over
(b) The maximum Contribution Percentage Amounts
permitted by the ACP test and the Aggregate Limit (determined
by reducing contributions made on behalf of Highly Compensated
Employees in order of their Contribution Percentages,
beginning with the highest of such percentages).
Such determination shall be made after first determining
Excess Elective Deferrals pursuant to Section 5.4, and then
determining Excess Contributions pursuant to Section 5.7.
69..11 Restriction on Distributions. No distribution may be
made from a Participant's Elective Deferral Account, Qualified
Nonelective Account or Qualified Matching Account until the
occurrence of one of the following events:
(a) The Participant's Disability, death or termination
of employment with the Affiliated Employers;
(b) Termination of the Plan without the establishment of
another defined contribution plan other than an employee stock
ownership plan as defined in section 4975(e) or section 409 of
the Code, or a simplified employee pension plan as defined in
section 408(k) of the Code;
(c) The Participant's attainment of age 59 1/2 (if the
Employer has elected in the Plan Agreement to permit such
distributions); or
(d) In the case of an Employer that is a corporation,
the disposition by the Employer to an unrelated entity of (i)
substantially all of the assets (within the meaning of section
409(d)(2) of the Code) used in a trade or business of the
Employer, if the Employer continues to maintain the Plan after
the disposition, but only with respect to Employees who
continue employment with the entity acquiring such assets; or
(ii) he Employer's interest in a subsidiary (within the
meaning of section 409(d)(3) of the Code), if the Employer
continues to maintain the Plan after the disposition, but only
with respect to Employees who continue employment with such
subsidiary.
In addition, if the Employer has elected in the Plan Agreement
to permit such distributions, a distribution may be made from a
Participant's Elective Deferral Account in the event of his
financial hardship as described in Section 5.12. All distributions
upon any of the events listed above are subject to the conditions
of Article 10, Joint and Survivor Annuity Requirements. In
addition, distributions made after March 31, 1988, on account of an
event described in subsection (b) or (d) above must be made in a
lump sum.
69..12 Hardship Distributions. If the Employer has so
elected in the Plan Agreement, upon a Participant's written request
the Employer may permit a distribution from his Elective Deferral
Account and from his Employer Matching Account. The terms and
conditions of Section 12.2 and the special vesting rule contained
in Section 8.4 shall apply to hardship distributions from an
Employer Contribution Account or an Employer Matching Account. The
further terms of this Section 5.12 shall apply to hardship
distributions from an Elective Deferral Account. No hardship
distribution shall be made from a Qualified Nonelective Account or
a Qualified Matching Account.
(a) The maximum amount that may be distributed on
account of hardship from an Elective Deferral Account after
December 31, 1988, shall not exceed the sum of (1) the amount
credited to the Account as of December 31, 1988, and (2) the
aggregate amount of the Elective Deferrals made by the
Participant after December 31, 1988, and before the hardship
distribution.
(b) Hardship distributions shall be permitted only on
account of the following financial needs:
(1) Expenses for medical care described in section
213(d) of the Code for the Participant, his spouse,
children and dependents, or necessary for these persons
to obtain such care;
(2) Purchase of the principal residence of the
Participant (excluding regular mortgage payments);
(3) Payment of tuition and related educational fees
for the upcoming 12 months of post-secondary education
for the Participant, his spouse, children or dependents;
or
(4) Payments necessary to prevent the Participant's
eviction from, or the foreclosure of a mortgage on, his
principal residence.
(c) Hardship distributions shall be subject to the
spousal consent requirements contained in sections 411(a)(11)
and 117 of the Code, to the same extent that those
requirements apply to a Participant pursuant to Section 10.1.
(d) A hardship distribution will be made to a
Participant only upon satisfaction of the following
conditions:
(1) The Participant has obtained all nontaxable
loans and all distributions other than hardship
distributions available to him from all plans maintained
by the Affiliated Employers;
(2) The hardship distribution does not exceed the
amount of the Participant's financial need as described
in paragraph (b) plus any amounts necessary to pay
federal, state and local income taxes and penalties
reasonably anticipated to result from the distribution;
(3) All plans maintained by the Affiliated
Employers provide that the Participant's Elective
Deferrals and voluntary after-tax contributions will be
suspended for a period of 12 months following his receipt
of a hardship distribution; and
(4) All plans maintained by the Affiliated
Employers provide that the amount of Elective Deferrals
that the Participant may make in his taxable year
immediately following the year of a hardship distribution
will not exceed the applicable limit under section 402(g)
of the Code for the taxable year, reduced by the amount
of Elective Deferrals made by the Participant in the
taxable year of the hardship distribution.
69..13 Special Effective Dates. If the Plan is adopted as an
amendment of an existing plan, the provisions of Sections 5.3 and
Section 5.7 through 5.9 are effective as of the first day of the
first Plan Year beginning after December 31, 1986.
<PAGE>
ARTICLE 70. LIMITATIONS ON ALLOCATIONS
70..1 No Additional Plan. 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), or an individual medical account (as defined in section
415(1)(2) of the Code) which provides an Annual Addition as defined
in Section 6.5(a), maintained by an Affiliated Employer:
(a) The amount of Annual Additions which may be credited
to the Participant's accounts for any Limitation Year will not
exceed the lesser of the Maximum Annual Additions or any other
limitation contained in this Plan. If the Employer
contribution 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 Annual
Additions, the amount contributed or allocated will be reduced
so that the Annual Additions for the Limitation Year will
equal the Maximum Annual Additions.
(b) Before determining a Participant's actual Section
415 Compensation for a Limitation Year, the Employer may
determine the Maximum Annual Additions for the Participant on
the basis of a reasonable estimation of the Participant's
Section 415 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 Annual Additions for
the Limitation Year will be determined on the basis of the
Participant's actual Section 415 Compensation for the
Limitation Year.
(d) If pursuant to paragraph (c), or as a result of the
reallocation of Forfeitures, or as a result of a reasonable
error in determining the amount of Elective Deferrals that may
be made by a Participant, the Annual Additions exceed the
Maximum Annual Additions, the Excess Amount will be disposed
of as follows:
(1) Any nondeductible voluntary Participant
contributions and Elective Deferrals, to the extent they would
reduce the Excess Amount, will be returned to the Participant.
(2) If after the application of (1) above 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 Accounts 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.
(3) If after the application of (1) above an Excess
Amount still exists, and the Participant is not covered
by the Plan at the end of a 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.
(4) If a suspense account is in existence at any
time during a Limitation Year pursuant to this Section
6.1(d), it will 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.
70..2 Additional Master or Prototype Plan. If in addition to
this Plan a Participant is covered under another qualified Master
or Prototype defined contribution plan or a welfare benefit fund
(as defined in section 419(e) of the Code), or an individual
medical account (as defined in section 415(1)(2) of the Code) which
provides an Annual Addition as defined in Section 6.5(a),
maintained by an Affiliated Employer during any Limitation Year:
(a) The Annual Additions which may be credited to a
Participant's Accounts under this Plan for any such Limitation
Year will not exceed the Maximum Annual Additions reduced by
the Annual Additions credited to a Participant's accounts
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 an Affiliated Employer are less
than the Maximum Annual Additions, and the Employer
contribution that would otherwise be contributed or allocated
to the Participant's Accounts 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 Plan Year will equal the Maximum Annual
Additions. 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 Annual Additions, no amount will be
contributed or allocated to the Participant's Accounts under
this Plan for the Limitation Year.
(b) Before determining a Participant's actual Section
415 Compensation for a Limitation Year, the Employer may
determine the Maximum Annual Additions for the Participant in
the manner described in Section 6.1(b).
(c) As soon as is administratively feasible after the
end of the Plan Year, the Maximum Annual Additions for the
Plan Year will be determined on the basis of the Participant's
actual Section 415 Compensation for the Plan Year.
(d) If, pursuant to Section 6.2(c) or as a result of the
allocation of Forfeitures, or of a reasonable error in
determining the amount of Elective Deferrals that may be made
by him, 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 under any qualified
Master or Prototype defined contribution plan, except that
Annual Additions to any 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 X and Y, where (X) is the
total Excess Amount allocated as of such date, and (Y) is 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 attributed to this Plan will be
disposed of in the manner described in Section 6.1(d).
70..3 Additional Non-Master or Non-Prototype Plan. If the
Participant is covered under another qualified defined contribution
plan maintained by an Affiliated Employer which is not a Master or
Prototype plan, Annual Additions which may be credited to the
Participant's Accounts 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 Plan Agreement.
70..4 Additional Defined Benefit Plan. If an Affiliated
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 Plan Fraction and Defined
Contribution Plan Fraction will not exceed 1.0 in any Limitation
Year. The Annual Additions which may be credited to the
Participant's Accounts under this Plan for any Limitation Year will
be limited in accordance with the Plan Agreement.
70..5 Definitions.
(a) Annual Additions means the sum of the following
amounts credited to a Participant's Accounts for the
Limitation Year:
(1) Employer contributions;
(2) For any Limitation Year beginning after
December 31, 1986, after-tax Employee contributions;
(3) Forfeitures;
(4) Amounts allocated after March 31, 1984, to any
individual medical account, as defined in section
415(1)(2) of the Code, which is part of a pension or
annuity plan maintained by an Affiliated Employer;
(5) Amounts derived from contributions paid or
accrued after December 31, 1985, in taxable years ending
after such date, which are attributable to postretirement
medical benefits allocated to the separate account of a
Key Employee, as defined in section 419A(d)(3) of the
Code, under a welfare benefit fund as defined in section
419(e) of the Code, maintained by an Affiliated Employer;
and
(6) In a Plan that includes a CODA, Excess Elective
Deferrals, Excess Contributions (including
recharacterized Elective Deferrals) and Excess Aggregate
Contributions.
For this purpose, any Excess Amount applied under
Sections 6.1(d) or 6.2(e) in the Limitation Year to reduce
Employer contributions will be considered Annual Additions for
such Limitation Year. Any rollover contribution will not be
considered an Annual Addition.
(b) Section 415 Compensation means, for a self-employed
person, his earned income; and for any other Participant, his
"Form W-2 earnings" as defined in Section 2.7, if the Employer
has elected in item 4 of the Plan Agreement a definition of
Compensation based on "Form W-2 earnings"; or if the Employer
has not so elected, his 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, bonuses, fringe benefits and reimbursements or
other expense allowances under a nonaccountable plan as
described in Income Tax Regulations Section 1.62-2(c)), and
excluding the following:
(1) Employer contributions to a plan of deferred
compensation which are not includible in the
Participant's gross income for the taxable year in which
contributed, or Employer contributions under a Simplified
Employee pension plan to the extent such contributions
are deductible by the Employee, or any distributions from
a plan of deferred compensations;
(2) Amounts realized from the exercise of a non-
qualified stock option, or when restricted stock (or
property) held by the Participant either becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture;
(3) Amounts realized from the sale, exchange or
other disposition of stock acquired under a qualified
stock option; and
(4) 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 contract described in section
403(b) of the Code (whether or not the contributions are
actually excludable from the gross income of the
Participant).
For purposes of applying the limitations of this Article 6,
Section 415 Compensation for a Limitation Year is the Section
415 Compensation actually paid or made available during such
Limitation Year.
(c) Defined Benefit Fraction means 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 Affiliated Employers, and
the denominator of which is the lesser of 125% of the dollar
limitation in effect for the Limitation Year under sections
415(b) and (d) of the Code, or 140% of the Participant's
Highest Average Compensation including any adjustments under
section 415(b) of the Code. Notwithstanding the foregoing, 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 an Affiliated
Employer which were in existence on May 6, 1986, the
denominator of this fraction will not be less than 125% 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 change
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 means $30,000
or if greater, one-fourth 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 means a fraction, the
numerator of which is the sum of the Annual Additions to the
Participant's accounts under all the defined contribution
plans (whether or not terminated) maintained by Affiliated
Employers for the current and all prior Limitation Years
including the Annual Additions attributable to the
Participant's nondeductible Employee contributions to all
definEd benefit plans, whether or not terminated, maintained
by the Affiliated Employers, 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), and the
denominator of which is the sum of the maximum Annual
Additions for the current and all prior Limitation Years of
service with the Affiliated Employers (regardless of whether
a defined contribution plan was maintained by any Affiliated
Employer). The Maximum Annual Additions in any Plan Year is
the lesser of 125% of the dollar limitation determined under
sections 415(b) and (d) of the Code in effect under section
415(c)(1)(A) of the Code, or 35% of the Participant's Section
415 Compensation for such year. If the Employee 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 an Affiliated
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 product of the excess of the sum of the factions over
1.0, multiplied by 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 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 100% of
nondeductible Employee contributions as Annual Additions.
(f) Excess Amount means, with respect to any
Participant, the amount by which Annual Additions exceed the
Maximum Annual Additions.
(g) Highest Average Compensation means the average
compensation for the three consecutive Years of Service with
the Employer that produces the highest average. A Year of
Service with the Employer is the period of 12 consecutive
months specified as the Limitation Year in the Plan Agreement.
(h) Limitation Year means the period of 12 consecutive
months specified in the Plan Agreement. All qualified plans
maintained by the Employer must use the same Limitation Year.
If the Limitation Year is amended to a different period of 12
consecutive months, the new Limitation Year must begin on a
date within the Limitation Year in which the amendment is
made.
(i) Master or Prototype plan means a plan the form of
which is the subject of a favorable opinion letter from the
Internal Revenue Service.
(j) Maximum Annual Additions, which is the maximum
annual addition that may be contributed or allocated to a
Participant's account under the plan for any Limitation Year,
means an amount not exceeding the lesser of (a) the Defined
Contribution Dollar Limitation or (b) 25% of the Participant's
Section 415 Compensation for the Limitation Year. The
compensation limitation referred to in (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 period
of 12 consecutive months, the Maximum Annual Additions will
not exceed the Defined Contribution Dollar Limitation
multiplied by the following fraction:
number of months in the
short Limitation Year
12
(k) Projected Annual Benefit means 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:
(1) the Participant will continue employment until
normal retirement age under the Plan (or current age, if
later), and
(2) the Participant's Section 415 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.
<PAGE>
ARTICLE 71. ELIGIBILITY FOR DISTRIBUTION OF BENEFITS
71..1 Retirement. After his Retirement, the amount credited
to a Participant's Accounts will be distributed to him in
accordance with Article 9. The termination of a Participant's
employment with the Affiliated Employers after he has (i) attained
the normal retirement age specified in the Plan Agreement, (ii)
fulfilled the requirements for early retirement (if any) specified
in the Plan Agreement, or (iii) become Disabled, will constitute
his Retirement. Upon a Participant's Retirement (or, if earlier,
his attainment of the normal retirement age specified in the Plan
Agreement or fulfillment of the requirements for early retirement,
if any, specified in the Plan Agreement) the Participant's Accounts
shall become fully vested, regardless of the vesting schedule
specified by the Employer in the Plan Agreement. A Participant who
separates from service with any vested balance in his Accounts,
after satisfying the service requirements for early retirement (if
any is specified in the Plan Agreement) but before satisfying the
age requirement for early retirement (if any is specified in the
Plan Agreement), shall be entitled to a fully vested early
retirement benefit upon his satisfaction of such age requirement.
71..2 Death. if a Participant dies before the distribution
of his Accounts has been completed, his Beneficiary will be
entitled to distribution of benefits in accordance with Article 9.
A Participant's Accounts will become fully vested upon his death
before termination of his employment with the Affiliated Employers,
regardless of the vesting schedule specified by the Employer in the
Plan Agreement.
A Participant may designate a Beneficiary by completing and
returning to the Plan Administrator a form provided for this
purpose. The form most recently completed and returned to the
Plan Administrator before the Participant's death shall supersede
any earlier form. If a Participant has not designated any
Beneficiary before his death, or if no Beneficiary so designated
survives the Participant, his Beneficiary shall be his surviving
spouse, or if there is no surviving spouse, his estate. A married
Participant may designate a Beneficiary other than his spouse only
if his spouse consents in writing to the designation, and the
spouse's consent acknowledges the effect of the consent and is
witnessed by a notary public or a representative of the Plan. The
beneficiary or beneficiaries named in the designation to which the
spouse has so consented may not be changed without further written
spousal consent unless the terms of the spouse's original written
consent expressly permit such a change, and acknowledge that the
spouse voluntarily relinquishes the right to limit the consent to
a specific beneficiary. The marriage of a Participant shall
nullify any designation of a beneficiary previously executed by the
Participant. If it is established to the satisfaction of the Plan
Administrator that the Participant has no spouse or that the spouse
cannot be located, the requirement of spousal consent shall not
apply. Any spousal consent, or establishment that spousal consent
cannot be obtained, shall apply only to the particular spouse
involved.
71..3 Other Termination of Employment. A Participant whose
employment terminates for any reason other than his Retirement or
death will be entitled to distribution, in accordance with Article
9, of benefits equal to the amount of the vested balance of his
Accounts as determined under Article 8.<PAGE>
ARTICLE 72. VESTING
72..1 Vested Balance. The vested balance of a Participant's
Accounts will be determined as follows:
(a) General Rule. A Participant's Participant
Contribution Account and Rollover Account shall be fully
vested at all times. The vested portion of his Employer
Contribution Account shall be equal to the percentage that
corresponds, in the vesting schedule specified in the Plan
Agreement, to the number of Years of Service credited to the
Participant as of the end of the Year of Service in which his
employment terminates. The vesting schedule specified in the
Plan Agreement applies to all benefits within the meaning of
section 411(a)(7) of the Code, except those attributable to
Employee contributions.
(b) Special Rules for CODA. In a Plan that includes a
CODA, a Participant's Elective Deferral Account, Qualified
Nonelective Account, and Qualified Matching Account shall be
fully vested at all times. The vested portion of his Employer
Matching Account shall be equal to the percentage that
corresponds, in the vesting schedule specified in the Plan
Agreement, to the number of Years of Service credited to the
Participant as of the end of the Year of Service in which his
employment terminates.
(c) Retirement. All of a Participant's Accounts shall
become fully vested upon his Retirement or his earlier
attainment of early retirement age (if any) or the normal
retirement age elected by the Employer in the Plan Agreement.
For so long as a former Employee does not receive a
distribution (or a deemed distribution) of the vested portion of
his Accounts, the undistributed portion shall be held in a separate
account witch shall be invested pursuant to Section 13.3 and shall
share in earnings and losses of the Trust Fund pursuant to Section
13.4 in tile same manner as the Accounts of active Participants.
72..2 Vesting of Accounts of Returned Former Employees. The
following rules apply in determining the vested portion of the
Accounts of a Participant who incurs one or more consecutive One-
Year Vesting Breaks and then returns to employment with an
Affiliated Employer:
(a) If the Participant incurred fewer than five
consecutive One-Year Vesting Breaks, then all of his Years of
Service will be taken into account in determining the vested
portion of his Accounts, as soon as he has completed one Year
of Service following his return to employment.
(b) If the Participant incurred five or more consecutive
One-Year Vesting Breaks, then:
(1) No Year of Service completed after his return
to employment will be taken into account in determining
the vested portion of his Accounts as of any time before
he incurred the first One-Year Vesting Break;
(2) Years of Service completed before he incurred
the first One-Year Vesting Break will not be taken into
account in determining the vested portion of his Accounts
as of any time after his return to employment (i) unless
some portion of his Employer Contribution Account or
Employer Matching Account had become vested before he
incurred the first One-Year Vesting Break, and (ii) until
he has completed one Year of Service following his return
to employment; and
(3) Separate sub-accounts will be maintained for
the Participant's prebreak and post-break Employer
Contribution Account and Employer Matching Account, until
both sub-accounts become fully vested. Both sub-accounts
will share in the earnings and losses of the Trust Fund.
72..3 Forfeiture of Non-Vested Amounts. The portion of a
former Employee's Accounts that has not become vested under Section
8.1 shall become a Forfeiture in accordance with the following
rules, and shall be reallocated in accordance with Section 4.2 or
Article 5 (whichever applies) no later than the end of the Plan
Year in which it becomes a Forfeiture.
(a) If Distribution Is Made. If any or all of the
vested portion of a Participant's Accounts is distributed in
accordance with Section 9.1 or 9.2 before the Participant
incurs five consecutive One-Year Vesting Breaks, the nonvested
portion of his Accounts shall become a Forfeiture in the Plan
Year in which the distribution occurs. For purposes of this
Section 8.3, if the value of the vested portion of a
Participant's Accounts is zero, he shall be deemed to have
received a distribution of the entire vested balance of his
Accounts on the day his employment terminates. If the
Participant elects to have distributed less than the entire
vested portion of his Employer Contribution Account or
Employer Matching Accounts, the part of the nonvested portion
that will become a Forfeiture is the total nonvested portion
multiplied by a fraction, the numerator of which is the amount
of the distribution and the denominator of which is the total
value of the entire vested portion of such Accounts.
(b) Right of Repayment. If a Participant who receives
a distribution pursuant to paragraph (a) returns to employment
with an Affiliated Employer, the balance of his Employer
Contribution Account and Employer Matching Account will be
restored to the amount of such balance on the date of
distribution, if he repays to the Plan the full amount of the
distribution, before the earlier of (i) the fifth anniversary
of his return to employment or (ii) the date he incurs five
consecutive One-Year Vesting Breaks following the date of
distribution. If an Employee is deemed to receive a
distribution pursuant to this Section 8.3, and he resumes
employment covered under this Plan before the date he incurs
5 consecutive One-Year Vesting Breaks, upon his reemployment
the Employer-derived account balance of the Employee will be
restored to the amount on the date of such deemed
distribution. Such restoration will be made, first, from the
amount of any Forfeitures available for reallocation as the
last day of the Plan Year in which repayment is made, to the
extent thereof; and to the extent that Forfeitures are not
available or are insufficient to restore the balance, from
contributions made by the Employer pursuant to Section 4.1(e).
(c) If No Distribution Is Made. If no distribution (or
deemed distribution) is made to a Participant before he incurs
five consecutive One-Year Vesting Breaks, the nonvested
portion of his Accounts shall become a Forfeiture at the end
of the Plan Year that constitutes his fifth consecutive One-
Year Vesting Break.
(d) Adjustment of Accounts. Before a Forfeiture is
incurred, a Participant's Accounts shall share in earnings and
losses of the Trust Fund pursuant to Section 13.4 in the same
manner as the Accounts of active Participants.
(e) Accumulated Deductible Contributions. For Plan
Years beginning before January 1, 1989, a Participant's vested
Account balance shall not include accumulated deductible
contributions within the meaning of section 72(o)(5)(B) of the
Code.
72..4 Special Rule in the Event of a Withdrawal. If a
withdrawal pursuant to Section 12.2 or 12.3 is made from a
Participant's Employer Contribution Account or Employer Matching
Account before the Account is fully vested, and the Participant may
increase the vested percentage in the Account, then a separate
account will be established at the time of the withdrawal, and at
any relevant time after the withdrawal the vested portion of the
separate account will be equal to the amount "X" determined by the
following formula:
X = P(AB + D) - D
For purposes of the formula, P is the Participant's vested
percentage at the relevant time, AB is the account balance at the
relevant time, and D is the amount of the withdrawal.
72..5 Vesting Election. If the Plan is amended to change any
vesting schedule, or is amended in any way that directly or
indirectly affects the computation of a Participant's vested
percentage, each Participant who has completed not less than three
Years of Service may elect, within a reasonable period after the
adoption of the amendment or change, in a writing filed with the
Employer to have his vested percentage computed under the Plan
without regard to such amendment. For a Participant who is not
credited with at least one Hour of Service in a Plan Year beginning
after December 31, 1988, the preceding sentence shall be applied by
substituting "five Years of Service" for "three Years of Service."
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 (a) 60 days after the amendment is
adopted; (b) 60 days after the amendment becomes effective; or (c)
60 days after the Participant is issued written notice of the
amendment by the Employer.<PAGE>
ARTICLE 73. PAYMENT OF BENEFITS
73..1 Distribution of Accounts. A Participant or Beneficiary
who has become eligible for a distribution of benefits pursuant to
Article 7 may elect to receive such benefits at any time, subject
to the terms and conditions of this Article 9, Article 10 and
Article 11. Unless a Participant or Beneficiary elects otherwise,
distribution of benefits will begin no later than the 60th day
after the end of the Plan Year in which the latest of the following
events occurs:
(a) The Participant attains age 65 (or if earlier, the
normal retirement age specified by the Employer in the Plan
Agreement); or
(b) The tenth anniversary of the year in which the
Participant commenced participation in the Plan; or
(c) The Participant's employment with the Affiliated
Employers terminates.
A Beneficiary who is the surviving spouse of a Participant may
elect to have distribution of benefits begin within the 90-day
period following the Participant's death.
For purposes of this Section 9.1, the failure of a Participant
(and his spouse, if spousal consent is required pursuant to Article
10) to consent to a distribution while a benefit is "immediately
distributable" within the meaning of Section 9.2 shall be
considered an election to defer commencement of payment. If the
Employer has so specified in the Plan Agreement, the vested portion
of a Participant's Accounts will be distributed in a lump sum in
cash no later than 60 days after the end of the Plan Year in which
his employment terminates, if at the time the Participant first
became entitled to a distribution the value of such vested portion,
derived from Employer and Employee contributions, does not exceed
$3,500. Commencement of distributions in any case shall be subject
to Section 9.4.
73..2 Restriction on Immediate Distributions. A
Participant's account balance is considered "immediately
distributable" if any part of the account balance could be
distributed to the Participant (or his surviving spouse) before the
Participant attains, or would have attained if not deceased, the
later of the normal retirement age specified in the Plan Agreement
or age 62.
(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)
$3,500, and the account balance is immediately distributable,
the Participant and his spouse (or where either the
Participant or the spouse has died), the survivor must consent
to any such distribution, unless an exception described in
paragraph (b) applies. The consent of the Participant and his
spouse shall be obtained in writing within the 90-day period
ending on the annuity starting date, which 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 spouse, no less than 30 days and no more
than 90 days before the annuity starting date, 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
of the optional forms of benefit available under the Plan and
an explanation of their relative values, in a manner that
would satisfy the notice requirements of section 417(a)(3) of
the Code.
(b) Notwithstanding paragraph (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
10.1(b) 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
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 the Plan, if the Plan
does not offer an annuity option (purchased from a commercial
provider, and no Affiliated Employer maintains another defined
contribution plan (other than an employee stock ownership plan
as defined in section 4975(e)(7) of the Code), a Participant's
account balance shall be distributed to the Participant
without his consent. If any Affiliated Employer maintains
another defined contribution plan (other than an employee
stock ownership plan as defined in section 4975(e)(7) of the
Code), a Participant's account balance shall be transferred to
that defined contribution plan without his consent, unless he
consents to an immediate distribution. 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.
73..3 Optional Forms of Distribution. Provided that the
Employer has so elected in the Plan Agreement, if at the time a
Participant first becomes entitled to a distribution the value of
his vested Account balance derived from Employer and Employee
contributions does not exceed $3,500, distribution shall be made in
a lump sun in cash. Subject to the preceding sentence and to the
rules of Article 10 concerning joint and survivor annuities, a
Participant or Beneficiary may elect to receive benefits in any of
the following optional forms:
(a) A lump sum payment in cash or in kind or in a
combination of both;
(b) A series of installments over a period certain that
meets the requirements of Article 11; or
(c) A nontransferable annuity contract, purchased from
a commercial provider, with terms complying with the
requirements of Article 11; provided, however, that an annuity
for the life of any person shall be available as an optional
form of distribution only if the Employer has so elected in
the Plan Agreement.
(d) In the event that the Plan is adopted as an
amendment to an existing plan, each optional form of
distribution available under the existing plan shall be made
available under the Plan, and may be made available where
necessary through the purchase of an appropriate annuity
contract in accordance with paragraph (c).
73..4 Distribution Procedure. The Trustee shall make or
commence distributions to or for the benefit of Participants only
on receipt of an order from the Employer in writing or by such
other means; as shall be acceptable to the Trustee, certifying that
a distribution of a Participant's benefits is payable pursuant to
the Plan, and specifying the time and manner of payment. The
amount to be distributed shall be determined as of the Valuation
Date coincident with or next following the Employer's order. The
Trustee shall be fully protected in acting upon the directions of
the Employer in making benefit distributions, and shall have no
duty to determine the rights or benefits of any person under the
Plan or to inquire into the right or power of the Employer to
direct any such distribution. The Trustee shall be entitled to
assume conclusively that any determination by the Employer with
respect to a distribution meets the requirements of the Plan. The
Trustee shall not be required to make any payment hereunder in
excess of the net realizable value of the assets of the Account in
question at the time of such payment, nor to make any payment in
cash unless the Employer has furnished instructions as to the
assets to be converted to cash for the purposes of making payment.
73..5 Lost Distributee. In the event that the Plan
Administrator is unable with reasonable effort to locate a person
entitled to distribution under the Plan, the Accounts distributable
to such a person shall become a Forfeiture at the end of the third
Plan Year after the Plan Administrator's efforts to locate such
person began; provided, however, that the amount of the Forfeiture
shall be restored in the event that such person thereafter submits
a claim for benefits under the Plan. Such restoration will be
made, first, from the amount of Forfeitures available for
reallocation as of the last day of the Plan Year in which the claim
is made, to the extent thereof; and to the extent that Forfeitures
are not available or are insufficient to restore the balance, from
contributions made by the Employer pursuant to Section 4.1(e). A
Forfeiture occurring under this Section 9.5 shall be reallocated as
though it were an Employer contribution.
<PAGE>
ARTICLE 74. JOINT AND SURVIVOR ANNUITY REQUIREMENTS
74..1 Applicability.
(a) Generally. The provisions of Sections 10.2 through
10.5 shall generally apply to a Participant who is credited
with at least one Hour of Service on or after August 23, 1984,
and such other Participants as provided in Section 10.6.
(b) Exception for Certain Plans. The provisions of
Sections 10.2 through 10.5 shall not apply to a Participant
if: (i) the Participant does not or cannot elect payment of
benefits in the form of a life annuity, and (ii) on the death
of the Participant, his Vested Account Balance will be paid to
his surviving spouse (unless there is no surviving spouse, or
the surviving spouse has consented to the designation of
another Beneficiary in a manner conforming to a Qualified
Election) and the surviving spouse may elect to have
distribution of the Vested Account Balance (adjusted in
accordance with Section 13.4 for gains or losses occurring
after the Participant's death) commence within the 90-day
period following the date of the Participant's death. The
Participant may waive the spousal death benefit described in
this paragraph (b) at any time, provided that no such waiver
shall be effective unless it satisfies the conditions
applicable under Section 10.4(c) to a Participant's waiver of
a Qualified Preretirement Survivor Annuity. The exception in
this paragraph (b) shall not be operative with respect to a
Participant in a profit sharing plan if the Plan:
(1) is a direct or indirect transferee of a defined
benefit plan, money purchase pension plan, target benefit
plan, stock bonus plan, or profit sharing plan which is
subject to the survivor annuity requirements of Sections
401(a)(11) and 417 of the Code; or
(2) is adopted as an amendment of a plan that did
not qualify for the exception in this paragraph (b)
before the amendment was adopted.
For purposes of this paragraph (b), Vested Account
Balance shall have the meaning provided in Section 10.4(f).
The provisions of Sections 10.2 through 10.6 set forth the
survivor annuity requirements of sections 401(a)(11) and 417
of the Code.
(c) Exception for Certain Amounts. The provisions of
Sections 10.2 through 10.5 shall not apply 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 or a target benefit plan, provided that the
exceptions applicable to certain profit sharing plans under
paragraph (b) are applicable with respect to the separate
account (for this purpose, Vested Account Balance means 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).
74..2 Qualified Joint and Survivor Annuity. Unless an
optional form of benefit is selected pursuant to a Qualified
Election within the 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. In either case, the Participant may elect
to have such an annuity distributed upon his attainment of the
Earliest Retirement Age under the Plan.
74..3 Qualified Preretirement Survivor Annuity. Unless an
optional form of benefit has been selected within the Election
Period pursuant to a Qualified Election, the Vested Account Balance
of a Participant who dies before the Annuity Starting Date shall be
applied toward the purchase of an annuity for the life of his
surviving spouse (a "Qualified Preretirement Survivor Annuity").
The surviving spouse may elect to have such an annuity distributed
within a reasonable period after the Participant's death. For
purposes of this Article 10, the term "spouse" means the current
spouse or surviving spouse of a Participant, except 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.
74..4 Definitions. The following definitions apply:
(a) Election Period means the period beginning on the
first day of the year in which a Participant attains age 35
and ending on the date of the Participant's death. If a
Participant separates from service before the first day of the
Plan Year which he reaches age 35, the Election Period with
respect to his account balance as of the date of separation
shall begin on the date of separation. A Participant who will
not attain age 35 as of the end of a 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 35. Such an
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 10.5. Qualified Preretirement Survivor
Annuity coverage will be automatically reinstated as of the
first day of the Plan Year in which the Participant attains
age 35. Any new waiver on or after that date shall be subject
to the full requirements of this article.
(b) Earliest Retirement Age means the earliest date on
which the Participant could elect to receive Retirement
benefits under the Plan.
(c) Qualified Election means a waiver of a Qualified
Joint and Survivor Annuity or a Qualified Preretirement
Survivor Annuity. Any such waiver shall not be effective
unless: (1) the Participant's spouse consents in writing to
the waiver; (2) the waiver designates a specific Beneficiary,
including any class of beneficiaries or any contingent
beneficiaries, which may not be changed without spousal
consent (unless the spouse's consent expressly permits
designations by the Participant without any further spousal
consent); (3) the spouse's consent acknowledges the effect of
the waiver; and (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 waiver designates a
form of benefit payment which may not be changed without
spousal consent (unless the spouse's consent 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. Any consent by a spouse obtained under these
provisions (and any establishment that the consent of a spouse
may not be obtained) shall be effective only with respect to
the particular spouse involved. A consent that permits
designations by the Participant without any requirement of
further consent by the spouse must acknowledge that the spouse
has the right to limit the 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
those 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 10.5.
(d) Qualified Joint and Survivor Annuity means an
immediate annuity for the life of a Participant, with a
survivor annuity for the life of the spouse which is not less
than 50% and not more than 100% 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 that can be
purchased with the Participant's Vested Account Balance. The
percentage of the survivor annuity under the Plan shall be
50%.
(e) Annuity Starting Date means the first day of the
first period for which an amount is paid as an annuity (or any
other form).
(f) Vested Account Balance means the aggregate value of
the Participant's vested account balance derived from Employer
and Employee contributions (including rollovers), whether
vested before or upon death, including the proceeds of
insurance contracts, if any, on the Participant's life. The
provisions of this Article 10 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.
74..5 Notice Requirements. In the case of a Qualified Joint
and Survivor Annuity, no less than 30 days and no more than 90 days
before a Participant's Annuity Starting Date the Plan Administrator
shall provide to him 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 the 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.
In the case of a Qualified Preretirement Survivor Annuity,
within the applicable period for a Participant the Plan
Administrator shall provide to him a written explanation of the
Qualified Preretirement Survivor Annuity, in terms and manner
comparable to the requirements applicable to the explanation of a
Qualified Joint and Survivor Annuity as described in the preceding
paragraph. 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 32
and ending with the close of the Plan Year preceding the Plan Year
in which the Participant attains age 35; (ii) a reasonable period
ending after an individual becomes a Participant; (iii) a
reasonable period ending after this Article 10 first applies to the
Participant. Notwithstanding the foregoing, in the case of a
Participant who separates from service before attaining age 35,
notice must be provided within a reasonable period ending after his
separation from service.
For purposes of applying the preceding paragraph, a reasonable
period ending after the enumerated events described in (ii) and
(iii) is the end of the two-year period beginning one year before
the date the applicable event occurs, and ending one year after
that date. In the case of a Participant who separates from service
before the Plan Year in which he reaches age 35, notice shall be
provided within the two-year period beginning one year before the
separation and ending one year after the separation. If such a
Participant thereafter returns to employment with the Employer, the
applicable period for the Participant shall be redetermined.
74..6 Transitional Rules.
(a) Any living Participant not receiving benefits on
August 23, 1984, who would otherwise not receive the benefits
prescribed by the preceding sections of this Article 10, must
be given the opportunity to elect to have those sections apply
if the Participant is credited with at least one Hour of
Service under the Plan or a predecessor plan in a Plan Year
beginning on or after January 1, 1976, and the Participant had
at least ten 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 Hour of
Service under the 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 benefits paid in
accordance with paragraph (d) of this Section 10.6.
(c) The respective opportunities to elect (as described
in paragraphs (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 be paid to those Participants.
(d) Any Participant who has so elected pursuant to
paragraph (b) of this Section 10.6, and any Participant who
does not elect under paragraph (a), or who meets the
requirements of paragraph (a) except that he does not have at
least ten years of vesting service when he separates from
service, shall have his benefits distributed in accordance
with all of the following requirements, if his benefits would
otherwise have been payable in the form of a life annuity:
(1) Automatic joint and survivor annuity. if
benefits in the form of a life annuity become payable to
a married Participant who:
(i) begins to receive payments under the Plan
on or after normal retirement age; or
(ii) dies on or after normal retirement age
while still working for the Employer; or
(iii) begins to receive payments on or after
the qualified early retirement age; or
(iv) 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 the Plan in the
form of a Qualified Joint and Survivor Annuity, unless
the Participant has elected otherwise during the election
period, which must begin at least six months before the
Participant attains qualified early retirement age and
end not more than 90 days before the commencement of
benefits. Any election hereunder will be in writing and
may be changed by the Participant at any time.
(2) 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 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 (i) the 90th day
before the Participant attains the qualified early
retirement age, or (ii) the date on which participation
begins, and ends on the date the Participant terminates
employment.
(3) For purposes of this Section 10.6, qualified
early retirement age is the latest of the earliest date
under the Plan on which the Participant may elect to
receive Retirement benefits, the first day of the 120th
month beginning before the Participant reaches normal
retirement age, or the date the Participant begins
participation.<PAGE>
ARTICLE 75. MINIMUM DISTRIBUTION REQUIREMENTS
75..1 General Rules. Subject to Article 10, Joint and
Survivor Annuity Requirements, the requirements of this Article 11
shall apply to any distribution of a Participant's interest and
will take precedence over any inconsistent provisions of the Plan.
Unless otherwise specified, the provisions of this Article 11 apply
to calendar years beginning after December 31, 1984. All
distributions required under this Article 11 shall be determined
and made in accordance with the Income Tax Regulations issued under
section 401(a)(9) of the Code (including proposed regulations,
until the adoption of final regulations), including the minimum
distribution incidental benefit requirement of section 1.401(a)(9)-
2 of the proposed regulations.
75..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, determined as
follows.
(a) 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 70 1/2.
(b) Transitional Rules. The required beginning date of
a Participant who attains age 70 1/2 before January 1, 1988,
shall be determined in accordance with (1) or (2) below:
(1) Non-5% owners. The required beginning date of
a Participant who is not a 5% owner is the first day of
April of the calendar year following the calendar year in
which the later of his Retirement or his attainment of
age 70 1/2 occurs.
(2) 5% owners. The required beginning date of a
Participant who is a 5% owner during any year beginning
after December 31, 1979, is the first day of April
following the later of:
(i) the calendar year in which the Participant
attains age 70 1/2, or
(ii) the earlier of the calendar year with or
within which ends the Plan Year in which the
Participant becomes a 5% owner, or the calendar
year in which the Participant retires.
The required beginning date of a Participant who is not
a 5% owner, who attains age 70 1/2 during 1988 and who has not
retired as of January 1, 1989, is April 1, 1990.
(c) Rules for 5% Owners. A Participant is treated as
a 5% owner for purposes of this Section 11.2 if he is a 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 he attains age 66 1/2,
or any subsequent Plan Year. Once distributions have begun to
a 5% owner under this Section 11.2, they must continue, even
if the Participant ceases to be a 5% owner in a subsequent
year.
75..3 Limits on Distribution Periods. As of the first
Distribution Calendar Year, distributions not made in a single sum
may be made only over one or a combination of the following
periods:
(a) the life of the Participant,
(b) the life of the Participant and his 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 his Designated
Beneficiary.
Designated Beneficiary means the individual who is designated
as the Beneficiary under the Plan in accordance with section
401(a)(9) of the Code and the regulations issued thereunder
(including proposed regulations, until the adoption of final
regulations) and Section 7.2.
Distribution Calendar Year means a calendar year for which a
minimum distribution is required under section 401(a)(9) of the
Code and this Section 11.3. 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.
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. Unless otherwise
elected by the Participant (or his spouse, in the case of
distributions described in Section 11.5(b)) by the time
distributions are required to begin, Life Expectancies shall be
recalculated annually. Any such election shall be irrevocable as
to the Participant (or spouse) and shall apply to all subsequent
years. The Life Expectancy of a nonspouse beneficiary may not be
recalculated.
75..4 Determination of Amount to be Distributed Each Year.
If the Participant's interest is to be distributed in other than a
single sum, the following minimum distribution rules shall apply on
or after the required beginning date. Paragraphs (a) through (d)
apply to distributions in forms other than the purchase of an
annuity contract.
(a) 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 his 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 Year, must at least equal the
quotient obtained by dividing the Participant's Benefit by the
Applicable Life Expectancy.
(b) 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
50% of the present value of the amount available for
distribution is paid within the Life Expectancy of the
Participant.
(c) 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 Income Tax Regulations. Distributions after the
death of the Participant shall be distributed using the
Applicable Life Expectancy in paragraph (a) above as the
relevant divisor, without regard to Proposed Regulations
Section 1.401(a)(9)-2.
(d) 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.
(e) If the Participant's Benefit is distributed in the
form of an annuity contract 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
regulations issued thereunder (including proposed regulations,
until the adoption of final regulations).
Applicable Life Expectancy means 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 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(e) 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 in the Plan, the applicable
calendar year is the year of purchase.
Participant's Benefit means 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. For purposes of
the preceding sentence, 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.
75..5 Death Distribution Provisions.
(a) Distribution Beginning Before Death. If the
Participant dies after distribution of his interest has begun,
the remaining portion of his interest will continue to be
distributed at least as rapidly as under the method of
distribution being used before the Participant's death.
(b) Distribution Beginning after Death. If the
Participant dies before distribution of his interest begins,
distribution of his 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 (1) or (2) below:
(1) If any portion of the Participant's interest is
payable to a Designated Beneficiary, distributions may be
made over the Designated Beneficiary's 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; or
(2) If the Designated Beneficiary is the
Participant's surviving spouse, the date distributions
are required to begin in accordance with (1) above shall
not be earlier than the later of (i) December 31 of the
calendar year immediately following the calendar year in
which the Participant died, and (ii) December 31 of the
calendar year in which the Participant would have
attained age 70 1`/2.
If the Participant has not made an election pursuant to
this Section 11.5 by the time of his death, the Participant's
Designated Beneficiary must elect the method of distribution
no later than the earlier of (i) December 31 of the Calendar
year in which distributions would be required to begin under
this Section 11.5, or (ii) 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.
(c) For purposes of paragraph (b), if the surviving
spouse dies after the Participant, but before payments to the
spouse begin, the provisions of paragraph (b), with the
exception of subparagraph (2) therein, shall be applied as if
the surviving spouse were the Participant.
(d) For purposes of this Section 11.5, any amount paid
to a child of the Participant will be treated as if it had
been paid to the surviving spouse of the Participant if the
amount becomes payable to the surviving spouse when the child
reaches the age of majority.
(e) For the purposes of this Section 11.5, distribution
of a Participant's interest is considered to begin on the
Participant's required beginning date (or, if paragraph (c)
above is applicable, the date distribution is required to
begin to the surviving spouse pursuant to paragraph (b)
above). If distribution in the form of an annuity contract
described in Section 11.4(e) irrevocably commences to the
Participant before the required beginning date, the date
distribution is considered to begin is the date distribution
actually commences.
75..6 Transitional Rule. Notwithstanding the other
requirements of this Article 11, and subject to the requirements of
Article 10, Joint and Survivor Annuity Requirements, distribution
on behalf of any Participant, including a 5% owner, may be made in
accordance with all of the following requirements (regardless of
when such distribution commences):
(a) The distribution is one which would not have
disqualified the Trust under section 401(a)(9) of the Internal
Revenue Code of 1954 as in effect before its amendment by the
Deficit Reduction Act of 1984.
(b) 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 the Employee.
(c) The designation specified in paragraph (b) was in
writing, was signed by the Employee or the Beneficiary, and
was made before January 1, 1984.
(d) The Employee had accrued a benefit under the plan as
of December 31, 1983.
(e) The method of distribution designated by the
Employee or the Beneficiary specifies the time at which
distribution will commence, the period over 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.
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. 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
paragraphs (a) and (e).
If a designation is revoked, any subsequent distribution must
satisfy the requirements of section 401(a)(9) of the Code and the
regulations thereunder. If a designation is revoked after 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 designation described in paragraphs (b) through (e). 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 Income Tax
Regulations. Any changes in the designation generally will be
considered to be a revocation of the designation, but 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 the 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 of an amount
transferred or rolled over from one plan to another plan, the rules
in Q&A J-2 and Q&A J-3 of Section 1.401(a)(9)-l of the Proposed
Income Tax Regulations shall apply.<PAGE>
ARTICLE 76. WITHDRAWALS AND LOANS
76..1 Withdrawals from Participant Contribution Accounts.
Subject to the requirements of Article 10, a Participant may upon
written notice to the Employer withdraw any amount from his
Participant Contribution Account. A withdrawn amount may not be
repaid to the Plan. No forfeiture will occur solely as a result of
an Employee's withdrawal of Participant contributions.
76..2 Withdrawals on Account of Hardship. If the Employer
has so elected in the Plan Agreement, upon a Participant's written
request the Plan Administrator may permit a withdrawal of funds
from the vested portion of the Participant's Accounts (excluding
the amount credited to a Rollover Account) on account of the
Participant's financial hardship, which must be demonstrated to the
satisfaction of the Plan Administrator. In considering such
requests, the Plan Administrator shall apply uniform standards that
do not discriminate in favor of Highly Compensated Employees. In
a Plan with a CODA, if hardship withdrawals are permitted from both
the Employer Contribution Account and the Elective Deferral
Account, they shall be made first from a Participant's Employer
Contribution Account and thereafter from a Participant's Elective
Deferral Account, subject to the additional requirements set forth
in Section 5.12. The requirements of Section 5.12(b), (c), (d)(1)
and (d)(2) shall also apply to hardship distributions from a
Participant's Employer Contribution Account and Employer Matching
Account. In a Plan with a CODA, if hardship withdrawals are
permitted from more than one of the Elective Deferral Account,
Employer Matching Account, and Employer Contribution Account, they
shall be made first from a Participant's Employer Contribution
Account, and thereafter from the Employer Matching Account, and
finally from the Elective Deferral Account, subject to the
additional requirements of Section 5.12. A withdrawn amount may
not be repaid to the Plan.
76..3 Withdrawals After Reaching Age 59 1/2. If so specified by
the Employer in the Plan Agreement, a Participant who has reached
age 59 1/2 may upon written request to the Employer withdraw during
his employment any amount not exceeding the vested balance of his
Accounts. A withdrawn amount may not be repaid to the Plan.
76..4 Loans. If the Employer has so elected in the Plan
Agreement, the Employer may direct the Trustee to make a loan to a
Participant or Beneficiary from the vested portion of his Accounts,
subject to the following terms and conditions and to such
reasonable additional rules and regulations as the Plan
Administrator may establish for the orderly operation of the
program:
(a) The Plan Administrator shall administer the loan
program subject to the terms and conditions of this Section
12.4.
(b) A Participant's or Beneficiary's request for a loan
shall be submitted to the Plan Administrator by means of a
written application on a form supplied by the Plan
Administrator. Applications shall be approved or denied by
the Plan Administrator on the basis of its assessment of the
borrower's ability to collateralize and repay the loan, as
revealed in the loan application.
(c) Loans shall be made to all Participants and
Beneficiaries on a reasonably equivalent basis. Loans shall
not be made available to highly compensated Employees (as
defined in section 414(q) of the Code) in amounts greater than
the amounts made available to other Employees (relative to the
borrower's Account balance).
(d) Loans must be evidenced by the Participant's
promissory note for the amount of the loan payable to the
order of the Trustee, and adequately secured by assignment of
not more than 50% of the Participant's entire right, title and
interest in and to the Trust Fund, exclusive of any asset as
to which Putnam is not the Trustee.
(e) Loans must bear a reasonable interest rate
comparable to the rate charged by commercial lenders in the
geographical area for similar loans. The Plan Administrator
shall not discriminate among Participants in the matter of
interest rates, but loans may bear different interest rates
if, in the opinion of the Plan Administrator, the difference
in rates is justified by conditions that would customarily be
taken into account by a commercial lender in the Employer's
geographical area.
(f) The Period for repayment for any loan shall not
exceed five years, except in the case of a loan used to
acquire a dwelling unit which within a reasonable time is to
be used as the principal residence of the Participant, in
which case the repayment period shall not exceed ten years.
The terms of a loan shall require that it be repaid in level
payments of principal and interest not less frequently then
quarterly throughout the repayment period, except that
alternative arrangements for repayment may apply in the event
that the borrower is on unpaid leave of absence for a period
not to exceed one year.
(g) To the extent that a Participant would be required
under Article 10 to obtain he consent of his spouse to a
distribution of an immediately distributable benefit other
than a Qualified Joint and Survivor Annuity, the consent of
the Participant's spouse shall be required for the use of his
Account as security for a loan. The spouse's consent must be
obtained no earlier than the beginning of the 90-day period
that ends on the date on which the loan is to be so secured,
and obtained in accordance with the requirements of Section
10.4(c) for a Qualified Election. Any such consent shall
thereafter be binding on the consenting spouse and any
subsequent spouse of the Participant. A new consent shall be
required for use of the Account as security for any extension,
renewal, renegotiation or revision of the original loan.
(h) If valid spousal consent has been obtained in
accordance with Section 12.4(g), then notwithstanding any
other provision of the Plan the portion of the Participant's
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 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.
(i) In the event of default on a loan by a Participant
who is an active Employee, foreclosure on the Participant's
Account as security will not occur until the Employer has
reported to the Trustee the occurrence of an event permitting
distribution from the Plan in accordance with Article 9 or
Section 5.11.
(j) No loan shall be made to an Owner-Employee or a
Shareholder-Employee.
(k) No loan to any Participant or Beneficiary can be
made to the extent that the amount of the loan, when added to
the outstanding balance of all other loans to the Participant
or Beneficiary, would exceed the lesser of (a) $50,000 reduced
by the excess (if any) of the highest outstanding balance of
loans during the one 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 the value
of the vested account balance of the Participant. For the
purpose of the above limitation, all loans from all qualified
plans of the Affiliated Employers are aggregated.
(1) Loans shall be considered investments directed
by a Participant pursuant to Section 13.3. The amount
loaned shall be charged solely against the Accounts of
the Participant, and repaid amounts and interest shall be
credited solely thereto.
76..5 Procedure; Amount Available. Withdrawals and loans
shall be made subject to the terms and conditions applicable to
distributions pursuant to Section 9.4, except that the amount of
any withdrawal or loan shall be determined by reference to the
vested balance of the Participant's Account as of the most recent
Valuation Date preceding the withdrawal or loan, and shall not
exceed the amount of the vested account balance.
<PAGE>
ARTICLE 77. TRUST FUND AND INVESTMENTS
77..1 Establishment of Trust Fund. The Employer and the
Trustee hereby agree to the establishment of a Trust Fund
consisting of all amounts as shall be contributed or transferred
from time to time to the Trustee pursuant to the Plan, and all
earnings thereon. The Trustee shall hold the assets of the Trust
Fund for the exclusive purpose of providing benefits to
Participants and Beneficiaries and defraying the reasonable
expenses of administering the Plan, and no such assets shall ever
revert to the Employer, except that:
(a) contributions made by the Employer by mistake of
fact, as determined by the Employer, may be returned to the
Employer within one (1) year of the date of payment,
(b) contributions that are conditioned on their
deductibility under section 404 of the Code may be returned to
the Employer, to the extent disallowed, within one (1) year of
the disallowance of the deduction,
(c) contributions that are conditioned on the initial
qualification of the Plan under the Code, and all investment
gains attributable to them, may be returned to the Employer
within one (1) year after such qualification is denied by
determination of the internal Revenue Service, but only if an
application for determination of such qualification is made
within the time prescribed by law for filing the Employer's
federal income tax return for its taxable year in which the
Plan is adopted, or such later date as the Secretary of the
Treasury may prescribe, and
(d) amounts held in a suspense account may be returned
to the Employer on termination of the Plan, to the extent that
they may not then be allocated to any Participant's Account,
in accordance with Article 6.
All Employer contributions under the Plan other than those
made pursuant to Section 4.1(e) are hereby expressly conditioned on
the initial qualification of the Plan and their deductibility under
the Code. Investment gains attributable to contributions returned
pursuant to subsections (a) and (b) shall not be returned to the
contributing Employer, and investment losses attributable to such
contributions shall reduce the amount returned.
77..2 Management of Trust Fund. Except to the extent of any
investment in Policies pursuant to Article 14, the assets of the
Trust Fund shall be held in trust by the Trustee and accounted for
in accordance with this Article 13, and shall be invested in
accordance with Section 13.3 in the Investment Products specified
by the Employer in the Plan Agreement and from time to time
thereafter in writing. The Employer shall have the exclusive
authority and discretion to select the Investment Products
available under the Plan. In making that selection, the Employer
shall use the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in a
like capacity and familiar with such matters would use in the
conduct of an enterprise of like character and with like aims. The
Employer shall cause the available Investment Products to be
diversified sufficiently to minimize the risk of large losses,
unless under the circumstances it is clearly prudent not to do so.
It is especially intended that the Trustee shall have no
discretionary authority to determine the investment of Trust
assets.
77..3 Investment Instructions. Except as Article 14 may
apply, all amounts held in the Trust Fund under the Plan shall be
invested in Investment Products. If the Employer has elected in
the Plan Agreement to make investment decisions for the Plan,
investment instructions as to Employer Contribution Accounts,
Employer Matching Accounts, Qualified Matching Accounts and
Qualified Nonelective Contribution Accounts shall be the fiduciary
responsibility of the Employer, and each of such Accounts shall
have a pro rata interest in all assets of the Trust (other than
Policies under Article 14) to which the Employer's instructions
apply. If the Employer has not elected to make investment
decisions for the Plan, then assets of the Trust shall be invested
solely in accordance with the instructions of the Participant to
whose Accounts they are allocable, as delivered to Putnam in
accordance with its service agreement with the Employer.
Instructions shall apply to future contributions, past
accumulations, or both, according to their terms, and shall be
communicated by the Employer to Putnam in accordance with
procedures prescribed in the service agreement between the Employer
and Putnam. Instructions shall be effective prospectively,
coincident with or within a reasonable time after their receipt in
good order by Putnam. An instruction once received shall remain in
effect until it is changed by the provision of a new instruction.
New instructions shall be accented by Putnam at any Valuation Date.
In the event that the Employer adopts a Putnam prototype plan
as an amendment to or restatement of an existing plan, the Employer
shall specify one or more investment Products to serve as the sole
investments for all Participants' Accounts during the period in
which existing records of the Plan are transferred to the
Recordkeeper. During that period, new investment instructions as
to existing assets of the Plan cannot be carried out, nor can
distributions be made from the Plan except to the extent permitted
under the terms of the service agreement between the Employer and
Putnam. The Employer and the Recordkeeper shall use their best
efforts to minimize the duration of the period to which the
preceding sentence applies.
To the extent specifically authorized and provided in the
service agreement between the Employer and Putnam, the Employer may
direct the Trustee to establish as an Investment Product a fund all
of the assets of which shall be invested in shares of stock of the
Employer that constitute "qualifying employer securities" within
the meaning of Section 407(d)(5) of ERISA ("Employer Stock").
Putnam shall be under no duty to question or review the investment
directions given by the Employer or to make suggestions to the
Employer in connection therewith. Putnam shall not be liable for
any loss, or by reason of any breach, that arises from the
Employer's exercise or non-exercise of rights under this Article
13, or from any direction of the Employer unless it is clear on the
face of the direction that the actions to be taken under the
direction are prohibited by the fiduciary duty rules of Section
404(a) of ERISA. All interest, dividends and other income received
with respect to, and any proceeds received from the sale or other
disposition of, securities or other property held in an investment
fund shall be credited to and reinvested in such investment fund,
and all expenses of the Trust that are properly allocated to a
particular investment fund shall be so allocated and charged. The
Employer may at any time direct Putnam to eliminate any investment
fund or funds, and Putnam shall thereupon dispose of the assets of
such investment fund and reinvest the proceeds thereof in
accordance with the directions of the Employer.
Neither the Employer nor the Trustee nor Putnam shall be
responsible for questioning any instructions of a Participant or
for reviewing the investments selected therein, or for any loss
resulting from instructions of a Participant or from the failure of
a Participant to provide or to change instructions. Neither Putnam
nor the Trustee shall have any duty to question any instructions
received from the Employer or a Participant or to review the
investments selected thereby, nor shall Putnam or the Trustee be
responsible for any loss resulting from instructions received from
the Employer or a Participant or from the failure of the Employer
or a Participant to provide or to change instructions. In the
event that Putnam or the Trustee receives a contribution under the
Plan as to which no instructions are delivered, or such
instructions as are delivered are unclear to Putnam or the Trustee,
such contribution shall be invested until clear instructions are
received in the default investment option set forth in the service
agreement between the Employer and Putnam, or if no such option is
so set forth, in Putnam Daily Dividend Trust. Neither Putnam nor
the Trustee shall have any discretionary authority or
responsibility in the investment of the assets of the Trust Fund.
77..4 Valuation of the Trust Fund. As of each Valuation
Date, the Trustee shall determine the fair market value of the
Trust Fund, and the net earnings or losses and expenses of the
Trust Fund for the period elapsed since the most recent previous
Valuation Date shall be allocated among the Accounts of
Participants. Earnings, losses and expenses which pertain to
investments which are specifically held for a given Participant's
Account shall be allocated solely to that Account. In the event
that an investment is not specifically held for a given
Participant's Account, the earnings, losses and expenses pertaining
to that investment shall be allocated among all Participants'
Accounts in the ratio that each such Account bears to the total of
all Accounts of all Participants. Each Participant's Accounts
shall be adjusted pursuant to this Section 13.4 until such time as
they are either fully distributed or forfeited, regardless of
whether the Participant continues to be an Employee.
77..5 Distributions on Investment Company Shares. Subject to
Section 9.3, all dividends and capital gains or other distributions
received on any Investment Company Shares credited to Participant's
Account will (unless received in additional Investment Company
Shares) be reinvested in full and fractional shares of the same
Investment Company at the price determined as provided in the then
current prospectus of the Investment Company. The shares so
received or purchased upon such reinvestment will be credited to
such accounts. If any dividends or capital gain or other
distributions may be received on such Investment Company Shares at
the election of the shareholder in additional shares or in cash or
other property, the Trustee will elect to receive such dividends or
distributions in additional Investment Company Shares.
77..6 Registration and Voting of Investment Company Shares.
All Investment Company Shares shall be registered in the name of
the Trustee or its nominee. Subject to any requirements of
applicable law, the Trustee will transmit to the Employer copies of
any notices of shareholders' meetings, proxies and proxy-soliciting
materials, prospectuses and the annual or other reports to share
holders, with respect to Investment Company Shares held in the
Trust Fund. The Trustee shall act in accordance with directions
received from Participants or the Employer, as the case may be,
with respect to matters to be voted upon by the shareholders of the
Investment Company. Such directions must be in writing on a form
approved by the Trustee, signed by the addressee and delivered to
the Trustee within the time prescribed by it. The Trustee will not
vote Investment Company Shares as to which it receives no written
directions.
77..7 Investment Manager. The Employer, with the consent of
Putnam, may appoint an investment manager, as defined in Section
3(38) of the Employee Retirement Income Security Act of 1974, with
respect to all or a portion of the assets of the Trust Fund. The
Trustee shall have no liability in connection with any action or
nonaction pursuant to directions of such an investment manager.
77..8 Employer Stock. Notwithstanding any other provision of
the Plan, the provisions of this Section 13.8 shall govern the
voting of Employer Stock held by Putnam as Trustee under the Plan.
The Trustee shall vote Employer Stock in accordance with the
directions of the Employer unless the Employer has elected in the
Plan Agremeent that Participants shall be appointed Named
Fiduciaries as to the voting of Employer Stock and shall direct the
Trustee as to the voting of Employer Stock in accordance with the
provisions of the second, third and fourth paragraphs of this
Section 13.8. In either case, the Employer shall be responsible
for determining whether, under the circumstances prevailing at a
given time, its fiduciary duty to Participants nd Beneficiaries
under the Plan and ERISA requires that the Employer follow the
advice of independent counsel as to the voting of Employer Stock.
The remainder of this Section 13.8 applies only if the Employer
elects in the plan Agreement that Participants shall direct the
Trustee as to the voting of Employer Stock.
When the issuer of Employer Stock files preliminary proxy
solicitation materials with the Securities and Exchange Commission,
the Employer shall cause a copy of all the materials to be
simultaneously sent to the Trustee, and the Trustee shall prepare
a voting instruction form based upon these materials. At the time
of mailing of notice of each annual or special stockholders'
meeting of the issuer of Employer Stock, the Employer shall cause
a copy of the notice and all proxy solicitation materials to be
sent to each Participant, together with the foregoing voting
instruction form to be returned to the Trustee or its designee.
The form shall show the number of full and fractional shares of
Employer Stock credited to the Participant's accounts, whether or
not vested. For purposes of this Section 13.8, the number of
shares of Employer Stock deemed credited to a Participant's
accounts shall be determined as of the last preceding Valuation
Date for which an allocation has been completed and Employer Stock
has actually been credited to Participant's accounts. The Employer
shall provide the Trustee with a copy of any materials provided to
Participants and shall certify to the Trustee that the materials
have been mailed or otherwise sent to Participants.
Each Participant shall have the right to direct the Trustee as
to the manner in which to vote that number of shares of Employer
Stock held under the Plan equal to a fraction, of which the
numerator is the number of shares of Employer Stock credited to his
account and the denominator is the number of shares of Employer
Stock credited to all Participants' accounts. Such directions
shall be communicated in writing or by facsimile or similar means
and shall be held in confidence by the Trustee and not divulged to
the Employer, or any officer or employee thereof, or any other
persons. Upon its receipt of directions, the Trustee shall vote
the shares of Employer Stock as directed by the Participant. To
the extent that any Participant gives no direction as to the voting
of Employer Stock that he has the right to direct under this
Section 13.8, the Plan Administrator shall retain the status of
Named Fiduciary and shall direct the voting of such Employer Stock.
With respect to all rights in connection with Employer Stock
other than the right to vote, Participants are hereby appointed
Named Fiduciaries to the same extent (if any) as provided in the
foregoing paragraphs of this Section 13.8 with regard to the right
to vote, and the Trustee shall follow the directions of
Participants and the Plan Administrator with regard to the exercise
of such rights to the same extent as with regard to the right to
vote.<PAGE>
ARTICLE 78. INSURANCE POLICIES
78..1 Purchase of Insurance Products. At the time of
establishment of the Plan, the Employer shall purchase for each
Participant such Policy or Policies, if any, as a Participant shall
request and annually thereafter such additional Policies as a
Participant shall request, subject to the limitations of Section
14.2. All Policies shall have the same day and month of issue,
insofar as reasonably possible. The premiums on all Policies shall
be paid at the same intervals (for example, annually, semi-
annually, quarterly or monthly), but the interval may be changed
with respect to all Policies from time to time.
78..2 Limitation on Premiums. The premiums paid for Policies
in respect of any Participants shall be limited so that premiums
paid on any ordinary insurance Policies (that is, Policies with
both nonincreasing premiums and nondecreasing death benefits) on
the life of the Participant shall be 49% or less of the Employer's
total contributions for the Participant (and Forfeitures allocated
and amounts reapplied to his Employer Contribution Account), and
premiums paid on term insurance Policies on the life of the
Participant shall be less than 25% of such amount; provided that if
both ordinary life insurance Policies and term Policies are
purchased for any Participant, the total premiums on term Policies
plus one-half the premiums on ordinary life Policies shall be less
than 25% of such amount. If at any time the total premiums to be
paid by the Employer for a Participant shall equal or exceed the
above limitations, then the life insurance coverage of that
Participant shall be reduced so that the total premiums shall not
equal or exceed the limitations. The required reduction shall be
made by changing all or a portion of the life insurance on the
Participant to paid-up life insurance or by cancelling all or a
portion of any term life insurance.
78..3 Policy Options. At the election of the Participant
covered hereunder, a Policy may contain a waiver of premium
disability benefit provision or a provision for additional
indemnity in the event of accidental death, or both, if available
on the type of Policy selected and if permitted by the insurer.
78..4 Insurability. If any Participant who has elected that
a Policy be purchased is found by the insurer not to be insurable
at standard rates, the Employer shall, if permitted by the rules of
the insurer, purchase a similar Policy which provides a lesser
death benefit and which can be purchased for the same premium.
78..5 Dividends on Policies. Dividends and other credits
payable on any Policy shall be applied to the purchase of
additional benefits under the Policy unless the Participant
requests that they be applied in reduction of premiums.
78..6 Trustee of Policy. The Insurance Trustee shall apply
for and be the owner of each Policy purchased under the terms of
the Plan. Each Policy must provide that proceeds will be payable
to the Insurance Trustee; however, the Insurance Trustee shall be
required to pay over all such proceeds to the Participant's
Designated Beneficiary in accordance with the distribution
provisions of the Plan including, without limitation, Section 10.3.
Under no circumstances shall the Trust retain any part of the
proceeds. In the event of any conflict between the terms of the
Plan and the terms of any Policy purchased hereunder, the Plan
provisions shall control.
78..7 Obligations with Respect to Policies. Except as may be
otherwise provided in any conditional or binding receipt issued by
an insurer, there shall be no coverage and no death benefit payable
under any Policy to be purchased from such insurer until such
Policy shall have been delivered and the premium therefor shall
have been paid. The Employer and the Insurance Trustee shall not
have any responsibility as to the effectiveness of any Policy
purchased from an insurer, nor shall either of them have any
liability or obligation to pay any amount to any Participant or his
beneficiary by reason of any failure or refusal by the insurer to
make such payment.
78..8 Distribution of Proceeds on Participant's Death. In
the event of the death of a Participant before the conversion
provided for in Section 14.9, there shall be payable to the
beneficiary named in any Policy on his life the benefits provided
by the terms of such Policy.
78..9 Conversion of Policies. Except as provided in Section
19.3, if any Policies of a Participant (other than retirement
income, endowment or annuity Policies) are held for his benefit at
the time distribution is to commence, the Policies may be converted
by the Insurance Trustee into cash, paid to the Trustee, credited
to the Employer Contribution Account of the Participant, invested
in accordance with the written instructions of the Employer (and if
no such instructions have been given or if such instructions are
not clear, invested in Investment Company Shares in the same
proportion as the most recent contributions to the Participant's
Account) and distributed pursuant to Article 9, subject to the
terms and conditions of Article 10. Retirement income, endowment
or annuity Policies will be distributed directly to the Participant
at the time distribution is to commence.
78..10 Conflict with Policies. In the event of any conflict
between the terms of the Plan and the terms of any Policies
hereunder, the Plan provisions shall control.
78..11 Insurance Loans to Owner-Employees. If an Owner-
Employee or Shareholder-Employee receives, either directly or
indirectly, any amount from an Insurer as a loan under a Policy,
the amount so received shall be considered a distribution under the
Plan. Any assignment or pledge (or agreement to assign or pledge)
by an Owner-Employee or Shareholder-Employee of any interest in the
Plan shall be considered a distribution of such interest.
<PAGE>
ARTICLE 79. TOP-HEAVY PLANS
79..1 Superseding Effect. For any Plan Year beginning after
December 31, 1983, in which Plan is determined to be a Top-Heavy
Plan under Section 15.2(b), the provisions of this Article 15 will
supersede any conflicting provisions in the Plan or the Plan
Agreement.
79..2 Definitions. For purposes of this Article 15, the
terms below shall be defined as follows:
(a) Key Employee means any Employee or former Employee
(and the Beneficiaries of such Employee) who at any time
during the determination period was: (1) an officer of the
Employer having annual compensation greater than 50% of the
amount in effect under section 415(b)(1)(A) of the Code; (2)
an owner (or considered an owner under section 318 of the
Code) of one of the ten largest interests in the Employer
having annual compensation exceeding the dollar limitation
under Section 415(c)(1)(A) of the Code; (3) a 5% owner of the
Employer; or (4) a 1% owner of the Employer having annual
compensation of more than $150,000. Annual compensation means
compensation satisfying the definition elected by the Employer
in item 4 of the Plan Agreement, but including amounts
contributed by the Employer pursuant to a salary reduction
agreement which are excludible from the Employee's gross
income under section 125, section 402(a)(8), section 402(h) or
section 403(b) of the Code. The determination period is the
Plan Year containing the Determination Date and the four
preceding Plan Years. The determination of who is a Key
Employee will be made in accordance with Section 416(i)(1) of
the Code and the regulations thereunder.
(b) Top-Heavy: the Plan is Top-Heavy for any Plan Year
beginning after December 31, 1983, if any of the following
conditions exists:
(1) If the Top-Heavy Ratio for this Plan exceeds
60% and this Plan is not part of any Required Aggregation
Group or Permissive Aggregation Group of plans.
(2) If this Plan is a part of a Required
Aggregation Group of plans but not part of a Permissive
Aggregation Group and the Top-Heavy Ratio for the group
of plans exceeds 60%.
(3) If this plan is part of a Required Aggregation
Group and part of a Permissive Aggregation Group of Plans
and the Top-Heavy Ratio for the Permissive Aggregation
group exceeds 60%.
(c) Top-Heavy Ratio means the following:
(1) If the Employer maintains one or more qualified
defined contribution plans (or any simplified employee
pension plan) and the Employer has not maintained any
qualified defined benefit plan which during the 5-year
period ending on the Determination Date(s) has or has had
accrued benefits, the op-Heavy ratio for this Plan alone
or for the Required or Permissive Aggregation Group as
appropriate is a fraction, the numerator of which is the
sum of the account balances of all Key Employees as of
the Determination Date(s) (including any part of any
account distributed in the 5-year period ending on the
Determination Date(s)), and the denominator of which is
the sum of all account balances (including any part of
any account balances distributed in the 5-year period
ending on the Determination Date(s)), both computed in
accordance with section 416 of the Code and the
regulations thereunder. Both the numerator and
denominator of the Top-Heavy Ratio are increased to
reflect any contribution not actually made as of the
Determination Date, but which is required to be taken
into account on that date under section 416 of the Code
and the regulations thereunder.
(2) If the Employer maintains one or more qualified
defined contribution plans (or any simplified employee
pension plan) and the Employer maintains or has
maintained one or more qualified defined benefit plans
which during the 5-year period ending on the
Determination Date(s) has or has had any accrued
benefits, the Top-Heavy Ratio for any Required or
Permissive Aggregation Group as appropriate is a
fraction, the numerator of which is the sum of account
balances under the aggregated qualified defined
contribution plan or plans for all Key Employees,
determined in accordance with (1) above, and the Present
Value of accrued benefits under the aggregated qualified
defined benefit plan or plans for all Key Employees as of
the Determination Date(s), and the denominator of which
is the sum of the account balances under the aggregated
qualified defined contributions plan or plans for all
Participants, determined in accordance with (1) above,
and the Present Value of accrued benefits under the
qualified defined benefit plan or plans for all
Participants as of the Determination Date(s), all
determined in accordance with section 416 of the Code and
the regulations thereunder. The accrued benefits under
a defined benefit plan in both the numerator and
denominator of the Top-Heavy Ratio are increased for any
distribution of an accrued benefit made in the 5-year
period ending on the Determination Date.
(3) For purposes of (1) and (2) above, the value of
account balances and the Present Value of accrued
benefits will be determined as of the most recent
Valuation Date that falls within or ends with the 12-
month period ending on the Determination Date; except as
provided in section 416 of the Code and the regulations
thereunder for the first and second Plan Years of a
defined benefit plan. The account balances and accrued
benefits of a Participant (A) who is not a Key Employee
but who was a Key Employee in a prior Plan Year, or (B)
who has not been credited with at least one Hour of
Service for the Employer during the 5-year period ending
on the Determination Date, will be disregarded. The
calculation of the Top-Heavy Ratio, and the extent to
which distributions, rollovers and transfers are taken
into account will be made in accordance with Section 416
of the Code and the regulations thereunder. Deductible
Employee contributions will not be taken into account for
purposes of computing the Top-Heavy Ratio. When
aggregating plans, the value of account balances and
accrued benefits will be calculated with reference to the
Determination Dates that fall within the same calendar
year.
The accrued benefit of a Participant other than a
Key Employee shall be determined under (a) the method, if
any, that uniformly applies for accrual purposes under
all defined benefit plans maintained by the Employer, or
(b) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate
permitted under the fractional rule of section
411(b)(1)(C) of the Code.
(d) Permissive Aggregation Group means the Required
Aggregation Group of plans plus any other qualified plan or
plans (or simplified employee pension plan) of the Employer
which, when considered as a group with the Required
Aggregation Group, would continue to satisfy the requirements
of sections 401(a)(4) and 410 of the Code.
(e) Required Aggregation Group means (i) each qualified
plan of the Employer in which at least one Key Employee
participates or participated at any time during the
determination period (regardless of whether the Plan has
terminated) and (ii) any other qualified plan of the Employer
which enables a plan described in (i) to meet the requirements
of section 401(a)(4) or 410 of the Code.
(f) Determination Date means, for 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
Determination Date is the last day of that Plan Year.
(g) Valuation Date means the last day of the Plan Year.
(h) Present Value means present value based only on the
interest and mortality rates specified by the Employer in the
Plan Agreement.
79..3 Minimum Allocation.
(a) Except as otherwise provided in paragraphs (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 3% of such
Participant's Earnings, 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
$200,000 of the Key Employee's Earnings, 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 of the Employer's contributions and
Forfeitures for the Plan Year because of (1) the Participant's
failure to be credited with at least 1,000 Hours of Service,
or (2) the Participant's failure to make mandatory Employee
contributions to the Plan, or (3) the Participant's receiving
Earnings less than a stated amount. Neither Elective
Deferrals, Employer Matching Contributions nor Qualified
Matching Contributions for non-Key Employees shall be taken
into account for purposes of satisfying the requirement of
this Section 15.3(a).
(b) For purposes of computing the minimum allocation,
Earnings will mean Section 415 Compensation as defined in
Section 6.5(b) of the Plan.
(c) The provision in paragraph (a) above shall not apply
to any Participant who was not employed by the Employer on the
last day of the Plan Year.
(d) The provision in paragraph (a) above shall not apply
to any Participant to the extent he is covered under any other
plan or plans of the Employer, and the Employer has provided
in the Plan Agreement that the minimum allocation 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) of the
Code) may not be forfeited under sections 411(a)(3)(B) or (D)
of the Code.
79..4 Adjustment of Fractions. For any Plan Year in which
the Plan is Top-Heavy, the Defined Benefit Fraction and the Defined
Contribution Fraction in Article 6 shall each be computed using
100% of the dollar limitations specified in sections 415(b)(1)(A)
and 415(c)(1)(A) instead of 125%. The foregoing requirement shall
not apply if the Top-Heavy Ratio does not exceed 90% and the
Employer has elected in the Plan Agreement to provide increased
minimum allocations or benefits satisfying section 416(h)(2) of the
Code.<PAGE>
ARTICLE 80. ADMINISTRATION OF THE PLAN
80..1 Plan Administrator. The Plan shall be administered by
the Employer, as Plan Administrator and Named Fiduciary within the
meaning of ERISA, under rules of uniform application; provided,
however, that the Plan Administrator's duties and responsibilities
may be delegated to a person appointed by the Employer or a
committee established by the Employer for that purpose, in which
case the committee shall be the Plan Administrator and Named
Fiduciary. The member os such a committee shall act by majority
vote, and may by majority vote authorize any one or ones of their
number to act for the committee. The person or committee (if any)
initially appointed by the Employer may be named in the Plan
Agreement, but the Employer may remove any such person or committee
member by written notice to him, and any such person or committee
may resign by written notice to the Employer, without the necessity
of amending the Plan Agreement. To the extent permitted under
applicable law, the Plan Administrator shall have the sole
authority to enforce the terms hereof on behalf of any and all
persons having or claiming any interest under the Plan, and shall
be responsible for the operation of the Plan in accordance with its
terms. The Plan Administrator shall have discretionary authority
to determine all questions arising out of the administration,
interpretation and application of the Plan, all of which
determinations shall be conclusive and binding on all persons. The
Plan Administrator, in carrying out its responsibilities under the
Plan, may rely upon the written opinions of its counsel and on
certificates of physicians. Subject to the provisions of the Plan
and applicable law, the Plan Administrator shall have no liability
to any person as a result of any action taken or omitted hereunder
by the Plan Administrator.
80..2 Claims Procedure. Claims for participation in or
distribution under the Plan shall be made in writing to the Plan
Administrator, or an agent designated by the Plan Administrator
whose name shall have been communicated to all Participants and
other persons as required by law. If any claim so made is denied
in whole or in part, the claimant shall be furnished promptly by
the Plan Administrator with a written notice:
(a) setting forth the reason for the denial,
(b) making reference to pertinent Plan provisions,
(c) describing any additional material or information
from the claimant which is necessary and why, and
(d) explaining the claim review procedure set forth
herein.
Within 60 days after denial of any claim for participation or
distribution under the Plan, the claimant may request in writing a
review of the denial by the Plan Administrator. Any claimant
seeking review hereunder shall be entitled to examine all pertinent
documents and to submit issues and comments in writing. The Plan
Administrator shall render a decision on review hereunder;
provided, that if the Plan Administrator determines that a hearing
would be appropriate, its decision on review shall be rendered
within 120 days after receipt of the request for review. The
decision on review shall be in writing and shall state the reason
for the decision, referring to the Plan provisions upon which it is
based.
80..3 Employer's Responsibilities. The Employer shall be
responsible for:
(a) Keeping records of employment and other matters
containing all relevant data pertaining to any person affected
hereby and his eligibility to participate, allocations to his
Accounts, and his other rights under the Plan;
(b) Periodic, timely filing of all statements, reports
and returns required to be filed by ERISA;
(c) Timely preparation and distribution of disclosure
materials required by ERISA;
(d) Providing notice to interested parties as required
by section 7476 of the Code;
(e) Retention of records for periods required by law;
and
(f) Seeing that all persons required to be bonded on
account of handling assets of the Plan are bonded.
80..4 Recordkeeper. The Recordkeeper is hereby designated as
agent of the Employer under the Plan to perform directly or through
agents certain ministerial duties in connection with the Plan, in
particular:
(a) To keep and regularly furnish to the Employer a
detailed statement of each Participant's Accounts, showing
contributions thereto by the Employer and the Participant,
Investment Products purchased therewith, earnings thereon and
Investment Products purchased therewith, and each redemption
or distribution made for any reason, including fees or
benefits; and
(b) To the extent agreed between the Employer and the
Recordkeeper, to prepare for the Employer or to assist the
Employer shall be required to furnish to Participants and
Beneficiaries or other interested persons and to the Internal
Revenue Service or the Department of Labor; all as may be more
fully set forth in a service agreement executed by the
Employer and the Recordkeeper. If the Employer does not
appoint another person or entity as Recordkeeper, the Employer
itself shall be the Recordkeeper.
80..5 Prototype Plan. Putnam is the sponsor of the Putnam
Basic Plan Document, a prototype plan approved as to form by the
Internal Revenue Service. Provided that an Employer's adoption of
the Plan is made known to and accepted by Putnam in accordance with
the Plan Agreement, Putnam will inform the Employer of amendments
to the prototype plan and provide such other services in connection
with the Plan as may be agreed between Putnam and the Employer.
Putnam may impose for its services as sponsor of the prototype plan
such fees as it may establish from time to time in a fee schedule
addressed to the Employer. Such fees shall, unless paid by the
Employer, be paid from the Trust Fund, and shall in that case be
charged pro rata against the Accounts of all Participants. The
Trustee is expressly authorized to cause Investment Products to be
sold or redeemed for the purpose of paying such fees.
<PAGE>
ARTICLE 81. TRUSTEE AND INSURANCE TRUSTEE
81..1 Powers and Duties of the Trustee. The Trustee shall
have the authority, in addition to any authority given by law, to
exercise the following powers in the administration of the Trust:
(a) To invest all or a part of the Trust Fund in
Investment Products in accordance with the investment
instructions delivered by the Employer pursuant to Section
13.3, without restriction to investments authorized for
fiduciaries, including without limitation any common,
collective or commingled trust fund maintained by the Trustee
(or any other such fund, acceptable to Putnam and the Trustee,
that qualifies for exemption from federal income tax pursuant
to Revenue Ruling 81-100). Any investment in, and any terms
and conditions of, any such common, collective or commingled
trust fund available only to employee trusts which meet the
requirements of the Code, or corresponding provisions of
subsequent income tax laws of the United States, shall
constitute an integral part of this Agreement;
(b) If Putnam and the Trustee have consented thereto in
writing, to invest without limit in stock of the Employer or
any affiliated company;
(c) To dispose of all or part of the investments,
securities or other property which may from time to time or at
any time constitute the Trust Fund in accordance with the
written directions furnished by the Employer for the
investment of Participants' separate Accounts or the payment
of benefits or expenses of the Plan, and to make, execute and
deliver to the purchasers thereof good and sufficient deeds of
conveyance therefore, and all assignments, transfers and other
legal instruments, either necessary or convenient for passing
the title and ownership thereto, free and discharged of all
trusts and without liability on the part of such purchasers to
see to the application of the purchase money;
(d) To hold cash uninvested to the extent necessary to
pay benefits or expenses of the Plan;
(e) To follow the directions of an investment manager
appointed pursuant to Section 13.7
(f) To cause any investment of the Trust Fund to be
registered in the name of the Trustee or the name of its
nominee or nominees or to retain such investment unregistered
or in a form permitting transfer by delivery; provided that
the books and records of the Trustee shall at all times show
that all such investments are part of the Trust Fund;
(g) Upon written direction of or through the Employer,
to vote in person or by proxy (in accordance with Section 13.6
and, in the case of stock of the Employer, at the direction of
the Employer or Participants) with respect to all securities
that are part of the Trust Fund;
(h) To consult and employ any suitable agent to act on
behalf of the Trustee and to contract for legal, accounting,
clerical and other services deemed necessary by the Trustee to
manage and administer the Trust Fund according to the terms of
the plan'
(i) Upon the written direction of the Employer, to make
loans from the Trust Fund to Participants in amounts and on
terms approved by the Plan Administrator in accordance with
the provisions of the Plan; provided that the Employer shall
have the sole responsibility for computing and collecting all
loan repayments required to be made under the Plan; and
(j) To pay from the Trust Fund all taxes imposed or
levied with respect to the Trust Fund or any part thereof
under existing or future laws, and to contest the validity or
amount of any tax assessment, claim or demand respecting the
Trust Fund or any part thereof.
81..2 Limitation of Responsibilities. Except as may
otherwise be required under applicable law, neither the Trustee nor
the Insurance Trustee nor any of their respective agents shall have
any responsibility for:
(a) Determining the correctness of the amount of any
contribution for the sole collection or payment of
contributions, which shall be the sole responsibility of the
Employer;
(b) Loss or breach caused by any Participant's exercise
of control over his Accounts, which shall be the sole
responsibility of the Participant;
(c) Loss or breach caused by the Employer's exercise of
control over Accounts pursuant to Section 13.3, which shall be
the sole responsibility of the Employer;
(d) Sums paid to an insurer or the validity of any
Policy or the accuracy of information provided by an insurer,
which shall be the sole responsibility of the insurer;
(e) Performance of any other responsibilities not
specifically allocated to them under the Plan.
81..3 Fees and Expenses. The Trustee's fees for performing
its duties hereunder shall be such reasonable amounts as shall be
established by the Trustee from time to time in a fee schedule
addressed to the Employer. Such fees, any taxes of any kind which
may be levied or assessed upon or in respect of the Trust Fund and
any and all expenses reasonably incurred by the Trustee shall,
unless paid by the Employer, be paid from the Trust Fund and shall,
unless allocable to the Accounts of specific Participants, be
charged pro rata against the Accounts of all Participants. The
Trustee is expressly authorized to cause Investment Products to be
sold or redeemed for the purpose of paying such amounts. Charges
and expenses incurred in connection with a specific Investment
Product, unless allocable to the Accounts of specific Participants,
shall be charged pro rata against the Accounts of all Participants
for whose benefit amounts have been invested in the specific
Investment Product.
81..4 Reliance on Employer. The Trustee and its agents (and
the Insurance Trustee, if any) shall rely upon any decision of the
Employer, or of any person authorized by the Employer, purporting
to be made pursuant to the terms of the Plan, and upon any
information or statements submitted by the Employer or such person
(including those relating to the entitlement of any Participant to
benefits under the Plan), and shall not inquire as to the basis of
any such decision or information or statements, and shall incur no
obligation or liability for any action taken or omitted in reliance
thereon. The Trustee and its agents shall be entitled to rely on
the latest written instructions received from the Employer as to
the person or persons authorized to act for the Employer hereunder,
and to sign on behalf of the Employer any directions or
instructions, until receipt from the Employer of written notice
that such authority has been revoked.
81..5 Action Without Instructions. If the Trustee receives
no instructions from the Employer in response to communications
sent by registered or certified mail to the Employer at its last
known address as shown on the books of the Trustee, then the
Trustee may make such determinations with respect to administrative
matters arising under the Plan as it considers reasonable,
notwithstanding any prior instructions or directions given by or on
behalf of the Employer, but subject to any instruction or direction
given by or on behalf of the Participants. To the extent permitted
by applicable law, any determination so made will be binding on all
persons having or claiming any interest under the Plan or Trust,
and the Trustee will incur no obligation or responsibility for any
such determination made in good faith or for any action taken
pursuant thereto. In making any such determination the Trustee may
require that it be furnished with such relevant documents as it
reasonable considers necessary.
81..6 Advice of Counsel. The Trustee and the Insurance
Trustee may each consult with legal counsel (who may, but need not
be, counsel for the Employer) concerning any questions which may
arise with respect to their respective rights and duties under the
Plan, and the opinion of such counsel shall be full and complete
protection to the extent permitted by applicable law in the respect
of any action taken or omitted by the Trustee or the Insurance
Trustee, as the case may be, hereunder in accordance with the
opinion of such counsel.
81..7 Accounts. The Trustee shall keep full accounts of all
receipts and disbursements which pertain to investments in
Investment Products, and the Trustee and the Insurance Trustee
shall each keep accounts of such other transactions as it is
required to perform hereunder. Within a reasonable time following
the cost of each Plan Year, or upon its removal or resignation or
upon termination of the Trust and at such other times as may be
appropriate, each shall render to the Employer and any other
persons as may be required by law an account of its administration
of the Plan and Trust during the period since the last previous
such accounting, including such information as may be required by
law. The written approval of any account by the Employer and all
other persons to whom an account is rendered shall be final and
binding as to all matters and transactions stated or shown therein,
upon the Employer and Participants and all persons who then are or
thereafter become interested in the Trust. The failure of the
Employer or any other person to whom an account is rendered to
notify the party rendering the account within 60 days after the
receipt of any account of his or its objection to the account shall
be the equivalent of written approval. If the Employer or any
other person to whom an account is rendered files any objections
within such 60-day period with respect to any matters or
transactions stated or shown in the account and the Employer or
such other person and the party rendering the account cannot
amicably settle the questions raised by such objections, the party
rendering the account and the Employer or such person shall have
the right to have such questions settled by judicial proceedings,
although the Employer or such other person to whom an account is
rendered shall have, to the extent permitted by applicable law,
only 60 days from filing of written objection to the account to
commence legal proceedings. Nothing herein contained shall be
construed so as to deprive the Trustee or the Insurance Trustee of
the right to have a judicial settlement of its accounts. In any
proceeding for a judicial settlements of any account or for
instructions, the only necessary parties shall be the Trustee, the
Insurance Trustee, the Employer and persons to whom an account is
required by law to be rendered.
81..8 Access to Records. The Trustee and the Insurance
Trustee shall give access to their respective records with respect
to the Plan at reasonable times and on reasonable notice to any
person required by law to have access to such records.
81..9 Successors. Any corporation into which the Trustee may
merge or with which it may consolidate or any corporation resulting
from any such merger or consolidation shall be the successor of the
Trustee without the execution or filing of any additional
instrument or the performance of any further act.
81..10 Persons Dealing with Trustee or Insurance Trustee. No
person dealing with the Trustee or the Insurance Trustee shall be
bound to see to the application of any money or property paid or
delivered to such party or to inquire into the validity or
propriety of any transactions.
81..11 Resignation and Removal; Procedure. The Trustee or
the Insurance Trustee may resign at any time by giving 60 days'
written notice to the Employer and to Putnam. The Employer may
remove the Trustee or the Insurance Trustee at any time by giving
60 days' written notice to the party removed and to Putnam. In any
case of resignation or removal hereunder, the period of notice may
be reduced to such shorter period as is satisfactory to the
Trustee, the Insurance Trustee and the Employer. Notwithstanding
anything to the contrary herein, any resignation hereunder shall
take effect at the time notice thereof is given if the Employer may
no longer participate in the prototype Plan and is deemed to have
an individually designed plan at the time notice is given.
81..12 Action of Trustee Following Resignation or Removal.
When the resignation or removal of the Trustee becomes effective,
the Trustee shall perform all acts necessary to transfer the Trust
Fund to its successor. However, the Trustee may reserve such
portion of the Trust Fund as it may reasonably determine to be
necessary for payment of its fees and any taxes and expenses, and
any balance of such reserve remaining after payment of such fees,
taxes and expenses shall be paid over to its successor. The
Trustee shall have no responsibility for acts or omissions
occurring after its resignation becomes effective.
81..13 Action of Insurance Trustee Following Resignation or
Removal. When the Insurance Trustee's resignation or removal
becomes effective, the Insurance Trustee shall perform all acts
necessary to transfer ownership of the Policies to its successor.
If no successor has accepted appointment, the Policies shall be
held and owned by the Employer acting as Insurance Trustee until a
successor is appointed.
81..14 Effect of Resignation or Removal. Resignation or
removal of the Trustee or the Insurance Trustee shall not terminate
the Trust. In the event of any vacancy in the position of Trustee
(or, in a Plan having amounts invested in Policies, the position of
Insurance Trustee), whether the vacancy occurs because of the
resignation or removal of the Trustee (or the Insurance Trustee)
the Employer shall appoint a successor to fill the vacant position.
If the Employer does not appoint such a successor who accepts
appointment by the later of 60 days after notice of resignation or
removal is given or by such later date as the Trustee or the
Insurance Trustee, as the case may be, and Employer may agree in
writing to postpone the effective date of the Trustee or the
Insurance Trustee's resignation or removal, the Trustee or
Insurance Trustee may apply to a court of competent jurisdiction
for such appointment of cause the Trust to be terminated, effective
as of the date specified by the Trustee or Insurance Trustee, as
the case may be, in writing delivered to the Employer. Each
successor Trustee so appointed and accepting a trusteeship
hereunder shall have all of the rights and powers and all of the
duties and obligations of the original Trustee or Insurance
Trustee, as the case may be, under the provisions hereof, but shall
have no responsibility for acts or omissions before he becomes a
Trustee or Insurance Trustee.
81..15 Fiscal Year of Trust. The fiscal year of the Trust
will coincide with the Plan Year.
81..16 Limitation of Liability. Except as may otherwise be
required by law and other provisions of the Plan, no fiduciary of
the Plan, within the meaning of Section 3(21) of ERISA, shall be
liable for any losses incurred with respect to the management of
the Plan, nor shall he or it be liable for any acts or omissions
except those caused by his or its own negligence or bad faith in
failing to carry out his or its duties under the terms contained in
the Plan.
81..17 Indemnification. Subject to the limitations of
applicable law, the Employer agrees to indemnify and hold harmless
(i) all fiduciaries, within the meaning of ERISA Sections 3(21) and
404, and (ii) Putnam, for all liability occasioned by any act of
such party or omission to act, in good faith and without gross
negligence, and for all expenses incurred by any such party in
determining its duty or liability under ERISA with respect to any
question under the Plan.<PAGE>
ARTICLE 82. AMENDMENT
82..1 General. The Employer reserves the power at any time
or times to amend the provisions of the Plan and the Plan Agreement
to any extent and in any manner that it may deem advisable. If,
however, the Employer makes any amendment (including an amendment
occasioned by a waiver of the minimum funding requirement under
section 412(d) of the Code) other than
(a) a change in an election made in the Plan Agreement,
(b) amendments stated in the Plan Agreement which allow
the Plan to satisfy section 415 and to avoid duplication of
minimums under section 416 of the Code because of the required
aggregation of multiple plans, or
(c) 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,
the Employer shall cease to participate in this prototype Plan and
will be considered to have an individually designed plan. In that
event, Putnam shall have no further responsibility to provide to
the Employer any amendments or other material incident to the
prototype plan, and Putnam may resign immediately as Trustee and as
Recordkeeper. Any amendment shall be made by delivery to the
Trustee (and the Recordkeeper, if any) of a written instrument
executed by the Employer providing for such amendment. Upon the
delivery of such instrument to the Trustee, such instrument shall
become effective in accordance with its terms as to all
Participants and all persons having or claiming any interest
hereunder, provided, that the Employer shall not have the power:
(1) To amend the Plan in such a manner as would
cause or permit any part of the assets of the Trust to be
diverted to purposes other than the exclusive benefit of
Participants or their Beneficiaries, or as would cause or
permit any portion of such assets to revert to or become
the property of the Employer.
(2) To amend the Plan retroactively in such a
manner as would have the effect of decreasing a
Participant's accrued benefit, except that 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 (2), an amendment shall be
treated as reducing a Participant's accrued benefit if it
has the effect of reducing his Account balance, or of
eliminating an optional form of benefit with respect to
amounts attributable to contributions made performed
before the adoption of the amendment; or
(3) To amend the Plan so as to decrease the portion
of a Participant's Account balance that has become
vested, as compared to the portion that was vested, under
the terms of the Plan without regard to the amendment, as
of the later of the date the amendment is adopted or the
date it becomes effective.
(4) To amend the Plan in such a manner as would
increase the duties or liabilities of the Trustee or the
Recordkeeper unless the Trustee or the Recordkeeper
consents thereto in writing.
82..2 Delegation of Amendment Power. The Employer and all
sponsoring organizations of the Putnam Basic Plan Document delegate
to Putnam Financial Services, Inc., the power to amend the Plan
(including the power to amend this Section 18.2 to name a successor
to which such power of amendment shall be delegated), for the
purpose of adopting amendments which are certified to Putnam
Financial Services, Inc., by counsel satisfactory to it, as
necessary or appropriate under applicable law, including any
regulation or ruling issued by the United States Treasury
Department or any other federal or state department or agency;
provided that Putnam Financial Services, Inc., or such successor
may amend the Plan only if it has mailed a copy of the proposed
amendment to the Employer at its last known address as shown on its
books by the date on which it delivers a written instrument
providing for such amendment, and only if the same amendment is
made on said date to all plans in this form as to which Putnam
Financial Services, Inc., or such successor has a similar power of
amendment. If a sponsoring organization does not adopt any
amendment made by Putnam Financial Services, Inc., such sponsoring
organization shall cease to participate in this prototype Plan and
will be considered to have an individually designed plan.
<PAGE>
ARTICLE 83. TERMINATION OF THE PLAN AND TRUST
83..1 General. The Employer has established the Plan and the
Trust with the bona fide intention and expectation that
contributions will be continued indefinitely, but the Employer
shall have no obligation or liability whatsoever to maintain the
Plan for any given length of time and may discontinue contributions
under the Plan or terminate the Plan at any time by written notice
delivered to the Trustee and the Insurance Trustee, without any
liability whatsoever for any such discontinuance or termination.
83..2 Events of Termination. The Plan will terminate upon
the happening of any of the following events:
(a) Death of the Employer, if a sole proprietor, or
dissolution or termination of the Employer, unless within 60
days thereafter provision is made by the successor to the
business with respect to which the Plan was established for
the continuation of the Plan, and such continuation is
approved by the Trustee;
(b) Merger, consolidation or reorganization of the
Employer into one or more corporations or organizations,
unless the surviving corporations or organizations adopt the
Plan by an instrument in writing delivered to the Trustee
within 60 days after such a merger, consolidation and
reorganization;
(c) Sale of all or substantially all of the assets of
the Employer, unless the purchaser adopts the Plan by an
instrument in writing delivered to the Trustee within 60 days
after the sale;
(d) The institution of bankruptcy proceedings by or
against the Employer, or a general assignment by the Employer
to or for the benefit of its creditors; or
(e) Delivery of notice as provided in Section 19.1.
83..3 Effect of Termination. Notwithstanding any other
provisions of this Plan, other than Section 19.4, upon termination
of the Plan or complete discontinuance of contributions thereunder,
each Participant's Accounts will become fully vested and
nonforfeitable, and upon partial termination of the Plan, the
Accounts of each Participant affected by the partial termination
will become fully vested and nonforfeitable. The Employer shall
notify the Trustee and the Insurance Trustee in writing of such
termination, partial termination or complete discontinuance of
contributions. In the event of the complete termination of the
Plan or discontinuance of contributions, the Trustee will, after
payment of all expenses of the Trust Fund, make distribution of the
Trust asses to the Participants or other persons entitled thereto,
in such form as the Employer may direct pursuant to Article 10 or,
in the absence of such direction, in a single payment in cash or in
kind. Upon completion of such distributions under this Article,
the Trust will terminate, the Trustee and the Insurance Trustee
will be relieved from their obligations under the Trust, and no
Participant or other person will have any further claim thereunder.
83..4 Approval of Plan. Notwithstanding any other provision
of the Plan, if the Employer fails to obtain or to retain the
approval by the Internal Revenue Service of the Plan as a qualified
plan under section 401(a) of the Code, then (i) the Employer shall
promptly notify the Trustee, and (ii) the Employer may no longer
participate in the Putnam prototype plan, but will be deemed to
have an individually designed plan. If it is determined by the
Internal Revenue Service that the Plan upon its initial adoption
does not qualify under section 401(a) of the Code, all assets then
held under the Plan will be returned within one year of the denial
of initial qualification to the Participants and the Employer to
the extent attributable to their respective contributions and any
income earned thereon, but only if the application for
qualification is made by the time prescribed by law for filing the
Employer's federal income tax return for the taxable year in which
the Plan is adopted, or such later date as the Secretary of the
Treasury may prescribe. Upon such distribution, the Plan will be
considered to be rescinded and to be of no force or effect.
<PAGE>
ARTICLE 84. TRANSFERS FROM OTHER QUALIFIED PLANS; MERGERS
84..1 General. Notwithstanding any other provision hereof,
subject to the approval of the Trustee there may be transferred to
the Trustee all or any of the assets held (whether by a trustee,
custodian or otherwise) in respect of any other plan which
satisfies the applicable requirements of section 401(a) of the Code
and which is maintained for the benefit of any Employee (provided,
however, that the Employee is not a member of a class of Employees
excluded from eligibility to participate in the Plan) except that
insurance policies held in respect of such other plan shall be
transferred to the Insurance Trustee as trustee if the Employer so
determines. Any such assets so transferred shall be accompanied by
written instructions from the Employer naming the persons for whose
benefit such assets have been transferred and showing separately
the respective contributions made by the Employer and by the
Participants and the current value of the assets attributable
thereto.
84..2 Amounts Transferred. The Employer shall credit any
assets transferred pursuant to Section 20.1 to the appropriate
Accounts of the persons for whose benefit such assets have been
transferred. Any amounts credited as contributions previously made
by an employer or by such persons under such other plan shall be
treated as contributions previously made under the Plan by the
Employer or by such persons, as the case may be.
84..3 Merger or Consolidation. The Plan shall not be merged
or consolidated with any other plan, nor shall any assets or
liabilities of the Trust Fund be transferred to any other plan,
unless each Participant would receive a benefit immediately after
the transaction, if the Plan then terminated, which is equal to or
greater than the benefit he would have been entitled to receive
immediately before the transaction if the Plan had then terminated.
<PAGE>
ARTICLE 85. MISCELLANEOUS
85..1 Notice of Plan. The Plan shall be communicated to all
Participants by the Employer on or before the last day on which
such communication may be made under applicable law.
85..2 No Employment Rights. Neither the establishment of the
Plan and the Trust, nor any amendment thereof, nor the creation of
any fund or account, nor the purchase of Policies, nor the payment
of any benefits shall be construed as giving to any Participant or
any other person any legal or equitable right against the Employer,
the Trustee, or the Insurance Trustee, except as provided herein or
by ERISA; and in no event shall the terms of employment or service
of any Participant be modified or in any way be affected hereby.
85..3 Distributions Exclusively From Plan. Participants and
Beneficiaries shall look solely to the assets held in the Trust and
any Policies purchased pursuant to the Plan for the payment of any
benefits under the Plan.
85..4 No Alienation. The benefits provided hereunder shall
not be subject to alienation, assignment, garnishment, attachment,
execution or levy of any kind, and any attempt to cause such
benefits to be so subjected shall not be recognized, except as
provided in Section 12.4 or in accordance with a qualified domestic
relations order within the meaning of section 414(p) of the Code.
The Plan Administrator shall determine whether a domestic relations
order is qualified in accordance with written procedures adopted by
the Plan Administrator.
85..5 Provision of Information. The Employer, Trustee and
Insurance Trustee shall furnish to each other such information
relating to the Plan and Trust as may be required under the Code or
ERISA and any regulations issued or forms adopted by the Treasury
Department or the Labor Department or otherwise thereunder.
85..6 No Prohibited Transactions. The Employer, Trustee, and
Insurance Trustee shall, to the extent of their respective powers
and authority under the Plan, prevent the Plan from engaging in any
transaction known by that person to constitute a transaction
prohibited by section 4975 of the Code and any rules or regulations
with respect thereto.
85..7 Governing Law. The Plan shall be construed,
administered, regulated and governed in all respects under and by
the laws of the United States, and to the extent permitted by such
laws, by the laws of the Commonwealth of Massachusetts
85..8 Gender. Whenever used herein, a pronoun in the
masculine gender includes the feminine gender unless the context
clearly indicates otherwise.
SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS
Fund name: Putnam Equity Income Fund --
Class A Shares
Fiscal period ending: November 30, 1994
Inception date (if less than 10 years of performance):
TOTAL RETURN
Formula -- Average Annual Total Return: ERV = P(1+T)^n
n = Number of Time Periods 1 Year 5 Years 10 Years
P = Initial Investment $1,000 $1,000 $1,000
ERV = Ending Redeemable Value $957 $1,332 $2,404
T = Average Annual
Total Return -4.26% +5.92% +9.17*
YIELD
Formula:
Interest + Dividends - Expenses
2 (-------------------------------------------------- +1)(6) -1
POP x Average shares
Interest and Dividends $1,224,835
Expenses $270,937
Reimbursement $0
Average shares 35,973,003
NAV $8.47
Sales Charge 5.75%
POP $8.99
Yield at POP 3.57%
CLASS B SHARES
Fiscal period ending: November 30, 1994
Inception date (if less than 10 years of performance):
September 13, 1993
TOTAL RETURN
Formula -- Average Annual Total Return: ERV = P(1+T)^n
n = Number of Time Periods 1 Year 5 Years 10 Years*
P = Initial Investment $1,000 n/a $1,000
ERV = Ending Redeemable Value $968 n/a $959
T = Average Annual
Total Return -2.61% n/a -4.03%*
*Life of fund, if less than 10 years
YIELD
Formula:
Interest + Dividends - Expenses
2 (-------------------------------------------------- +1)(6) -1
POP x Average shares
Interest and Dividends $127,392
Expenses $47,847
Reimbursement 0
Average shares 3,730,947
NAV $8.45
Maximum Contingent Deferred
Sales Charge 5.0%
Yield at NAV 3.05%
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM Putnam Equity Income Fund Class A AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-END> NOV-30-1994
<INVESTMENTS-AT-COST> 341,552,006
<INVESTMENTS-AT-VALUE> 336,651,127
<RECEIVABLES> 8,059,300
<ASSETS-OTHER> 1,089
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 344,711,516
<PAYABLE-FOR-SECURITIES> 7,244,117
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,229,080
<TOTAL-LIABILITIES> 8,473,197
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 478,512,508
<SHARES-COMMON-STOCK> 35,840,982
<SHARES-COMMON-PRIOR> 37,880,313
<ACCUMULATED-NII-CURRENT> 962,796
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (138,336,106)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (4,900,879)
<NET-ASSETS> 336,238,319
<DIVIDEND-INCOME> 13,115,225
<INTEREST-INCOME> 3,083,550
<OTHER-INCOME> 0
<EXPENSES-NET> 3,746,844
<NET-INVESTMENT-INCOME> 12,451,931
<REALIZED-GAINS-CURRENT> (12,857,401)
<APPREC-INCREASE-CURRENT> (19,899,597)
<NET-CHANGE-FROM-OPS> 5,409,735
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11,953,233)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,457,816
<NUMBER-OF-SHARES-REDEEMED> (6,415,431)
<SHARES-REINVESTED> 918,284
<NET-CHANGE-IN-ASSETS> (6,812,522)
<ACCUMULATED-NII-PRIOR> (1,170,449)
<ACCUMULATED-GAINS-PRIOR> (184,364,092)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,186,967
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,746,844
<AVERAGE-NET-ASSETS> 319,602,578
<PER-SHARE-NAV-BEGIN> 8.67
<PER-SHARE-NII> .32
<PER-SHARE-GAIN-APPREC> (.18)
<PER-SHARE-DIVIDEND> (.32)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.49
<EXPENSE-RATIO> 1.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM Putnam Equity Income Fund Class B AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-END> NOV-30-1994
<INVESTMENTS-AT-COST> 341,552,006
<INVESTMENTS-AT-VALUE> 336,651,127
<RECEIVABLES> 8,059,300
<ASSETS-OTHER> 1,089
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 344,711,516
<PAYABLE-FOR-SECURITIES> 7,244,117
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,229,080
<TOTAL-LIABILITIES> 8,473,197
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 478,512,508
<SHARES-COMMON-STOCK> 3,794,221
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 336,238,319
<DIVIDEND-INCOME> 13,115,225
<INTEREST-INCOME> 3,083,550
<OTHER-INCOME> 0
<EXPENSES-NET> 3,746,844
<NET-INVESTMENT-INCOME> 12,451,931
<REALIZED-GAINS-CURRENT> (12,857,401)
<APPREC-INCREASE-CURRENT> (19,899,597)
<NET-CHANGE-FROM-OPS> 5,409,735
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (684,178)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,834,343
<NUMBER-OF-SHARES-REDEEMED> (815,497)
<SHARES-REINVESTED> 64,999
<NET-CHANGE-IN-ASSETS> (6,812,522)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,186,967
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,746,844
<AVERAGE-NET-ASSETS> 23,491,146
<PER-SHARE-NAV-BEGIN> 8.65
<PER-SHARE-NII> .27
<PER-SHARE-GAIN-APPREC> (.18)
<PER-SHARE-DIVIDEND> (.27)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.46
<EXPENSE-RATIO> 1.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
PUTNAM INVESTMENTS
(Logo)
PUTNAM EQUITY INCOME FUND
Class M Shares
Trust Certificate
Account No. Certificate No. Shares
CUSIP 746745-30-6
THIS CERTIFIES THAT
is the owner of Class M shares of
beneficial interest in Putnam Equity Income Fund, fully paid and
nonassessable, the said shares being issued, received and held
under and subject to the terms and provisions of the Agreement
and Declaration of Trust dated as of April 27, 1977, establishing
the Trust, and all amendments thereto, copies of which are on
file with the Secretary of State of The Commonwealth of
Massachusetts. The said owner by accepting this certificate
agrees to and is bound by all of the said terms and provisions.
The shares represented hereby are transferable in writing by the
owner thereof in person or by attorney upon surrender of this
certificate to the Trustees properly endorsed for transfer. This
certificate is executed on behalf of the Trustees as Trustees and
not individually and the obligations hereof are not binding upon
any of the Trustees or shareholders individually but are binding
only upon the assets and property of the Putnam Equity Income
Fund. This certificate is not valid unless countersigned by the
Investor Servicing Agent.
In Witness Whereof the Trustees of Putnam Equity Income Fund
have caused the following facsimile signatures to be affixed to
this certificate.
Dated: COUNTERSIGNED:
PUTNAM INVESTOR SERVICES
a division of Putnam Fiduciary
Trust Company
INVESTOR SERVICING AGENT
BY
FOR THE TRUSTEES AUTHORIZED SIGNATURE
(Portions of Agreement and Declaration of Trust
of Putnam Equity Income Fund
Relating to Shareholders' Rights)
ARTICLE I
Name and Definitions
(c) "Shares" means the equal proportionate transferable
units of interest into which the beneficial interest in the
Trust shall be divided from time to time or, if more than
one series or class of Shares is authorized by the Trustees,
the equal proportionate transferable units into which each
series or class of Shares shall be divided from time to
time;
(d) "Shareholder" means a record owner of Shares;
ARTICLE III
Shares
Division of Beneficial Interest
Section 1. The Shares of the Trust shall be issued in one
or more series as the Trustees may, without shareholder approval,
authorize. Each series shall be preferred over all other series
in respect of the assets allocated to that series. The
beneficial interest in each series shall at all times be divided
into Shares, without par value, each of which shall, except as
provided in the following sentence, represent an equal
proportionate interest in the series with each other Share of the
same series, none having priority or preference over another. The
Trustees may, without shareholder approval, divide the Shares of
any series into two or more classes, Shares of each such class
having such preferences and special or relative rights and
privileges (including conversion rights, if any) as the Trustees
may determine and as shall be set forth in the Bylaws. The
number of Shares authorized shall be unlimited. The Trustees may
from time to time divide or combine the Shares of any series or
class into a greater or lesser number without thereby changing
the proportionate beneficial interest in the series or class.
Ownership of Shares
Section 2. The ownership of Shares shall be recorded on the
books of the Trust or a transfer or similar agent. No
certificates certifying the ownership of Shares shall be issued
except as the Trustees may otherwise determine from time to time.
The Trustees may make such rules as they consider appropriate for
the issuance of Share Certificates, the transfer of Shares and
similar matters. The record books of the Trust as kept by the
Trust or any transfer or similar agent, as the case may be, shall
be conclusive as to who are the Shareholders of each series and
class and as to the number of Shares of each series and class
held from time to time by each Shareholder.
No Preemptive Rights
Section 4. Shareholders shall have no preemptive or other
right to subscribe to any additional Shares or other securities
issued by the Trust.
Status of Shares and Limitation of Personal Liability
Section 5. Shares shall be deemed to be personal property
giving only the rights provided in this Declaration of Trust or
the Bylaws. Every Shareholder by virtue of having become a
Shareholder shall be held to have expressly assented and agreed
to the terms of this Declaration of Trust and the Bylaws and to
have become a party hereto. The death of a Shareholder during
the continuance of the Trust shall not operate to terminate the
same nor entitle the representative of any deceased Shareholder
to an accounting or to take any action in court or elsewhere
against the Trust or the Trustees, but only to the rights of said
decedent under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any part of
the Trust property or right to call for a partition or division
of the same or for an accounting, nor shall the ownership of
Shares constitute the Shareholders partners. Neither the Trust
nor the Trustees, nor any officer, employee or agent of the Trust
shall have any power to bind personally any Shareholder, nor
except as specifically provided herein to call upon any
shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time
personally agree to pay.
ARTICLE V
Shareholders' Voting Powers and Meetings
Voting Powers
Section 1. Subject to the voting powers of one or more
classes of shares as set forth elsewhere in this Declaration of
Trust or in the Bylaws, the Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Article IV,
Section 1, (ii) for the removal of Trustees as provided in
Article IV, Section 1, (iii) with respect to any Manager as
provided in Article IV, Section 6, (iv) with respect to any
termination of this Trust to the extent and as provided in
Article IX, Section 4, (v) with respect to any amendment of this
Declaration of Trust to the extent and as provided in Article IX,
Section 7, (vi) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court
action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the
Trust or the Shareholders, and (vii) with respect to such
additional matters relating to the Trust as may be required by
this Declaration of Trust, the Bylaws or any registration of the
Trust with the Securities and Exchange Commission (or any
successor agency) or any state, or as the Trustees may consider
necessary or desirable. Each whole Share shall be entitled to
one vote as to any matter on which it is entitled to vote and
each fractional Share shall be entitled to a proportionate
fractional vote. Notwithstanding any other provision of this
Declaration of Trust, on any matter submitted to a vote of
Shareholders, all Shares of the Trust then entitled to vote shall
be voted in the aggregate as a single class without regard to
series or classes of shares, except (1) when required by the 1940
Act or when the Trustees shall have determined that the matter
affects one or more series or classes of Shares materially
differently, Shares shall be voted by individual series or class;
and (2) when the Trustees have determined that the matter affects
only the interests of one or more series or classes, then only
Shareholders of such series or classes shall be entitled to vote
thereon. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy. A proxy
with respect to Shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or prior
to exercise of the proxy the Trust receives a specific written
notice to the contrary from any one of them. A proxy purporting
to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger. Until
Shares of any series or class are issued, the Trustees may
exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the Bylaws to be
taken by Shareholders as to such series or class.
Voting Power and Meetings
Section 2. Meetings of Shareholders of any or all series or
classes may be called by the Trustees from time to time for the
purpose of taking action upon any matter requiring the vote or
authority of the Shareholders of such series or classes as herein
provided or upon any other matter deemed by the Trustees to be
necessary or desirable. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees
by mailing such notice at least seven days before such meeting,
postage prepaid, stating the time, place and purpose of the
meeting, to each Shareholder at the Shareholder's address as it
appears on the records of the Trust. If the Trustees shall fail
to call or give notice of any meeting of Shareholders for a
period of 30 days after written application by Shareholders
holding at least 10% of the then outstanding Shares of all series
and classes is entitled to vote at such meeting requesting that a
meeting be called for a purpose requiring action by the
Shareholders as provided herein or in the Bylaws, then
Shareholders holding at least 10% of the then outstanding Shares
of all series and classes entitled to vote at such meeting may
call and give notice of such meeting, and thereupon the meeting
shall be held in the manner provided for herein in case of call
thereof by the Trustees.
<PAGE>
Quorum and Required Vote
Section 3. Thirty percent of Shares entitled to vote on a
particular matter shall be a quorum for the transaction of
business on that matter at a Shareholders' meeting, except that
where any provision of law or of this Declaration of Trust
permits or requires that holders of any series or class shall
vote as an individual series or class, then thirty percent of the
aggregate number of Shares of that series or class entitled to
vote shall be necessary to constitute a quorum for the
transaction of business by that series or class. Any lesser
number shall be sufficient for adjournments. Any adjourned
session or sessions may be held, within a reasonable time after
the date set for the original meeting, without the necessity of
further notice. Except when a larger vote is required by any
provision of this Declaration of Trust or the Bylaws, or by the
1940 Act, a majority of the Shares voted shall decide any
questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Declaration of Trust
permits or requires that the holders of any series or classes
shall vote as an individual series or class, then a majority of
the Shares of that series or class voted on the matter shall
decide that matter insofar as that series or class is concerned.
Action by Written Consent
Section 4. Any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote
on the matter (or such larger proportion thereof as shall be
required by any express provision of this Declaration of Trust or
the Bylaws) consent to the action in writing and such written
consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
Additional Provisions
Section 5. The Bylaws may include further provisions not
inconsistent with this Declaration of Trust regarding
Shareholders' voting powers, the conduct of meetings and related
matters.
<PAGE>
ARTICLE VI
Distributions, Redemptions and Repurchases
Distributions
Section 1. The Trustees may each year, or more frequently
if they so determine, distribute to the Shareholders of each
series out of the assets of such series such amounts as the
Trustees may determine. Such amounts shall be distributed pro
rata to Shareholders of each series in proportion to the number
of Shares of each series held by each of them, except to the
extent otherwise required or permitted by the preferences and
special or relative rights and privileges of any classes of
Shares of that series, and any distribution to the Shareholders
of a particular class of Shares shall be made to such
Shareholders pro rata in proportion to the number of Shares of
such class held by each of them. Such distributions shall be
made in cash or Shares or a combination thereof as determined by
the Trustees. Any such distribution paid in Shares will be paid
at the net asset value thereof as determined in accordance with
the Bylaws.
Redemptions and Repurchases
Section 2. The Trust shall purchase such Shares as are
offered by any Shareholder for redemption, upon the presentation
of any certificate for the Shares to be purchased, a proper
instrument of transfer and a request directed to the Trust or a
person designated by the Trust that the Trust purchase such
Shares, or in accordance with such other procedures for
redemption as the Trustees may from time to time authorize; and
the Trust will pay therefor the net asset value thereof, as next
determined in accordance with the Bylaws. Payment for said
Shares shall be made by the Trust to the Shareholder within seven
days after the date on which the request is made. The obligation
set forth in this Section 2 is subject to the provision that in
the event that any time the New York Stock Exchange is closed for
other than customary weekends or holidays, or, if permitted by
rules of the Securities and Exchange Commission, during periods
when trading on the Exchange is restricted or during any
emergency which makes it impractical for the Trust to dispose of
its investments or to determine fairly the value of its net
assets, or during any other period permitted by order of the
Securities and Exchange Commission for the protection of
investors, such obligation may be suspended or postponed by the
Trustees. The Trust may also purchase or repurchase Shares at a
price not exceeding the net asset value of such Shares in effect
when the purchase or repurchase or any contract to purchase or
repurchase is made.
<PAGE>
Redemptions at the Option of the Trust
Section 3. The Trust shall have the right at its option and
at any time to redeem Shares of any Shareholder at the net asset
value thereof as determined in accordance with the Bylaws: (i) if
at such time such Shareholder owns fewer Shares than, or Shares
having an aggregate net asset value of less than, an amount
determined from time to time by the Trustees; or (ii) to the
extent that such Shareholder owns Shares of a particular series
or class of Shares equal to or in excess of a percentage of the
outstanding Shares of that series or class determined from time
to time by the Trustees; or (iii) to the extent that such
Shareholder owns Shares of the Trust representing a percentage
equal to or in excess of such percentage of the aggregate number
of outstanding Shares of the Trust or the aggregate net asset
value of the Trust determined from time to time by the Trustees.
ARTICLE VIII
Indemnification
Shareholders
Section 4. In case any Shareholder or former
Shareholder shall be held to be personally liable solely by
reason of his or her being or having been a Shareholder and not
because of his or her acts or omissions or for some other reason,
the Shareholder or former Shareholder (or his or her heirs,
executors, administrators or other legal representatives or in
the case of a corporation or other entity, its corporate or other
general successor) shall be entitled to be held harmless from and
indemnified against all loss and expense arising from such
liability, but only out of the assets of the particular series of
Shares of which he or she is or was a Shareholder.
ARTICLE IX
Miscellaneous
Trustees, Shareholders, etc. Not Personally Liable; Notice
Section 1. All persons extending credit to, contracting
with or having any claim against the Trust or a particular series
of Shares shall look only to the assets of the Trust or the
assets of that particular series of Shares for payment under such
credit, contract or claim, and neither the Shareholders nor the
Trustees, nor any of the Trust's officers, employees or agents,
whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect any
Trustee against any liability to which such Trustee would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of the office of Trustee.
<PAGE>
Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever executed or
done by or on behalf of the Trust or the Trustees or any of them
in connection with the Trust shall be conclusively deemed to have
been executed or done only in or with respect to their or his or
her capacity as Trustees or Trustee, and such Trustees or Trustee
shall not be personally liable thereon.
PUTNAM EQUITY INCOME FUND
CLASS M
DISTRIBUTION PLAN AND AGREEMENT
This Plan and Agreement (the "Plan") constitutes the
Distribution Plan for the Class M shares of Putnam Equity Income
Fund, a Massachusetts business trust (the "Trust"), adopted
pursuant to the provisions of Rule 12b-1 under the Investment
Company Act of 1940 (the "Act") and the related agreement between
the Trust and Putnam Mutual Funds Corp. ("PMF"). During the
effective term of this Plan, the Trust may incur expenses
primarily intended to result in the sale of its Class M shares
upon the terms and conditions hereinafter set forth:
SECTION 1. The Trust shall pay to PMF a monthly fee at the
annual rate of 1.00% of the average net asset value of the Class
M shares of the Trust, as determined at the close of each
business day during the month, to compensate PMF for services
provided and expenses incurred by it in connection with the
offering of the Trust's Class M shares, which may include,
without limitation, payments by PMF to investment dealers with
respect to Class M shares, as set forth in the then current
Prospectus or Statement of Additional Information of the Trust,
including the payment of a service fee of up to 0.25% of such net
asset value for the purpose of maintaining or improving services
provided to shareholders by PMF and investment dealers. Such
fees shall be payable for each month within 15 days after the
close of such month. A majority of the Qualified Trustees, as
defined below, may, from time to time, reduce the amount of such
payments, or may suspend the operation of the Plan for such
period or periods of time as they may determine.
SECTION 2. This Plan shall not take effect until:
(a) it has been approved by a vote of a majority of the
outstanding Class M shares of the Trust;
(b) it has been approved, together with any related
agreements, by votes of the majority (or whatever greater
percentage may, from time to time, be required by Section
12(b) of the Act or the rules and regulations thereunder)
of both (i) the Trustees of the Trust, and (ii) the
Qualified Trustees of the Trust, cast in person at a
meeting called for the purpose of voting on this Plan or
such agreement; and
(c) the Trust has received the proceeds of the initial
public offering of its Class M shares.
<PAGE>
SECTION 3.
This Plan shall continue in effect for a period
of more than one year after it takes effect only so long as such
continuance is specifically approved at least annually in the
manner provided for approval of this Plan in Section 2(b).
SECTION 4. PMF shall provide to the Trustees of the Trust,
and the Trustees shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such
expenditures were made.
SECTION 5. This Plan may be terminated at any time by vote
of a majority of the Qualified Trustees or by vote of the
majority of the outstanding Class M shares of the Trust.
SECTION 6. All agreements with any person relating to
implementation of this Plan shall be in writing, and any
agreement related to this Plan shall provide:
(a) that such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority
of the Qualified Trustees or by vote of a majority of
the outstanding Class M shares of the Trust, on not
more than 60 days' written notice to any other party
to the agreement; and
(b) that such agreement shall terminate automatically in
the event of its assignment.
SECTION 7. This Plan may not be amended to increase
materially the amount of distribution expenses permitted pursuant
to Section 1 hereof without the approval of a majority of the
outstanding Class M shares of the Trust and all material
amendments to this Plan shall be approved in the manner provided
for approval of this Plan in Section 2(b).
SECTION 8. As used in this Plan, (a) the term "Qualified
Trustees" shall mean those Trustees of the Trust who are not
interested persons of the Trust, and have no direct or indirect
financial interest in the operation of this Plan or any
agreements related to it, and (b) the term "majority of the
outstanding Class M shares of the Trust" means the affirmative
vote, at a duly called and held meeting of Class M shareholders
of the Trust, (i) of the holders of 67% or more of the Class M
shares of the Trust present (in person or by proxy) and entitled
to vote at such meeting, if the holders of more than 50% of the
outstanding Class M shares of the Trust entitled to vote at such
meeting are present in person or by proxy, or (ii) of the holders
of more than 50% of the outstanding Class M shares of the Trust
entitled to vote at such meeting, whichever is less, and (c) the
terms "assignment" and "interested person" shall have the
respective meanings specified in the Act and the rules and
regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission.
SECTION 9. A copy of the Agreement and Declaration of
Trust of the Trust is on file with the Secretary of State 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 or arising out of this instrument are not binding upon any of
the Trustees, officers or shareholders individually but are
binding only upon the assets and property of the Trust.
Executed as of November 28, 1994.
PUTNAM MUTUAL FUNDS CORP. PUTNAM EQUITY INCOME FUND
/s/ William N. Shiebler /s/ Charles E. Porter
By: ---------------------- By: --------------------------
William N. Shiebler Charles E. Porter
President Executive Vice President
PUTNAM EQUITY INCOME FUND
--------------------
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
This AMENDED AND RESTATED AGREEMENT AND DECLARATION OF
TRUST made at Boston, Massachusetts, this 9th day of September,
1993, hereby amends and restates in its entirety the Agreement
and Declaration of Trust of this Trust dated April 27, 1977, as
heretofore amended, by the Trustees hereunder, and by the holders
of shares of beneficial interest issued or to be issued hereunder
as hereinafter provided.
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the
business of an investment company; and
WHEREAS, the Trustees have agreed to manage all property
coming into their hands as trustees of a Massachusetts business
trust in accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will
hold all cash, securities and other assets, which they may from
time to time acquire in any manner as Trustees hereunder IN TRUST
to manage and dispose of the same upon the following terms and
conditions for the pro rata benefit of the holders from time to
time of Shares in this Trust as hereinafter set forth.
ARTICLE I
Names and Definitions
Name
Section 1. This Trust shall be known as "Putnam Equity
Income Fund", and the Trustees shall conduct the business of the
Trust under that name or any other name as they may from time to
time determine.<PAGE>
Definitions
Section 2. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business
trust established by this Agreement and Declaration of
Trust, as amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust named
herein or elected in accordance with Article IV;
(c) "Shares" means the equal proportionate units of
interest into which the beneficial interest in the Trust
shall be divided from time to time or, if more than one
class of Shares is authorized by the Trustees, the equal
proportionate transferable units into which each class of
Shares shall be divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act
of 1940 and the Rules and Regulations thereunder, all as
amended from time to time;
(f) The terms "Affiliated Person", "Assignment",
"Commission", "Interested Person", "Principal Underwriter"
and "Majority Shareholder Vote" (the 67% or 50%
requirement of the third sentence of Section 2(a)(42) of
the 1940 Act, whichever may be applicable) shall have the
meanings given them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Amended and
Restated Agreement and Declaration of Trust as amended or
restated from time to time;
(h) "Bylaws" shall mean the Bylaws of the Trust as
amended from time to time; and
(i) The term "class" or "class of Shares" refers to the
division of Shares into two or more classes as provided in
Article III, Section 1 hereof.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a managed
investment primarily in securities, including, without
limitation, the buying and selling of options, warrants, puts and
calls and any other instruments commonly known as securities.
ARTICLE III
Shares
Division of Beneficial Interest
Section 1. The beneficial interest in the Trust shall at
all times be divided into Shares, without par value, each of
which shall, except as provided in the following sentence,
represent an equal proportionate interest in the Trust with each
other Share, none having priority or preference over another.
The Trustees may, without Shareholder approval, divide the Shares
into two or more classes, Shares of each such class having such
preferences and special or relative rights and privileges
(including conversion rights, if any) as the Trustees may
determine and as shall be set forth in the Bylaws. The number of
Shares authorized shall be unlimited. The Trustees may from time
to time divide or combine the Shares of any class into a greater
or lesser number without thereby changing the proportionate
beneficial interest in the class.
Ownership of Shares
Section 2. The ownership of Shares shall be recorded on
the books of the Trust or a transfer or similar agent. No
certificates certifying the ownership of Shares shall be issued
except as the Trustees may otherwise determine from time to time.
The Trustees may make such rules as they consider appropriate for
the issuance of Share certificates, the transfer of Shares and
similar matters. The record books of the Trust as kept by the
Trust or any transfer or similar agent, as the case may be, shall
be conclusive as to who are the Shareholders of each class and as
to the number of Shares of each class held from time to time by
each Shareholder.
Investments in the Trust
Section 3. The Trustees shall accept investments in the
Trust from such persons and on such terms and for such
consideration, which may consist of cash or tangible or
intangible property or a combination thereof, as they from time
to time authorize.
No Preemptive Rights
Section 4. Shareholders shall have no preemptive or other
right to subscribe to any additional Shares or other securities
issued by the Trust.
<PAGE>
Status of Shares and Limitation of Personal Liability
Section 5. Shares shall be deemed to be personal property
giving only the rights provided in this Declaration of Trust or
the Bylaws. Every Shareholder by virtue of having become a
Shareholder shall be held to have expressly assented and agreed
to the terms of this Declaration of Trust and the Bylaws and to
have become a party hereto. The death of a Shareholder during
the continuance of the Trust shall not operate to terminate the
same nor entitle the representative of any deceased Shareholder
to an accounting or to take any action in court or elsewhere
against the Trust or the Trustees, but only to the rights of said
decedent under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any part of
the Trust property or right to call for a partition or division
of the same or for an accounting, nor shall the ownership of
Shares constitute the Shareholders partners. Neither the Trust
nor the Trustees, nor any officer, employee or agent of the Trust
shall have any power to bind personally any Shareholder, nor
except as specifically provided herein to call upon any
Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time
personally agree to pay.
ARTICLE IV
The Trustees
Election
Section 1. A Trustee may be elected either by the
Trustees or by the Shareholders. There shall not be less than
three Trustees. The number of Trustees shall be fixed by the
Trustees. Each Trustee elected by the Trustees or the
Shareholders shall serve until he or she retires, resigns, is
removed or dies or until the next meeting of Shareholders called
for the purpose of electing Trustees and until the election and
qualification of his or her successor. At any meeting called for
the purpose, a Trustee may be removed by vote of two-thirds of
the outstanding Shares.
Effect of Death, Resignation, etc. of a Trustee
Section 2. The death, declination, resignation,
retirement, removal, or incapacity of the Trustees, or any one of
them, shall not operate to annul the Trust or to revoke any
existing agency created pursuant to the terms of this Declaration
of Trust.
<PAGE>
Powers
Section 3. Subject to the provisions of this Declaration
of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient
to carry out that responsibility. Without limiting the
foregoing, the Trustees may adopt Bylaws not inconsistent with
this Declaration of Trust providing for the conduct of the
business of the Trust and may amend and repeal them to the extent
that such Bylaws do not reserve that right to the Shareholders;
they may fill vacancies in or add to their number, and may elect
and remove such officers and appoint and terminate such agents as
they consider appropriate; they may appoint from their own
number, and terminate, any one or more committees consisting of
two or more Trustees, including an executive committee which may,
when the Trustees are not in session, exercise some or all of the
power and authority of the Trustees as the Trustees may
determine; they may employ one or more custodians of the assets
of the Trust and may authorize such custodians to employ
subcustodians and to deposit all or any part of such assets in a
system or systems for the central handling of securities, retain
a transfer agent or a Shareholder servicing agent, or both,
provide for the distribution of Shares by the Trust, through one
or more principal underwriters or otherwise, set record dates for
the determination of Shareholders with respect to various
matters, and in general delegate such authority as they consider
desirable to any officer of the Trust, to any committee of the
Trustees and to any agent or employee of the Trust or to any such
custodian or underwriter.
Without limiting the foregoing, the Trustees shall have
power and authority:
(a) To invest and reinvest cash, and to hold cash
uninvested;
(b) To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the
assets of the Trust;
(c) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or
property; and to execute and deliver proxies or powers of
attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power
and discretion with relation to securities or property as
the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of
securities;
<PAGE>
(e) To hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or
other negotiable form, or in the name of the Trustees or
of the Trust or in the name of a custodian or subcustodian
or other depositary or a nominee or nominees or otherwise;
(f) To the extent necessary or appropriate to give effect
to the preferences and special or relative rights and
privileges of any classes of Shares, to allocate assets,
liabilities, income and expenses of the Trust to a
particular class of Shares or to apportion the same among
two or more classes of Shares;
(g) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation
or issuer any security of which is held in the Trust; to
consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or issuer, and to pay
calls or subscriptions with respect to any security held
in the Trust;
(h) To join with other security holders in acting through
a committee, depositary, voting trustee or otherwise, and
in that connection to deposit any security with, or
transfer any security to, any such committee, depositary
or trustee, and to delegate to them such power and
authority with relation to any security (whether or not so
deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of
the expenses and compensation of such committee,
depositary or trustee as the Trustees shall deem proper;
(i) To compromise, arbitrate or otherwise adjust claims
in favor of or against the Trust or any matter in
controversy, including but not limited to claims for
taxes;
(j) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(k) To borrow funds;
(l) To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of
guaranty or suretyship, or otherwise assume liability for
payment thereof; and to mortgage and pledge the Trust
property or any part thereof to secure any of or all such
obligations;
<PAGE>
(m) To purchase and pay for entirely out of Trust
property such insurance as they may deem necessary or
appropriate for the conduct of the business, including,
without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on
its portfolio investments, and insurance policies insuring
the Shareholders, Trustees, officers, employees, agents,
investment advisers or managers, principal underwriters,
or independent contractors of the Trust individually
against all claims and liabilities of every nature arising
by reason of holding, being or having held any such office
or position, or by reason of any action alleged to have
been taken or omitted by any such person as Shareholder,
Trustee, officer, employee, agent, investment adviser or
manager, principal underwriter, or independent contractor,
including any action taken or omitted that may be
determined to constitute negligence, whether or not the
Trust would have the power to indemnify such person
against such liability; and
(n) To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and
carry out pension, profit-sharing, share bonus, share
purchase, savings, thrift and other retirement, incentive
and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a
means of providing such retirement and other benefits, for
any or all of the Trustees, officers, employees and agents
of the Trust.
The Trustees shall not in any way be bound or limited by
any present or future law or custom in regard to investments by
trustees. Except as otherwise provided herein or from time to
time in the Bylaws, any action to be taken by the Trustees may be
taken by a majority of the Trustees present at a meeting of
Trustees (a quorum being present), within or without
Massachusetts, including any meeting held by means of a
conference telephone or other communications equipment by means
of which all persons participating in the meeting can hear each
other at the same time and participation by such means shall
constitute presence in person at a meeting, or by written
consents of a majority of the Trustees then in office.
Payment of Expenses by Trust
Section 4. The Trustees are authorized to pay or to cause
to be paid out of the principal income of the Trust, or partly
out of principal and partly out of income, as they deem fair, all
expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, or in connection with the
management thereof, including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of
the Trust's officers, employees, investment adviser or manager,
principal underwriter, auditor, counsel, custodian, transfer
agent, Shareholder servicing agent, and such other agents or
independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur.
Ownership of Assets of the Trust
Section 5. Title to all of the assets of the Trust shall
at all times be considered as vested in the Trustees.
Advisory, Management and Distribution
Section 6. Subject to a favorable Majority Shareholder
Vote, the Trustees may, at any time and from time to time,
contract for exclusive or nonexclusive advisory and/or management
services with any corporation, trust, association or other
organization (the "Manager"), every such contract to comply with
such requirements and restrictions as may be set forth in the
Bylaws; and any such contract may contain such other terms
interpretive of or in addition to said requirements and
restrictions as the Trustees may determine, including, without
limitation, authority to determine from time to time what
investments shall be purchased, held, sold or exchanged and what
portion, if any, of the assets of the Trust shall be held
uninvested and to make changes in the Trust's investments. The
Trustees may also, at any time and from time to time, contract
with the Manager or any other corporation, trust, association or
other organization, appointing it exclusive or nonexclusive
distributor or principal underwriter for the Shares, every such
contract to comply with such requirements and restrictions as may
be set forth in the Bylaws; and any such contract may contain
such other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the
Trust is a shareholder, director, officer, partner,
trustee, employee, manager, adviser, principal underwriter
or distributor or agent of or for any corporation, trust,
association, or other organization, or of or for any
parent or affiliate of any organization, with which an
advisory or management contract, or principal
underwriter's or distributor's contract, or transfer,
Shareholder servicing or other agency contract may have
been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust, or that
<PAGE>
(ii) any corporation, trust, association or other
organization with which an advisory or management contract
or principal underwriter's or distributor's contract, or
transfer, Shareholder servicing or other agency contract
may have been or may hereafter be made also has an
advisory or management contract, or principal
underwriter's or distributor's contract or transfer,
Shareholder servicing or other agency contract with one or
more other corporations, trusts, associations, or other
organizations, or has other businesses or interests
shall not affect the validity of any such contract or disqualify
any Shareholder, Trustee or officer of the Trust from voting upon
or executing the same or create any liability or accountability
to the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Voting Powers
Section 1. Subject to the voting powers of one or more
classes of Shares as set forth elsewhere in this Declaration of
Trust or in the Bylaws, the Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Article IV,
Section 1, (ii) for the removal of Trustees as provided in
Article IV, Section 1, (iii) with respect to any Manager as
provided in Article IV, Section 6, (iv) with respect to any
termination of this Trust to the extent and as provided in
Article IX, Section 4, (v) with respect to any amendment of this
Declaration of Trust to the extent and as provided in Article IX,
Section 7, (vi) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court
action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the
Trust or the Shareholders, and (vii) with respect to such
additional matters relating to the Trust as may be required by
this Declaration of Trust, the Bylaws or any registration of the
Trust with the Securities and Exchange Commission (or any
successor agency) or any state, or as the Trustees may consider
necessary or desirable. Each whole share shall be entitled to
one vote as to any matter on which it is entitled to vote and
each fractional Share shall be entitled to a proportionate
fractional vote. On any matter submitted to a vote of
Shareholders, all Shares of the Trust then entitled to vote
shall, except as otherwise provided in the Bylaws, be voted in
the aggregate as a single class without regard to classes of
shares, except (1) when required by the 1940 Act or when the
Trustees shall have determined that the matter affects one or
more classes of Shares materially differently, Shares shall be
voted by individual class; and (2) when the Trustees have
determined that the matter affects only the interests of one or
more classes, then only Shareholders of such classes shall be
entitled to vote thereon. There shall be no cumulative voting in
the election of Trustees. Shares may be voted in person or by
proxy. A proxy with respect to Shares held in the name of two or
more persons shall be valid if executed by any one of them unless
at or prior to exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on the
challenger. Until Shares of any class are issued, the Trustees
may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the Bylaws to be
taken by Shareholders as to such class.
Voting Power and Meetings
Section 2. Meetings of Shareholders of any or all classes
may be called by the Trustees from time to time for the purpose
of taking action upon any matter requiring the vote or authority
of the Shareholders of such classes as herein provided or upon
any other matter deemed by the Trustees to be necessary or
desirable. Written notice of any meeting of Shareholders shall
be given or caused to be given by the Trustees by mailing such
notice at least seven days before such meeting, postage prepaid,
stating the time, place and purpose of the meeting to each
Shareholder entitled to vote at such meeting at the Shareholder's
address as it appears on the records of the Trust. If the
Trustees shall fail to call or give notice of any meeting of
Shareholders for a period of 30 days after written application by
Shareholders holding at least 10% of the then outstanding Shares
of all classes entitled to vote at such meeting requesting that a
meeting be called for a purpose requiring action by the
Shareholders as provided herein or in the Bylaws, then
Shareholders holding at least 10% of the then outstanding Shares
of all classes entitled to vote at such meeting may call and give
notice of such meeting and thereupon the meeting shall be held in
the manner provided for herein in case of call thereof by the
Trustees.
Quorum and Required Vote
Section 3. Thirty percent of Shares entitled to vote on
a particular matter shall be a quorum for the transaction of
business on that matter at a Shareholders' meeting, except that
where any provision of law or of this Declaration of Trust or the
Bylaws requires that holders of any class shall vote as an
individual class, then thirty percent of the aggregate number of
Shares of that class entitled to vote shall be necessary to
constitute a quorum for the transaction of business by that
class. Any lesser number shall be sufficient for adjournments.
Any adjourned session or sessions may be held, within a
reasonable time after the date set for the original meeting,
without the necessity of further notice. Except when a larger
vote is required by any provision of law or of this Declaration
of Trust or the Bylaws, a majority of the Shares voted shall
decide any questions and a plurality shall elect a Trustee,
provided that where any provision of law or of this Declaration
of Trust or the Bylaws requires that the holders of any class
shall vote as an individual class, then a majority of the Shares
of that class voted on the matter (or a plurality with respect to
the election of a Trustee) shall decide that matter insofar as
that class is concerned.
Action by Written Consent
Section 4. Any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote
on the matter (or such larger proportion thereof as shall be
required by any express provision of this Declaration of Trust or
the Bylaws) consent to the action in writing and such written
consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
Additional Provisions
Section 5. The Bylaws may include further provisions not
inconsistent with this Declaration of Trust, regarding
Shareholders' voting powers, the conduct of meetings and related
matters.
ARTICLE VI
Distributions, and Redemptions and Repurchases
Distributions
Section 1. The Trustees may each year, or more frequently
if they so determine, distribute to the Shareholders out of the
assets of the Trust such amounts as the Trustees may determine.
Such amounts shall be distributed pro rata to Shareholders in
proportion to the number of Shares held by each of them, except
to the extent otherwise required or permitted by the preferences
and special or relative rights and privileges of any classes of
Shares of the Trust, and any distribution to the Shareholders of
a particular class of Shares shall be made to such Shareholders
pro rata in proportion to the number of Shares of such class held
by each of them. Such distributions shall be made in cash or
Shares or a combination thereof as determined by the Trustees.
Any such distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with the Bylaws.
<PAGE>
Redemptions and Repurchases
Section 2. The Trust shall purchase such Shares as are
offered by any Shareholder for redemption, upon the presentation
of any certificate for the Shares to be purchased, a proper
instrument of transfer and a request directed to the Trust or a
person designated by the Trust that the Trust purchase such
Shares or in accordance with such other procedures for redemption
as the Trustees may from time to time authorize; and the Trust
will pay therefor the net asset value thereof, as next determined
in accordance with the Bylaws. Payment for said Shares shall be
made by the Trust to the Shareholder within seven days after the
date on which the request is made. The obligation set forth in
this Section 2 is subject to the provision that in the event that
any time the New York Stock Exchange is closed for other than
customary weekends or holidays, or if permitted by the rules of
the Securities and Exchange Commission, during periods when
trading on the Exchange is restricted or during any emergency
which makes it impractical for the Trust to dispose of its
investments or to determine fairly the value of its net assets,
or during any other period permitted by order of the Securities
and Exchange Commission for the protection of investors, such
obligation may be suspended or postponed by the Trustees. The
Trust may also purchase or repurchase Shares at a price not
exceeding the net asset value of such Shares in effect when the
purchase or repurchase or any contract to purchase or repurchase
is made.
Redemptions at the Option of the Trust
Section 3. The Trust shall have the right at its option
and at any time to redeem Shares of any Shareholder at the net
asset value thereof as determined in accordance with the Bylaws:
(i) if at such time such Shareholder owns fewer Shares than, or
Shares having an aggregate net asset value of less than, an
amount determined from time to time by the Trustees; or (ii) to
the extent that such Shareholder owns Shares equal to or in
excess of a percentage of the Shares determined from time to time
by the Trustees.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Compensation
Section 1. The Trustees as such shall be entitled to
reasonable compensation from the Trust; they may fix the amount
of their compensation. Nothing herein shall in any way prevent
the employment of any Trustee for advisory, management, legal,
accounting, investment banking or other services and payment for
the same by the Trust.
<PAGE>
Limitation of Liability
Section 2. The Trustees shall not be responsible or
liable in any event for any neglect or wrongdoing of any officer,
agent, employee, Manager or principal underwriter of the Trust,
nor shall any Trustee be responsible for the act or omission of
any other Trustee, but nothing herein contained shall protect any
Trustee against any liability to which he or she would otherwise
be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his or her office.
Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever executed or
done by or on behalf of the Trust or the Trustees or any of them
in connection with the Trust shall be conclusively deemed to have
been executed or done only in or with respect to their or his or
her capacity as Trustees or Trustee, and such Trustees or Trustee
shall not be personally liable thereon.
ARTICLE VIII
Indemnification
Trustees, Officers, etc.
Section 1. The Trust shall indemnify each of its Trustees
and officers (including persons who serve at the Trust's request
as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or
otherwise) (hereinafter referred to as a "Covered Person")
against all liabilities and expenses, including but not limited
to amounts paid in satisfaction of judgments, in compromise or as
fines and penalties, and counsel fees, reasonably incurred by any
Covered Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a party
or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or
having been such a Trustee or officer, except with respect to any
matter as to which such Covered Person shall have been finally
adjudicated in any such action, suit or other proceeding (a) not
to have acted in good faith in the reasonable belief that such
Covered Person's action was in the best interests of the Trust or
(b) to be liable to the Trust or its Shareholders by reasons of
wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered
Person's office. Expenses, including counsel fees so incurred by
any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or
penalties), shall be paid from time to time by the Trust in
advance to the final disposition of any such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such
Covered Person, to repay amounts so paid to the Trust if it is
ultimately determined that indemnification of such expenses is
not authorized under this Article, provided, however, that either
(a) such Covered Person shall have provided appropriate security
for such undertaking, (b) the Trust shall be insured against
losses arising out of any such advance payments or (c) either a
majority of the disinterested Trustees acting on the matter
(provided that a majority of the disinterested Trustees then in
office act on the matter), or independent legal counsel in a
written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a full trial type
inquiry), that there is reason to believe that such Covered
Person will be found entitled to indemnification under this
Article.
Compromise Payment
Section 2. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or otherwise)
without an adjudication by a court, or by any other body before
which the proceeding was brought, that such Trustee, or officer
either (a) did not act in good faith in the reasonable belief
that his or her action was in the best interests of the Trust or
(b) is liable to the Trust or its Shareholders by reason of
wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her
office, indemnification shall be provided if (a) approved as in
the best interests of the Trust, after notice that it involved
such indemnification, by at least a majority of the disinterested
Trustees acting on the matter (provided that a majority of the
disinterested Trustees then in office act on the matter) upon a
determination, based upon a review of readily available facts (as
opposed to a full trial type inquiry), that such Trustee or
officer acted in good faith in the reasonable belief that his or
her action was in the best interests of the Trust and is not
liable to the Trust or its Shareholders by reasons of wilful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office, or (b)
there has been obtained an opinion in writing of independent
legal counsel, based upon a review of readily available facts (as
opposed to a full trial type inquiry), to the effect that such
Covered Person appears to have acted in good faith in the
reasonable belief that his or her action was in the best
interests of the Trust and that such indemnification would not
protect such person against any liability to the Trust to which
such person would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of office. Any approval
pursuant to this Section shall not prevent the recovery from any
Covered Person of any amount paid to such Covered Person in
accordance with this Section as indemnification if such Covered
Person is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable
belief that such Covered Person's action was in the best
interests of the Trust or to have been liable to the Trust or its
shareholders by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
Indemnification Not Exclusive
Section 3. The right of indemnification hereby provided
shall not be exclusive of or affect any other rights to which any
such Covered Person may be entitled. As used in this Article
VIII, the term "Covered Person" shall include such person's
heirs, executors and administrators and a "disinterested Trustee"
is a Trustee who is not an "interested person" of the Trust as
defined in Section 2(a)(19) of the Investment Company Act of
1940, as amended (or who has been exempted from being an
"interested person" by any rule, regulation or order of the
Securities and Exchange Commission) and against whom none of such
actions, suits or other proceedings or another action, suit or
other proceeding on the same or similar grounds is then or has
been pending. Nothing contained in this Article shall affect any
rights to indemnification to which personnel of the Trust, other
than Trustees and officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of any such
person.
Shareholders
Section 4. In case any Shareholder or former Shareholder
shall be held to be personally liable solely by reason of his or
her being or having been a Shareholder and not because of his or
her acts or omissions or for some other reason, the Shareholder
or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets of the Trust to be
held harmless from and indemnified against all loss and expense
arising from such liability.
ARTICLE IX
Miscellaneous
Trustees, Shareholders, etc. Not Personally Liable; Notice
Section 1. All persons extending credit to, contracting
with or having any claim against the Trust shall look only to the
assets of the Trust for payment under such credit, contract or
claim; and neither the Shareholders nor the Trustees, nor any of
the Trust's officers, employees or agents, whether past, present
or future, shall be personally liable therefor. Nothing in this
Declaration of Trust shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by
reason of wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the
office of Trustee.
Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers or
officer shall give notice that this Declaration of Trust is on
file with the Secretary of State of The Commonwealth of
Massachusetts and shall recite that the same was executed or made
by or on behalf of the Trust or by them as Trustee or Trustees or
as officer or officers and not individually and that the
obligations of such instrument are not binding upon any of them
or the Shareholders individually but are binding only upon the
assets and property of the Trust, and may contain such further
recital as he or she or they may deem appropriate, but the
omission thereof shall not operate to bind any Trustee or
Trustees or officers or officer or Shareholders individually.
Trustee's Good Faith Action, Expert Advice, No Bond or Surety
Section 2. The exercise by the Trustees of their powers
and discretions hereunder shall be binding upon everyone
interested. A Trustee shall be liable for his or her own wilful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee, and
for nothing else, and shall not be liable for errors of judgment
or mistakes of fact or law. The Trustees may take advice of
counsel or other experts with respect to the meaning and
operation of this Declaration of Trust, and shall be under no
liability for any act or omission in accordance with such advice
or for failing to follow such advice. The Trustees shall not be
required to give any bond as such, nor any surety if a bond is
required.
Liability of Third Persons Dealing with Trustees
Section 3. No person dealing with the Trustees shall be
bound to make any inquiry concerning the validity of any
transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the
Trust or upon its order.
Duration and Termination of Trust
Section 4. Unless terminated as provided herein, the
Trust shall continue without limitation of time. The Trust may
be terminated at any time by vote of Shareholders holding at
least 66 2/3% of the Shares entitled to vote or by the Trustees
by written notice to the Shareholders.
<PAGE>
Upon termination, after paying or otherwise providing for
all charges, taxes, expenses and liabilities, whether due or
accrued or anticipated as may be determined by the Trustees, the
Trust shall in accordance with such procedures as the Trustees
consider appropriate reduce the remaining assets to distributable
form in cash or shares or other securities, or any combination
thereof, and distribute the proceeds to the Shareholders, ratably
according to the number of Shares held by the several
Shareholders on the date of termination, except to the extent
otherwise required or permitted by the preferences and special or
relative rights and privileges of any classes of Shares of the
Trust, provided that any distribution to the Shareholders of a
particular class of Shares shall be made to such Shareholders pro
rata in proportion to the number of Shares of such class held by
each of them.
Filing of Copies, References, Headings
Section 5. The original or a copy of this instrument and
of each amendment hereto shall be kept at the office of the Trust
where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the
Trust with the Secretary of State of The Commonwealth of
Massachusetts and with the Boston City Clerk, as well as any
other governmental office where such filing may from time to time
be required. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any
such amendments have been made and as to any matters in
connection with the Trust hereunder; and, with the same effect as
if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any
such amendments. In this instrument and in any such amendment,
references to this instrument, and all expressions like "herein",
"hereof" and "hereunder", shall be deemed to refer to this
instrument as amended or affected by any such amendments.
Headings are placed herein for convenience of reference only and
shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this instrument. This
instrument may be executed in any number of counterparts each of
which shall be deemed an original.
Applicable Law
Section 6. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to
be governed by and construed and administered according to the
laws of said Commonwealth. The Trust shall be of the type
commonly called a Massachusetts business trust and, without
limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust.
<PAGE>
Amendments
Section 7. This Declaration of Trust may be amended at
any time by an instrument in writing signed by a majority of the
then Trustees when authorized to do so by vote of Shareholders
holding a majority of the Shares entitled to vote, except that an
amendment which in the determination of the Trustees shall affect
the holders of one or more classes of Shares but not the holders
of all outstanding classes shall be authorized by vote of the
Shareholders holding a majority of the Shares entitled to vote of
each class affected and no vote of Shareholders of a class not
affected shall be required. Amendments having the purpose of
changing the name of the Trust or of supplying any omission,
curing any ambiguity or curing, correcting or supplementing any
defective or inconsistent provision contained herein shall not
require authorization by Shareholder vote.
IN WITNESS WHEREOF, the undersigned, being a majority of
the Trustees of the Trust, have hereunto set their hands and
seals in the City of Boston, Massachusetts for themselves and
their assigns; as of the day and year first above written.
/s/ George Putnam /s/ Robert E. Patterson
------------------------- -------------------------
George Putnam Robert E. Patterson
/s/ William F. Pounds /s/ Donald S. Perkins
-------------------------- -------------------------
William F. Pounds Donald S. Perkins
/s/ Hans H. Estin /s/ George Putnam, III
-------------------------- -------------------------
Hans H. Estin George Putnam, III
/s/ John A. Hill /s/ A.J.C. Smith
-------------------------- ------------------------
John A. Hill A.J.C. Smith
/s/ Elizabeth T. Kennan /s/ W. Nicholas Thorndike
-------------------------- ------------------------
Elizabeth T. Kennan W. Nicholas Thorndike
/s/ Lawrence J. Lasser
--------------------------
Lawrence J. Lasser
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. Boston, September 9, 1993
Then personally appeared each of the above named Trustees
of Putnam Equity Income Fund and acknowledged the foregoing
instrument to be his or her free act and deed, before me,
/s/ Anne B. McCarthy
------------------------
Notary Public
My commission expires:
10/25/96
The address of the Trust is One Post Office Square, Boston,
Massachusetts 02109
