<PAGE>
File No: 2-34540;
811-1935.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. -----
Post-Effective Amendment No. 35 X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 X
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Amendment No. 21 X
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(Check appropriate box or boxes.)
EAGLE GROWTH SHARES, INC.
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(Exact Name of Registrant as Specified in Charter)
1200 North Federal Highway, Suite 424, Boca Raton, Florida 33432
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code 407-395-2155
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Ronald F. Rohe, Vice President
Eagle Growth Shares, Inc.
1200 North Federal Highway, Suite 424, Boca Raton, Florida 33432
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(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering April 1, 1996
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It is proposed that this filing will become effective (check
appropriate box)
_______ immediately upon filing pursuant to paragraph (b)
___X___ on April 1, 1996 pursuant to paragraph (b)
_______ 60 days after filing pursuant to paragraph (a)
_______ on pursuant to paragraph (a) of rule 485
EXHIBIT INDEX LOCATED ON PAGE 50
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FORM N-1A
CROSS REFERENCE SHEET
(as required by Rule 404)
FORM N-lA PART A ITEM NO. PROSPECTUS LOCATION
- ------------------------- -------------------
Item 1. Cover Page....................... Cover Page
Item 2. Synopsis......................... Expenses of the Fund
Item 3. Condensed Financial Information.. Financial Highlights;
Performance
Item 4. General Description of........... Cover Page; Invest-
Registrant ment Objectives and
Policies; Options
Transactions; Futures
Contracts; Investment
Restrictions
Item 5. Management of the Fund........... Management of the
Fund
Item 6. Capital Stock and Other
Securities....................... Dividends, Capital
Gains Distributions,
and Taxes; Rights of
Ownership
Item 7. Purchase of Securities Being
Offered.......................... Purchase of Shares
Item 8. Redemption or Repurchase......... Repurchase and
Redemption of Shares
Item 9. Pending Legal Proceedings........ Not Applicable
FORM N-1A PART B ITEM NO. LOCATION IN STATEMENT
- ------------------------- OF ADDITIONAL INFORMATION
-------------------------
Item 10. Cover Page....................... Cover Page
Item 11. Table of Contents................ Table of Contents
Item 12. General Information and
History.......................... Not Applicable
Item 13. Investment Objectives and
Policies......................... Investment Objectives
and Policies; Options
Transactions; Futures
Contracts;Investment
Limitations
<PAGE>
FORM N-1A PART B ITEM NO. LOCATION IN STATEMENT
- ------------------------- OF ADDITIONAL INFORMATION
-------------------------
Item 14. Management of the Fund........... Management of the
Fund
Item 15. Control Persons and Principal
Holders of Securities............ Not Applicable
Item 16. Investment Advisory and
Other Services................... Management of the
Fund
Item 17. Brokerage Allocation and Other
Practices........................ Management of the
Fund
Item 18. Capital Stock and Other
Securities....................... Prospectus-Rights
of Ownership
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered .......Letter of Intent;
Right of
Accumulation; Group
Discount Privilege;
Automatic Investment
Plan; Prospectus-
Account Reinstatement
Privilege; Check
Withdrawal Plan;
Further Information
Regarding Sale of
Shares; Redemption
and Repurchase of
Shares
Item 20. Tax Status....................... Prospectus-Dividends,
Capital Gains
Distributions, and
Taxes
Item 21. Underwriters..................... Underwriter
Item 22. Calculations of Performance Data. Calculation of
Performance Data;
Comparisons and
Advertisements
Item 23. Financial Statements............. Financial Statements
<PAGE>
FORM N-1A PART C ITEM NO. LOCATION IN PART C
- ------------------------- ------------------
Item 24. Financial Statements and
Exhibits......................... Financial Statements
and Exhibits
Item 25. Persons Controlled By or Under
Common Control with Registrant... Persons Controlled by
or under Common
Control with
Registrant
Item 26. Number of Holders of Securities.. Number of Holders
of Securities
Item 27. Indemnification.................. Indemnification
Item 28. Business and Other Connections
of Investment Advisor............ Business and Other
Connections of
Investment Advisor
Item 29. Principal Underwriters........... Principal Under-
writers
Item 30. Location of Accounts and Records. Location of
Accounts and
Records
Item 31. Management Services.............. Management Services
Item 32. Undertakings..................... Undertakings
<PAGE>
PART A
EAGLE GROWTH SHARES, INC.
1200 North Federal Highway April 1, 1996
Suite 424
Boca Raton, Florida 33432
407-395-2155
EAGLE GROWTH SHARES, INC. is an open-end, diversified investment company
(a mutual fund) seeking growth of capital.
This goal will be sought by investing in securities which appear to have
potential for capital appreciation. The Fund's portfolio will usually be
comprised of common stocks and securities convertible into common stocks of
seasoned companies whose prospects are believed to be above average. In
addition, the Fund may own securities of newer, less-seasoned companies and
companies representing so-called "special situations." Normally, investments
in fixed income securities will not be made except for defensive purposes, and
to employ temporarily uncommitted cash balances, or where such investments
appear to offer opportunities for capital appreciation.
This prospectus contains information which you should know before you
invest and should be retained for future reference. A Statement of Additional
Information (dated April 1, 1996) about the Fund, which is incorporated in
this prospectus by reference, has been filed with the Securities and Exchange
Commission, and is available from the Fund, without charge, by writing to the
Fund at the address shown above or by calling:
1-800-749-9933
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
----
Expenses of the Fund.......................................7
Financial Highlights.......................................8
Investment Objectives and Policies.........................8
Options Transactions......................................11
Futures Contracts.........................................13
Investment Restrictions...................................14
Purchase of Shares........................................14
Computation of Net Asset Value............................15
Account Reinstatement Privilege...........................18
Tax Sheltered Plans.......................................19
Repurchase and Redemption of Shares.......................19
Dividends, Capital Gains
Distributions, and Taxes..................................20
Rights of Ownership.......................................21
Management of the Fund....................................21
Performance...............................................23
<PAGE>
EXPENSES OF THE FUND
--------------------
The following table has been prepared to assist the investor in
understanding the various expenses that an investor in the Fund will bear
directly or indirectly.
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------
Maximum Sales Load Imposed on Purchases.............. 8.50%
Maximum Sales Load Imposed on Reinvested Dividends... none
Deferred Sales Load.................................. none
Redemption Fees...................................... none
ANNUAL FUND OPERATING EXPENSES
- ------------------------------
Management Fee After Expense Reimbursements.......... 0%
Administrative Fee After Expense Reimbursements...... 0%
Other Expenses....................................... 3.44%
Total Fund Operating Expenses................... 3.44%
For the 1995 fiscal year, actual "Other Expenses" and "Total Fund
Operating Expenses" incurred were $87,424 (3.44% of average net assets) and
$114,097 (4.44% of average net assets), respectively. However, because of
California regulations that limited the Fund's aggregate operating expenses,
Baxter Financial Corporation reimbursed the Fund $25,674 which reduced the
actual "Other Expenses" paid by the Fund to $87,424 (3.44% of average net
assets) for the fiscal year ended November 30, 1995. For the 1996 fiscal
year, "Other Expenses" are not anticipated to exceed 2.50%. This projection
is based on 1995 expenses and reasonably projected 1996 expenses. Total Fund
Operating Expenses for 1996 are also not expected to exceed 2.50% of average
net assets. Under California regulations, Baxter Financial Corporation is
required to reimburse the Fund to the extent that the total fund operating
expenses exceed 2.50% of average net assets on the first $30,000,000 of
average net assets. However, Baxter Financial Corporation is not obligated to
reimburse the Fund for any amounts in excess of the total management and
administrative fees payable by the Fund for the fiscal year 1996.
The following example illustrates the expenses that you would pay on a
$1,000 investment over various time periods assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period based on the
expenses shown in the table above. As noted in the table above, the Fund
charges no redemption fees of any kind.
1 year 3 years 5 years 10 years
------ ------- ------- --------
Shareholder Expenses $117 $182 $249 $425
<PAGE>
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or lesser than those
shown.
FINANCIAL HIGHLIGHTS
--------------------
The data set forth under the caption "Financial Highlights" in the Annual
Report to Stockholders for the fiscal year ended November 30, 1995 is
incorporated herein by reference. Such data is covered by the Independent
Auditor's Report which is contained in the Annual Report to Stockholders.
Further information regarding the Fund's investment performance is contained
in the Annual Report to Stockholders which may be obtained from the Fund upon
request without charge.
INVESTMENT OBJECTIVES AND POLICIES
----------------------------------
Eagle Growth Shares, Inc. is an open-end, diversified investment company,
established under Maryland law in 1969, whose investment objective is to
achieve growth of capital. This goal will be sought by investing in
securities which appear to have potential for capital appreciation. The
Fund's portfolio will usually be comprised of common stocks and securities
convertible into common stocks of seasoned companies whose prospects are
believed by Management to be above average. In addition, the Fund may also
own securities of newer, less-seasoned companies, and companies representing
so-called "special situations" (see below).
Normally, investments in fixed income securities will not be made except
for defensive purposes, and to employ temporarily uncommitted cash balances.
In those situations, the Fund will only invest in fixed income securities
rated Aaa, Aa or A by Moody's Investors Service, Inc. or AAA, AA, or A by
Standard & Poor's Corporation.
The Fund may also invest in fixed income securities where such
investments appear to offer opportunities for capital appreciation. When the
Fund invests in fixed income securities for this reason, the Fund may purchase
such securities which are rated B-2 or lower by Moody's or B- or lower by
Standard & Poor's. These fixed income debt securities are deemed to involve a
higher risk level than investment grade debt securities. The Fund may also
invest in unrated securities when Baxter Financial Corporation (the "Advisor")
believes that the terms of such securities and the financial condition of the
issuer are such that the protection afforded limits risks to a level similar
to that of rated securities in which the Fund may invest. Fixed income debt
securities offer a potential for capital appreciation because the value of the
fixed income security generally fluctuates inversely with interest rates.
The investment objective of the Fund may not be changed without a vote of
the holders of a majority of the Fund's outstanding voting securities.
<PAGE>
Generally, securities are selected solely on the basis of their growth
potential and current income is not sought in investment decisions.
Management considers many factors in selecting investments such as: expanding
demand for a company's products or services, new product developments,
research capability, increasing operating efficiency, and the possibility that
a disparity exists between the price of a stock and the value of the
underlying assets. The effects of general market, economic, and political
conditions are also taken into account in the selection of investments. The
portfolio of the Fund will be diversified and consist of different companies
in diverse industries. The Fund will not purchase securities of companies in
any single industry if as a result more than 25% of the Fund's total assets
will be invested in companies in such industry. The Fund has authority to
invest up to 20% of its assets in the securities of foreign companies.
Investments in foreign securities involve risks which are in addition to
the usual risks inherent in domestic investments. There may be less publicly
available information about foreign companies comparable to the reports and
ratings published about companies in the United States. Foreign companies are
not generally subject to uniform accounting, auditing, and financial reporting
standards, and auditing practices and requirements may not be comparable to
those applicable to United States companies. Foreign investments may also be
affected by fluctuations in the relative rates of exchange between the
currencies of different nations, by exchange control regulations, and by
indigenous economic and political developments. There is also the possibility
of expropriation, nationalization, or confiscatory taxation, foreign exchange
controls, political or social instability, or diplomatic developments which
could affect investments in securities of issuers in those nations.
The Fund has authority to buy securities of companies organized as real
estate investment trusts ("REITS"). REITS pool investors' funds for
investment primarily in income producing real estate or real estate related
loans or interests.
The Fund is authorized to invest in "restricted securities" (i.e. securities
which may not be sold without registration or an exemption from registration
under the Securities Act of 1933, as amended). Ordinarily, the Fund does not
expect to have more than 5% of the Fund's total net asset value invested in
restricted securities. The Fund will not purchase such securities if
immediately after such purchase more than 10% of the Fund's net assets will be
invested in restricted or other illiquid securities.
Securities offering the potential for capital appreciation may be subject
to greater risk than securities which do not have such potential but also may
afford a greater opportunity for increase in value. Of course, no assurance
can be given that the objective of the Fund will be achieved.
<PAGE>
In addition, the Fund may also own securities of new, less-seasoned
companies and companies representing so-called "special situations." There
are no limits on the percentage of total assets that may be invested in
special situations. A special situation would involve owning securities that,
in the opinion of the Advisor, should enjoy considerably better investor
reception in the fairly near future because of an essentially non-recurring
development that is either happening or, in the opinion of the Advisor, is
likely to happen. Such developments could include, among others, (1) a change
in management, (2) discovery of a new or unique product or technological
advance with sizable market potential, (3) an acquisition providing unusual
opportunity for market enlargement or for operating savings, (4) the adoption
of new laws that enhance prospects for an important part of the company's
business, or (5) takeovers, restructurings, leveraged buyouts, and
reorganizations.
Investments in such special situations may pose particular risks. The
market price of such securities may be more volatile to the extent that the
expected benefits from the non-recurring developments do not materialize.
Further, with regard to anticipated corporate restructurings, included among
the non-recurring developments of special situations, securities issued to
finance such restructurings may have special credit risks due to the highly
leveraged conditions of the issuer. In addition, such issuers may lose
experienced management as a result of the restructurings.
The Fund considers "less-seasoned companies" to be those which have a
record of less than three years continuous operations, which period may
include operations of a predecessor company, and also considers smaller
companies to be "less-seasoned" companies.
The Fund does not regard the frequency of portfolio transactions as a
limiting factor in its investment decisions. Therefore, its rate of portfolio
turnover (the annual rate at which portfolio securities are replaced) may
exceed that of most in vestment companies with a similar investment objective.
If, for example, all of the portfolio securities were replaced in one year,
the portfolio turnover rate would be 100%. Increased portfolio turnover
usually results in correspondingly heavier brokerage costs which the Fund must
pay. Of course, it is impossible to accurately predict the annual portfolio
turnover rate of the Fund (or any investment company).
Portfolio securities may be sold without regard to the length of time
held when management believes that such securities have reached their maximum
performance level, and when the Fund's assets can be more profitably utilized
in other investments. To the extent that short-term capital gains are
realized, such gains will be taxed to the shareholder as ordinary income.
<PAGE>
OPTIONS TRANSACTIONS
--------------------
The Fund may sell covered call options (options on securities owned by
the Fund) and uncovered call options (options on securities not owned by the
Fund) which are issued by the Options Clearing Corporation and listed on
national securities exchanges from time to time. This practice may enable the
Fund to increase its income because the buyer of the option pays the Fund a
sum of cash (a premium) for the option whether or not the buyer ultimately
exercises the option. The amount of the premium is determined on the exchange
upon which the option is traded, and will depend on various factors, such as
the market price and volatility of the underlying securities and the
expiration date and exercise price of the option.
Ordinarily, call options would be sold on stocks whose market value is
not expected to appreciate above the option exercise price by the expiration
date of the option, or when the premium received plus the exercise price of
the option exceeds the price at which the Advisor expects the underlying
securities to be trading by the expiration date of the option. When the Fund
sells an option it is obligated to deliver the underlying securities until the
expiration date of the option (which may be one, two, three, six or nine
months from the date the option is issued) if the option is exercised. If the
option is exercised, the Fund would deliver the underlying securities to the
buyer if the option was a covered option or buy the underlying securities to
deliver to the purchaser of the option if the option was uncovered.
The sale of covered call options should enable the Fund to increase its
income through the receipt of premium income on the call options it sells.
However, the Fund risks limiting potential gains the Fund would otherwise
realize if the market value of the underlying securities of a covered call
option appreciates above the exercise price of the option because the
purchaser will then exercise the option. In the case of uncovered call
options, the Fund risks a loss upon closing its option position if the market
price of the optioned securities at the time the option is exercised exceeds
the exercise price plus the premium received by the Fund.
The Fund may purchase call options when the Advisor believes that the
market price of the underlying securities will exceed the strike price of the
option, plus the premium the Fund must pay for the option, by the option
expiration date. If the market price of the underlying securities appreciates
after the option is purchased, the price of the option also will appreciate,
thereby affording the Fund the opportunity to resell the option at a profit
or, as an alternative, to purchase the underlying securities at the option
exercise price anytime until or on the expiration date and retain or resell
the underlying securities at their appreciated value. Purchasing call
options, however, entails the risk that the market price of the underlying
securities may decrease and the
<PAGE>
market value of the call option will also decrease and, in these
circumstances, while the Fund may sell the option, the transaction is likely
to result in a loss.
The Fund may also buy and sell put options. For the sale of a put option
the Fund receives a premium, which is determined on the exchange on which the
put is traded. The amount of the premium is influenced by the same factors as
influence the market price of call options.
The sale of a put option obligates the seller to purchase the underlying
securities at the option exercise price anytime until or on the expiration
date if the option is exercised. Alternatively, the seller may satisfy its
obligation by purchasing an identical put option for delivery to the purchaser
of the put option.
The option will be exercised if the market price of the underlying
securities is less than the strike price of the option on the expiration date
of the option. The Fund may sell put options to obtain premium income on
underlying securities whose market price the Advisor expects to increase or
remain relatively constant for the duration of the option. They may also be
sold when the Advisor believes the underlying securities are an attractive
long-term investment, despite a possible short term decline in their market
value. In these circumstances, the Fund would purchase the underlying
securities pursuant to the option rather than buy an identical put option to
close the transaction, if the option is exercised by the buyer.
The Fund also may buy put options to protect against a decline in the
market value of underlying securities that are held in the Fund's investment
portfolio. In return for paying a premium to the seller of the put option,
the Fund acquires the right to sell the underlying securities to the seller of
the option at the exercise price, thereby protecting itself against a decline
in the market price of the underlying securities. If, however, at the
expiration date of the option, the market value of the underlying securities
has not declined below the option exercise price, the Fund will not exercise
its put option.
Puts and calls also may be used in combination, to hedge investments in
underlying securities. For example, if the Fund has bought a call that
entitles it to purchase underlying securities at a specified strike price, it
may also buy a put, which enables it to sell the same securities at a
specified strike price. Put options, as well as call options, are frequently
available on identical underlying securities with identical expiration dates,
but at different strike prices. In this type of hedging transaction, the Fund
might seek to buy a put option whose strike price is higher than the strike
price of an otherwise identical call option on the same underlying securities,
thereby obtaining the right to buy the underlying securities at a lower price
than the price at which it would have the right to sell the securities.
<PAGE>
The success of options transactions depends largely on the ability of the
Advisor to predict future stock and option movements. Further, an option
position may be closed out only on an exchange which provides a secondary
market for an option of the same series. Although the Fund will generally
purchase or sell only those options for which the Advisor believes there is an
active secondary market, there is no assurance that a liquid secondary market
on an exchange will exist for any particular option. The inability to close-
out an option position could result in a loss to the Fund.
FUTURES CONTRACTS
-----------------
The Fund may buy and sell financial futures contracts and options on such
contracts. Financial futures contracts provide for the future sale by one
party and purchase by another party of a specified amount of specific
securities or currencies at a specified future time and at a specified price.
Futures contracts which are standardized as to maturity date and the
underlying financial instruments are traded on national futures exchanges.
The Fund may use financial futures and options thereon to implement a
number of hedging strategies. For example, because the purchase of a
financial futures contract requires only a relatively small initial margin
deposit, the Fund could remain exposed to the market activity of a broad-based
number of stocks contained in the futures index, while maintaining liquidity
to meet redemptions. Also, the Fund might temporarily invest available cash
in stock index futures contracts or options pending investments in securities.
These investments entail the risk that an imperfect correlation may exist
between changes in the market price of an index futures contract and the value
of the securities that comprise the index.
There are also limited risk strategies that involve combinations of
options and futures positions. For example, the Fund might purchase a futures
contract in anticipation of higher prices while simultaneously buying an
option on a futures contract to protect against the risk of lower prices.
Further, inasmuch as the Fund may purchase foreign securities which are
denominated in foreign currencies, the Fund may purchase foreign currency
futures contracts in order to hedge against fluctuations in foreign currency
exchange rates.
The Fund will be required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract if it is not terminated prior to the specified
settlement date. Minimum initial margin requirements are established by the
futures exchange and may be changed. Brokers may establish deposit
requirements which are higher than the exchange minimums.
<PAGE>
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
"variation" (additional) margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the Fund. Variation margin payments are made to and from the
futures broker for as long as the contract remains open. The Fund expects to
earn income on its margin deposits. The Fund will not enter into futures
contract transactions to the extent that, immediately thereafter, the sum of
its initial and variation margin deposits on open contracts exceeds 5% of the
market value of the Fund's total assets.
INVESTMENT RESTRICTIONS
-----------------------
The Fund has adopted the following restrictions which are designed to
reduce certain risks inherent in securities investment and which may be
changed only by a vote of the holders of the majority of the voting securities
of the Fund. The Fund may not:
Borrow money, except from banks for emergency purposes, and then not in
excess of 5% of the value of its total assets.
Invest more than 25% of the value of its assets in companies in any one
industry.
Purchase securities on margin.
Make any purchase resulting in more than 5% of the value of its assets
being invested in the securities of any one company, except U.S. Government
securities.
Purchase more than 10% of any class of securities of any company. For
this purpose, all debt securities of an issuer and all series of non-voting
preferred stock of an issuer are each considered as one class of securities.
PURCHASE OF SHARES
------------------
Shares of the Fund are continuously offered at the public offering price,
which is equal to the net asset value of the shares plus the applicable sales
charge (see below). Shares may be purchased by completing the Fund Account
Application Form which should be remitted together with payment for the shares
to Star Bank, N.A., P.O. Box 640115, Cincinnati, OH 45264-0115. Investors who
are interested in purchasing shares may also contact the Fund at
1-800-749-9933. Purchases can also be made through investment dealers who
have sales agreements with Baxter Financial Corporation, the Fund's
underwriter. Purchases of shares will be made in full and fractional shares
calculated to three decimal
<PAGE>
places. In the interests of economy and convenience, certificates for shares
of stock will not be issued except upon written request of the shareholder.
Certificates for fractional shares, however, will not be issued.
Once an account is established, subsequent investments should be sent to
Star Bank, N.A., P.O. Box 640115, Cincinnati, OH 45264-0115. A confirmation
will be mailed to the investor showing the shares purchased, the exact price
paid for the shares, and the total number of shares that are owned.
The minimum initial investment and minimum account balance for the Fund
is $500 and there is no minimum investment amount for subsequent purchases.
The Fund retains the right to waive the minimum initial investment at its
discretion.
The Fund reserves the right, after sending shareholders at least sixty (60)
days prior written notice, to redeem the shares held by any shareholder if the
shareholder's account has been inactive for a period of six (6) months
preceding the notice of redemption and the total value of the holder's shares
does not exceed the Fund's $500 minimum account balance as of the proposed
redemption date. An account will be considered inactive if no new purchases
have been made (excluding shares purchased through the reinvestment of
dividends and capital gains) within the specified time period. Shareholders
who receive notice of redemption for the first time may purchase shares of the
Fund at net asset value without paying any sales charge, in the amount
necessary to bring the account balance up to the minimum within the required
time period. Any redemptions by the Fund pursuant to this procedure will be
at the net asset value of the shares calculated as of the close of the New
York Stock Exchange on the stated redemption date and a check for the
redemption proceeds will be sent to the shareholder not more than seven (7)
days later.
Fund investors who purchase or redeem shares under any of the following fund
plans: the Group Discount Privilege, the Automatic Investment Plan or the
Check Withdrawal Plan will receive confirmations of purchases and redemptions
of Fund shares on a calendar quarter basis, not later than five business days
after the end of each calendar quarter in which a transaction takes place. The
confirmation will show the date of each transaction during the period, number
and price paid or received for shares purchased or redeemed, including
dividends and distributions, and total number of shares owned by the investor
as of the end of the period.
COMPUTATION OF NET ASSET VALUE
------------------------------
The net asset value per share is the value of the Fund's securities
investments plus cash and other assets minus its liabilities divided by the
number of outstanding shares (adjusted to the nearest cent). Portfolio
securities traded on a securities
<PAGE>
exchange or the NASDAQ National Market System are valued at the closing sales
price on the market on which they are principally traded. Securities traded
over-the-counter, except those that are quoted on the NASDAQ National Market
System, are valued at the prevailing quoted bid prices. Other assets
(including restricted securities) and securities for which no quotations are
readily available are valued at fair value as determined in good faith by the
Board of Directors or a delegated person acting pursuant to the directions of
the Board. The method of valuing assets and securities for which no
quotations are available, including restricted securities, will be reviewed at
appropriate intervals by the Board. Initial valuations of such assets will be
made in good faith by the Board of Directors. Net asset value is calculated
as of the close of the New York Stock Exchange, generally 4:00 p.m., New York
City time, on each day the New York Stock Exchange is open.
Purchases of shares are made at the public offering price, which is equal
to the net asset value next to be determined after receipt of a purchase order
in proper form plus applicable sales charge as shown in the table below.
Purchases of $100,000 or more may be made at net asset value, without the
imposition of a sales charge. The public offering price is computed as of the
close of the New York Stock Exchange and becomes effective once daily on each
day the New York Stock Exchange is open. Orders for shares of the Fund
received by dealers prior to the close of the New York Stock Exchange are
confirmed at the offering price effective at that time, provided the order is
received by the underwriter prior to that time. (It is the responsibility of
the dealers to transmit such orders so that they will be received by the
underwriter prior to the close of the New York Stock Exchange). Orders
received by dealers subsequent to that time will be confirmed at the offering
price effective at the close of the New York Stock Exchange on the next
business day. The following table shows the sales charges applicable to
purchases of Fund shares.
Percentage
Sales Charge as Reallowed to
a % of the: Dealers
--------------------- ------------
Amount Offering
Purchases of Invested Price
- -----------------------------------------------------
$ 9,999 or less..................9.29% 8.50% 8.25%
$ 10,000-$24,999, inclusive.......8.40 7.75 7.50
$ 25,000-$49,999, inclusive.......6.66 6.25 6.00
$ 50,000-$99,999, inclusive.......4.17 4.00 3.85
$ 100,000 or more..................0.00 0.00 0.00
The above scale is applicable to purchases of Fund shares and combined
purchases of shares of the Fund and Philadelphia Fund, Inc. made at one time
by an individual; an individual, his spouse and children under the age of 21;
and a trustee or other fiduciary
<PAGE>
of a single trust estate or single fiduciary account. Employee benefit plans
qualified under Section 401 of the Internal Revenue Code, and organizations
exempt from taxation under Sections 501(c)(3) or (13) of the Internal Revenue
Code, may purchase shares at one-half the sales charges listed above.
In addition, lower sales charges may be achieved by using any of the
following special purchase plans:
* Letter of Intent
* Right of Accumulation
* Group Discount Privilege
Also available from the Fund are the following privileges you may wish to
utilize:
* Automatic Investment Plan
This plan enables shareholders to make regular
monthly investments in shares through automatic
charges to their bank checking accounts.
* Check Withdrawal Plan
A convenient method whereby a monthly or a
quarterly check will be mailed to you at no
charge.
Complete details regarding these special purchase plans and privileges
may be obtained by writing or calling the Fund, or by obtaining a copy of the
Statement of Additional Information.
Purchases may be made at net asset value by officers, directors, and
employees of the Fund, as well as by employees of broker-dealer firms which
maintain effective selling dealer agreements with the Fund's underwriter.
From time to time the Fund may offer its shares at net asset value to certain
classes of potential investors which have been identified by management and
ratified by the Board of Directors. Prior to such offering, the Fund, in
compliance with applicable federal securities laws, will supplement or revise
this section of the prospectus to identify the class. Baxter Financial
Corporation, the principal underwriter of the Fund, participates in the offer
and sale of Fund shares on a best efforts basis and makes a continuous
offering of the shares.
Shares of the Fund may also be purchased at net asset value, without
sales charge, by persons who are members of a group which is not organized for
the sole purpose of purchasing shares of the Fund and which meets the
following criteria:
<PAGE>
1. Group investments must be sent directly to the fund's
custodian at the address shown under "Purchases of Shares" by
a common remitter which is bonded as well as licensed and
regulated by a state regulatory agency;
2. The group must include at least 750 members or participants;
3. Remittances on behalf of the group must be made at least once
per month; and
4. The common remitter must have a written agreement with each
participant or member of the group governing the remittance
of the investor's funds.
Investments in the Fund on behalf of group participants will be made at
the net asset value of the shares of the Fund calculated next after receipt by
the Fund's custodian of the investors' funds sent by the common remitter.
The Fund's $500 minimum initial investment and minimum account balance
shall be waived for shareholders who are active participants in a group
purchase plan approved by the Fund, since shareholders participating in such
plans generally make smaller investments on a regular basis.
Shareholders with inactive accounts below the $500 minimum account
balance who receive notice of redemption for the first time from the Fund may
purchase shares without the imposition of a sales charge in an amount
sufficient to meet the minimum account balance.
The Fund reserves the right to terminate the privileges to invest in Fund
shares at net asset value without sales charge at any time after 60 days
written notice to the investors affected thereby. The Fund reserves the
right to terminate the policy to waive the Fund's minimum initial investment
and minimum account balance at any time after 60 days written notice to the
investors affected thereby.
ACCOUNT REINSTATEMENT PRIVILEGE
-------------------------------
A stockholder may, after he has liquidated any of his shares of the Fund
on written request to the Fund, reinstate his account without payment of any
additional sales charge, at net asset value next calculated after receipt of
the reinstatement request, provided that he meets the qualifications listed
below. The Account Reinstatement Privilege may be exercised only once except
with respect to shares held under an Eagle Growth Shares Investing Program,
and the amount reinvested may not exceed the amount of the redemption proceeds
received on the liquidation of such shares. In
<PAGE>
addition, the reinstatement must be completed within thirty days after the
liquidation.
A liquidation of Fund shares is considered a sale under the Internal
Revenue Code and the "wash sale" provisions of Section 1091 of the Code will
be applicable to an account reinstatement if the cost of the liquidated shares
exceeds the proceeds of liquidation.
TAX SHELTERED PLANS
-------------------
For self-employed individuals, partnerships, and corporations, there is
available through the Fund a prototype Profit Sharing/Money Purchase Pension
Plan which has been approved by the Internal Revenue Service. The Profit
Sharing Plan permits an employer to make tax deductible investments in the
Fund on behalf of each participant up to the lesser of 15% of each
participant's earned income (or compensation), or $30,000. The Money Purchase
Pension Plan permits an employer to make tax deductible contributions on
behalf of each participant up to the lesser of 25% of earned income (or
compensation), or $30,000. If an employer adopts both the Profit Sharing Plan
and the Money Purchase Pension Plan, deductible contributions to both plans in
the aggregate may be made on behalf of each participant up to the lesser of
25% of earned income (or compensation), or $30,000. Also, the Fund makes
available an Individual Retirement Account (IRA) which permits annual tax
deductible investments in the Fund up to $2,000 ($2,250 for a Spousal IRA) per
year by certain taxpayers. All taxpayers may make nondeductible IRA
contributions up to $2,000 ($2,250 for a Spousal IRA) whether or not they are
eligible for a deductible contribution. Dividends and capital gains
distributions paid on Fund shares held in a retirement plan or an IRA will be
reinvested at net asset value and accumulate free from tax until withdrawn.
Forms to establish an IRA or a Profit Sharing/Money Purchase Pension Plan
are available from Baxter Financial Corporation or your investment dealer.
REPURCHASE AND REDEMPTION OF SHARES
-----------------------------------
Shares may be resold to the Fund or presented for redemption. Shares for
which certificates have been issued will be repurchased by Baxter Financial
Corporation, the Fund's underwriter, if they are properly tendered (see below)
through an authorized dealer. The repurchase price received by the investor
will be the net asset value of such shares next calculated after receipt by
Baxter Financial Corporation of the repurchase order. If the order for
repurchase of Fund shares is received by the dealer prior to the close of the
New York Stock Exchange and received by Baxter Financial Corporation prior to
that time, the shares will be repurchased at the price calculated as of the
close of the New York
<PAGE>
Stock Exchange on that day. Where certificates are tendered for repurchase
through a dealer, neither the Fund nor Baxter Financial Corporation charges
any fee on the transaction; however, the dealer may charge the shareholder a
reasonable fee for executing the order.
Shares of the Fund for which no certificates have been issued (those held
by American Data Services, Inc.("ADS")) and shares for which certificates have
been issued may be redeemed by mailing a written request for redemption to
American Data Services, Inc., 24 West Carver Street, Location #00150,
Huntington, NY 11743. Where certificates have been issued they must accompany
the investor's written redemption request. The value of shares tendered for
redemption shall be equal to the net asset value of such shares next
calculated after receipt by ADS of a proper written redemption request.
Shares for which certificates have been issued which are presented for
redemption or repurchase must be duly endorsed by the registered owner(s) with
signatures guaranteed by a member firm of the New York Stock Exchange or a
regional stock exchange, by a trust company, by a commercial bank, by an
overseas bank with a New York City correspondent, by certain credit unions, or
by certain savings associations. Also, written requests for redemption of
shares for which certificates have not been issued must be signed and have
signatures guaranteed in the same manner. Any questions regarding which
institutions may guarantee signatures should be directed to American Data
Services, Inc. at 1-800-525-6201.
The redemption or repurchase price will depend on the prevailing market
prices of the portfolio securities owned by the Fund (at the time the
applicable redemption proceeds are calculated) and, therefore, may be more or
less than the purchase price. The Fund's policy is to pay promptly when
shares are presented for redemption. Payment will be made within seven days
after the date of tender except when exchanges are closed or an emergency
exists. The Fund has reserved the right to redeem Fund shares in kind rather
than in cash should this be necessary in accordance with the applicable rules
of the Securities and Exchange Commission.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, AND TAXES
-------------------------------------------------
The Fund intends to continue to qualify for tax treatment under
Subchapter M of the Internal Revenue Code (the "Code") and, therefore, will
not be liable for Federal income taxes to the extent its earnings are
distributed. The Fund's policy is to pay all of its earnings out to
shareholders annually on approximately December 31 each year as dividends and
capital gain distributions.
Dividends, together with distributions of any short-term capital gains,
are taxable as ordinary income. Shareholders who
<PAGE>
are taxpayers pay Federal income taxes at capital gains rates on realized
long-term capital gains which are distributed to them, whether or not
reinvested in the Fund and regardless of the period of time the Fund's shares
have been owned by the shareholders.
Advice as to the tax status of each year's dividends and distributions
will be mailed to shareholders annually. Dividends and capital gains
distributed in January ordinarily will be included in the shareholder's income
for the previous year. Shareholders may elect to receive income dividends and
capital gains distributions in additional shares of the Fund at net asset
value, or to take cash.
Among other requirements, in order to maintain its favorable tax
treatment as a "regulated investment company" under the Internal Revenue Code
of 1986, capital gains from the sale of securities held for less than three
months must constitute less than 30% of the Fund's gross income for its fiscal
year. Premium income from the sale of options that are not exercised and net
premium income on option closing transactions are treated as capital gains.
Therefore, in order to continue to qualify for federal tax treatment as a
"regulated investment company," the Fund's gross income from the sale of
options and financial futures contracts held for less than three months and
the sale of other securities held for less than three months, in the
aggregate, must constitute less than 30% of the Fund's gross income on a
fiscal year basis.
RIGHTS OF OWNERSHIP
-------------------
Each share of common stock of the Fund has an equal interest in the
Fund's assets, net investment income, any net capital gains, and is entitled
to one vote. The shares are non-assessable, fully transferable, and
redeemable at the option of the holder. They may be sold only for cash except
in connection with mergers, stock distributions and similar transactions.
They have no conversion, pre-emptive or other subscription rights.
Shareholders having questions about the Fund or their accounts may contact the
Fund at the address or telephone number shown on the cover page of this
prospectus.
Ordinarily, the Fund does not intend to hold an annual meeting of
shareholders in any year except when required under the Investment Company Act
of 1940.
MANAGEMENT OF THE FUND
----------------------
Baxter Financial Corporation ("BFC" or the "Advisor") is employed by the
Fund to furnish investment advisory services to the Fund, subject to the
supervision of the Board of Directors of the
<PAGE>
Fund who, under Maryland law, are responsible for overall Fund policy and for
overseeing the management of the Fund. Donald H. Baxter, who is President,
Treasurer, Director, and sole stockholder of the Advisor, is also responsible
for selecting brokers and executing Fund portfolio transactions; and may
effect securities transactions with brokers who have sold shares of the Fund.
Mr. Baxter is primarily responsible for the day to day management of the
Fund's portfolio. He has been the Fund's portfolio manager since May, 1987.
Mr. Baxter is also President and Director of the Fund and of Philadelphia
Fund, Inc., a registered investment company. BFC also serves as investment
advisor to institutional and individual investors, including Philadelphia
Fund, Inc.
As compensation for the rendering of advisory services, the Advisor
receives an annual fee, payable monthly, equal to .75 percent of the net
assets of the Fund not exceeding $200,000,000. The rate of this annual fee is
reduced to .625 percent on net assets in excess of $200,000,000 but less than
$400,000,000, and to .50 percent of net assets in excess of $400,000,000. The
fee is based on the month-end net asset value of the Fund, and is payable
monthly at 1/12th of the annual fee rate.
As of November 30, 1995 the net assets of the Fund were $2,804,357. For
the fiscal year ended November 30, 1995, BFC earned advisory fees of $19,256
and administrative fees of $6,418; however, BFC reimbursed these expenses to
the Fund totalling $25,674, as described under "Expenses of the Fund."
The Advisor is also responsible for providing the Fund with
administrative services, such as office space, clerical and secretarial
personnel, and facilities, necessary to the administrative operation of the
Fund, pursuant to an Administration Agreement between the Fund and the
Advisor. Under the Administration Agreement, the Fund compensates the Advisor
at an annual rate of .25 percent of the net asset value of the Fund. All
services provided by the Advisor are subject to approval by, and overall
supervision of, the Fund's Board of Directors.
Total Fund expenses for the fiscal year ended November 30, 1995 were
3.44% of average net assets after giving effect to a reimbursement of expenses
by BFC, as described under "Expenses of the Fund."
Star Bank, N.A. acts as the Fund's custodian. American Data Services,
Inc. acts as transfer agent, and dividend disbursing agent, and also provides
the Fund with certain accounting services.
Baxter Financial Corporation is authorized to allocate brokerage
transactions to dealers that have sold Fund shares. Such transactions are
subject to the requirement to seek to obtain the best price and execution.
<PAGE>
PERFORMANCE
-----------
Total return data may from time to time be included in advertisements
pertaining to the Fund. Standardized "total return" of the Fund refers to the
average annual compounded rates of return over certain periods of time that
would equate the initial amount invested at the beginning of a stated period,
from which the maximum sales load is deducted, to the ending redeemable value
of the investment. Standardized total return also includes reinvestment of
dividends and distributions over the period for which performance is shown.
The Fund may advertise total return figures which shall represent Fund
performance over one or more time periods, including (1) one-year to date, and
(2) May 1, 1987 to date, the latter being the date on which Mr. Donald H.
Baxter assumed exclusive portfolio management responsibilities for the Fund.
Non-standardized total return quotations may also be presented. Such
quotations may reflect investment at reduced sales charge levels or at
net asset value without the imposition of a sales load. Any quotation of
total return not reflecting the maximum sales charge, or which reflects any
voluntary expense reimbursements, would be reduced if the maximum sales charge
were used or Fund expenses were not voluntarily limited.
The Fund may also advertise its investment performance by comparison to
market indices such as the S&P Index and to mutual fund indices such as those
reported by Lipper Analytical Services, Inc. Such indices may group funds by
investment objective (in the Fund's case, typically in the "Growth Funds"
Category) or may involve a more general ranking reflecting the Fund's overall
performance as compared to any number or variety of funds, regardless of
investment objective.
<PAGE>
EAGLE
GROWTH
SHARES, INC.
1200 North Federal Highway
Suite 424
Boca Raton, Florida 33432
(407) 395-2155
SHAREHOLDER SERVICES
(800) 525-6201
INVESTMENT ADVISOR, ADMINISTRATOR, AND UNDERWRITER
Baxter Financial Corporation
1200 North Federal Highway
Suite 424
Boca Raton, Florida 33432
CUSTODIAN
Star Bank, N.A.
P.O. Box 640115
Cincinnati, OH 45264-0115.
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
American Data Services, Inc.
24 West Carver Street
Location #00150
Huntington, NY 11743
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young PROSPECTUS
Great Valley Corporate Center
30 Valley Stream Parkway
Malvern, PA 19355
AUDITORS
Tait, Weller & Baker EAGLE
Two Penn Center Plaza GROWTH
Suite 700 SHARES, INC.
Philadelphia PA 10102-1707
Your Investment Dealer Is: April 1, 1996
<PAGE>
PART B
Eagle Growth Shares, Inc.
Statement of Additional Information
April 1, 1996
This statement is not a prospectus, but should be read in conjunction
with the Fund's current prospectus (dated April 1, 1996). To obtain the
prospectus please write to Eagle Growth Shares, Inc., 1200 North Federal
Highway, Suite 424, Boca Raton, Florida 33432
Or call:
Nationwide 1-800-749-9933
Florida 1-407-395-2155
Table of Contents Page
----------------- ----
Investment Objectives and Policies . . . . . . . . . 26
Options Transactions . . . . . . . . . . . . . . . . 26
Futures Contracts . . . . . . . . . . . . . . . . . 27
Federal Tax Treatment of Futures Contracts . . . . . 29
Investment Limitations . . . . . . . . . . . . . . . 29
Letter of Intent . . . . . . . . . . . . . . . . . . 32
Right of Accumulation . . . . . . . . . . . . . . . 32
Group Discount Privelege . . . . . . . . . . . . . . 33
Automatic Investment Plan . . . . . . . . . . . . . 34
Check Withdrawal Plan . . . . . . . . . . . . . . . 34
Further Information Regarding Sale of Shares . . . . 35
Redemption and Repurchase of Shares. . . . . . . . . 35
Management of the Fund . . . . . . . . . . . . . . . 36
Officers and Directors . . . . . . . . . . . . . . . 36
Brokerage. . . . . . . . . . . . . . . . . . . . . . 37
Additional Information about the Investment Advisor. 38
Underwriters . . . . . . . . . . . . . . . . . . . . 40
Independent Certified Public Accountants . . . . . . 41
Calculation of Performance Data. . . . . . . . . . . 41
Comparisons and Advertisements . . . . . . . . . . . 42
Financial Statements . . . . . . . . . . . . . . . . 43
<PAGE>
The following information supplements the information under "Investment
Goal and Policy," "Options Transactions," "Investment Limitations" and
"Futures Contracts" in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
----------------------------------
The Fund may, from time to time, invest in restricted securities and may
be deemed to be a statutory underwriter if it distributes any such restricted
securities. Such investments may generally be made at advantageous prices.
The Fund may not resell any such securities unless the Federal and any
applicable state registration requirements respecting such securities are
first satisfied, or an exemption from such registration requirements is
available. The restrictions upon the disposition of such securities may
adversely affect their marketability and the Fund generally may not be able to
dispose of such securities at prices for unrestricted securities of the same
class of the same issuer. The Fund will not purchase restricted securities if
immediately after such purchase more than 10% of the value of the Fund's net
assets would be invested in such securities or other assets for which market
quotations are not readily available. If the fair value of restricted
securities or other assets not having readily available market quotations
previously purchased exceeds 80% of the value of the Fund's assets during the
period such securities are held, appropriate steps will be taken in the
management of the balance of the portfolio to achieve adequate marketability.
Restricted securities are valued at fair value calculated by delegated persons
acting in accordance with methods of valuation determined in good faith by the
Board of Directors. The Board will review the appropriateness of such methods
of valuation at proper intervals. If it becomes necessary to register such
securities before resale with the appropriate federal and state authorities,
the Fund may have to bear part or all of the expenses of any such registration
if an agreement has not been reached with the issuer of the securities to bear
part or all of these costs.
OPTIONS TRANSACTIONS
--------------------
The Fund may write (sell) listed call options on its portfolio securities
(covered options). In selling an option, the Fund, effectively, agrees to
deliver, for example, 100 shares of common stock held in its portfolio at a
specified price (the "strike price") prior to the expiration date of the
option if the option is exercised by the purchaser.
If, at or near the expiration date of an option, the market price of the
optioned stock exceeds the strike price of the option, the option will be
exercised. In that event, the purchaser of the option must pay to the Fund
the strike price, and the Fund must
<PAGE>
thereupon deliver the optioned stock to the purchaser. In this event, the
Fund would lose the opportunity to take full advantage of the increase in
market price of the optioned stock. If, by the expiration date of the option,
the market price of the optioned stock fails to exceed the strike price of the
option, the option will expire unexercised. Alternatively, the Fund might
purchase an identical option for delivery to the buyer. In this event, the
cost of such option might exceed the premium for the option sold by the Fund.
The Fund retains the premium paid for the option regardless of whether the
option is exercised. Premiums received by the Fund are treated as short-term
capital gains under the Internal Revenue Code except when the optioned stock
is delivered in connection with the transaction, in which case the total
amount received by the Fund, the premium, and the strike price are added
together, and any gain or loss will be considered long-term or short-term
depending on how long the Fund held the optioned stock.
The Fund may also sell listed options on securities which it does not own
(uncovered options). Its obligation to the buyer of an uncovered option is
the same as when it sells a covered option. If the option is exercised the
Fund must either purchase the underlying securities in the market for delivery
to the seller or it must purchase an identical option for delivery to the
purchaser.
The Fund may also buy and sell listed put options. When the Fund sells a
put option, it receives a premium from the buyer and is obligated to purchase
the optioned securities at the strike price of the option on the expiration
date of the option if the option is exercised. The premium for a put option
is determined in the same manner as the premium on a call option. Similarly,
the purchase of a put option entitles the Fund to sell the optioned securities
to the option seller at the strike price of the option anytime until or on the
option expiration date.
When the Fund sells an uncovered call option or a put option, it will be
required to maintain in a segregated account, which will be "marked to
market," with its custodian bank cash or highly liquid, short-term U.S.
government securities in an amount equal to its obligation under the call or
put option. With respect to a put option this will be an amount equal to the
price of the underlying securities it will be obligated to buy if the option
is exercised. With respect to a call option, it would be the market value of
the underlying securities it is obligated to deliver if the option is
exercised.
FUTURES CONTRACTS
-----------------
The Fund may buy and sell financial futures contracts and options on
futures contracts. Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of specific securities at
a specified future time and at a specified price. Financial futures contracts
which are
<PAGE>
standardized as to maturity date and the underlying financial instruments are
traded on national futures exchanges, and include futures contracts on equity
securities, debt securities and foreign currencies.
Although index futures contracts by their terms call for settlement in
cash, in most cases the contracts are closed out before the settlement date.
Closing out an open futures position is done by taking an opposite position
("buying") a contract which has previously been "sold" or "selling" a contract
previously purchased in an identical contract to terminate the position.
Brokerage commissions are incurred when a futures contract is bought or sold.
Positions in futures contracts may be closed out only on an exchange
which provides a secondary market for such futures. However, there can be no
assurance that a liquid secondary market will exist for any particular futures
contract at any specific time. Therefore, it might not be possible to close a
futures position. In the event of adverse price movements, the Fund would
continue to be required to make daily cash payments to maintain its required
margin. In such situations, if the Fund has insufficient cash, it may have to
sell portfolio securities to meet daily margin requirements at a time when it
may be disadvantageous to do so. In addition, the Fund may be required to
make delivery of the securities underlying futures contracts it holds.
The Fund will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts can be substantial, due to
the low margin deposits required. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss
(as well as gain) to the investor. There is also the risk of loss by the Fund
of margin deposits, in the event of bankruptcy of a broker with whom the Fund
has an open position in the futures contract or related option.
When the Fund has a long position in a futures contract or sells a put
option, it must establish a segregated account with its custodian bank
containing cash or highly liquid, short-term U.S. government securities in an
amount equal to the purchase price of the contract or the strike price of the
put option (less any margin on deposit). When the Fund sells a call option on
a futures contract, it must establish a segregated account with its custodian
bank containing cash or highly liquid, short-term U.S. government securities
in an amount that, when added to the amount of the margin deposit, equals the
market value of the instruments underlying the call option (but are not less
than the strike price of the call option).
<PAGE>
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
------------------------------------------
Except for transactions the Fund has identified as hedging transactions,
the Fund is required for federal income tax purposes to recognize as income
for each taxable year its net unrealized gains and losses on certain futures
contracts as of the end of the year as well as those actually realized during
the year. In most cases, any gain or loss recognized with respect to a
futures contract is considered to be 60% long-term capital gain or loss and
40% short-term capital gain or loss, without regard to the holding period of
the contract. Furthermore, sales of futures contracts which are intended to
hedge against a change in the value of securities held by the Fund may affect
the holding period of such securities and, consequently, the nature of the
gain or loss on such securities upon disposition.
In order for the Fund to continue to qualify for Federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for its taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, gains from the sale of
securities and other income derived with respect to the Fund's business of
investing in securities. In addition, gains realized on the sale or other
disposition of securities held for less than three months must be limited to
less than 30% of the Fund's annual gross income. It is anticipated that any
net gain realized from the closing out of futures contracts will be considered
gain from the sale of securities and, therefore, constitute qualifying income
for purposes of the 90% requirement. In order to avoid realizing excessive
gains on securities held less than three months, the Fund may be required to
defer closing futures contracts beyond the time when it would otherwise be
advantageous to do so. It is anticipated that unrealized gains on futures
contracts which have been open for less than three months as of the end of the
Fund's fiscal year and which are recognized for tax purposes, will not be
considered gains on sales of securities held less than three months for the
purpose of the 30% test.
The Fund will distribute to shareholders annually any net capital gains
which have been recognized for federal income tax purposes, including
unrealized gains at the end of the Fund's fiscal year on futures transactions.
Such distributions will be combined with distributions of capital gains
realized on the Fund's other investments.
INVESTMENT LIMITATIONS
----------------------
In addition to the Investment Restrictions stated in the Fund's
Prospectus, the Fund may not:
<PAGE>
Purchase commodities or commodity contracts, except the Fund may purchase
and sell financial futures contracts and options thereon;
Purchase interests in real estate, except as may be represented by
securities for which there is an established market;
Purchase securities of another open-end investment company, except in
connection with a plan of merger, consolidation, or acquisition of assets. It
may, however, purchase shares of closed-end investment companies where such
purchase is in the open market and no commission or profit to a sponsor or
dealer results other than a customary broker's commission. The advisory fee
of the Fund will not be reduced for any assets invested in shares of closed
end investment companies.
Make short sales of securities;
Make loans, except through the purchase of debt securities of a type
commonly held by institutional investors;
Issue senior securities; except the Fund may buy and sell options;
Act as an underwriter of the securities of any other issuer, except the
Fund may invest not more than 10% of the value of its net assets at the time
the investment is made in securities which are not readily marketable because
registration under the federal securities laws would be required ("restricted
securities").
The foregoing Investment Limitations, and those set forth in the
Prospectus, may be changed only with the approval of the lesser of: (i) at
least 67% of the voting securities of the Fund present at a meeting, if the
holders of more than 50% of the outstanding voting securities are present or
represented by proxy, or (ii) more than 50% of the outstanding voting
securities of the Fund. The Fund does not consider the sale of uncovered call
options or financial futures contracts to be short sales.
Although changes in the following policies are not subject to shareholder
approval, the Fund will not:
Invest in companies for the purpose of exercising control of management,
except in situations where it is deemed advisable to protect an existing
investment.
Purchase securities for which a bona fide market does not exist
(including, but not limited to, "restricted," foreign securities not listed on
a recognized domestic or foreign securities exchange, and other illiquid
securities) if immediately after such purchase more than 10% of the Fund's net
assets will be invested in such securities.
<PAGE>
Pledge, mortgage, or hypothecate its assets to an extent greater than 15%
of the gross assets of the Fund taken at market value.
Purchase, or otherwise acquire, warrants, if immediately after such
acquisition more than 2% of the Fund's assets, taken at cost, would be so
invested. However, warrants acquired upon their initial issuance by the Fund
by reason of its ownership of other securities of the issuer of such warrants
shall not be subject to this restriction, nor shall the value of any such
warrants be added to the value of any other warrants held in determining the
value of warrants held under this investment restriction.
Purchase, or retain in its portfolio, securities of an issuer any of
whose officers, directors or security holders is an officer or director of the
Fund or the investment adviser if after such purchase one or more of the
Fund's officers or directors owns beneficially more than 1/2 of 1% of such
securities and such officers and directors together own beneficially more than
5% of such securities.
Invest in securities of "less-seasoned companies" as defined in the
prospectus, if after such purchase more than 5% of the total assets of the
Fund would be invested in the securities of such a company or companies.
Also, the Fund will not own any participation in oil or mineral leases or
mineral development projects.
The Fund may invest in repurchase agreements. Investments in repurchase
agreements involve certain risks. For example, if the seller of the
underlying securities defaults on its obligation to repurchase the securities
at a time when their value has declined, the Fund may incur a loss upon
disposition. If the seller becomes insolvent and subject to liquidation or
reorganization under the Bankruptcy Code or other laws, a bankruptcy court may
determine that the underlying securities are collateral not within the control
of the Fund and, therefore, subject to sale by the trustee in bankruptcy.
Finally, it is possible that the Fund may not be able to substantiate its
interest in the underlying securities. While management acknowledges these
risks, it believes that they can be controlled through stringent security
selection criteria and careful monitoring procedures.
The following information supplements the information in the prospectus
under "Purchase of Shares" regarding special purchase plans and other
privileges:
Purchases may be made at net asset value by officers, directors, and
employees of the Fund, as well as by employees of broker-dealer firms which
maintain effective selling dealer agreements with a Fund underwriter.
<PAGE>
Letter of Intent
- ----------------
An investor can qualify for a reduced sales charge as set forth in the
prospectus by signing a non-binding Letter of Intent stating his intention to
invest at least $10,000 during a 13 month period. The Letter of Intent is
applicable to the aggregate amount of purchases of shares of the Fund and
combined purchases of shares of the Fund and Philadelphia Fund, Inc. made by
an individual; an individual, his spouse and children under the age of 21; and
a trustee or other fiduciary of a single trust estate or single fiduciary
account, as well as Employee Benefit Plans qualified under section 401 of the
Internal Revenue Code and organizations exempt from taxation under sections
501(c)(3) or (13) of the Code. The Letter must be filed within 90 days after
the first purchase to be included under it. The value of shares of the Fund
and/or Philadelphia Fund Inc., previously purchased, including shares held
under Eagle Growth Shares or Philadelphia Fund Single Payment Investing
Programs and Systematic Investing Programs upon which all scheduled payments
have been made, will be included as a credit toward completion of the Letter
of Intent to the extent that such shares are held during the 13 month period
of the Letter of Intent when the investor so requests. The amount to be
credited will be equal to the offering price of the shares held on the date of
the first purchase under the Letter of Intent. The initial purchase under a
Letter of Intent must be in an amount of at least $1,000 and subsequent
purchases not less than $500.
Five percent of the total dollar amount specified in the Letter of Intent
is held in escrow by Star Bank, N.A. in shares. Any dividends or capital
gains distributions on the escrowed shares are credited to the shareholder.
Upon completion of the total dollar amount specified in the Letter the
escrowed shares are released. If total purchases under the Letter are less
than the amount specified therein the shareholder is required to remit to the
underwriter an amount equal to the difference between the dollar amount of
sales charges actually paid and the amount which would have been paid if the
total purchases made under the Letter were made at one time. If the
shareholder does not pay such difference within twenty days after having
received written request from the underwriter, the Custodian is authorized to
redeem so many of the escrowed shares to realize such difference and release
any remaining full shares and cash for any fractional shares to the
shareholder. There is no obligation upon the investor to purchase or the Fund
to sell the full indicated amount.
Right of Accumulation
- ---------------------
The reducing scale of sales charges set forth in the prospectus also
apply to subsequent purchases of the Fund's shares by an individual; an
individual, his spouse and children under the age of 21; or a trustee or other
fiduciary of a single trust estate or single fiduciary account where the
aggregate investments in
<PAGE>
shares of the Fund and/or Philadelphia Fund, Inc., including shares held under
Eagle Growth Shares or Philadelphia Fund Single Payment Investing Programs and
Systematic Investing Programs upon which all scheduled payments have been made
is $10,000 or more. For example, a stockholder who owns shares of the Fund
and/or Philadelphia Fund, Inc. that originally cost him $5,000 on which he
paid an 8.50% sales charge may subsequently purchase an additional $5,000 of
the Fund's shares at a sales charge of 7.75% of such subsequent purchase or an
additional $20,000 of the Fund's shares at a sales charge of 6.25%. To
determine eligibility, the shares currently held by the investor are valued at
the then net asset value or the cost of such shares to the investor, whichever
is greater. The Fund's underwriter, or the Custodian (if the payment is being
made by the investor directly to the Custodian), must be notified when a sale
takes place which would qualify for a reduced sales charge on the basis of
previous purchases, and reduction will be granted when the aggregate holdings
are confirmed through a check of the records of the Fund. The reduced sales
charges described under "Purchase of Shares" in the prospectus will be
applicable to subsequent purchases by an Employee Benefit Plan qualified under
Section 401 of the Internal Revenue Code, and organizations exempt from
taxation under Sections 501(c)(3) or (13) of the Internal Revenue Code.
Group Discount Privilege
- ------------------------
Any purchaser, including his spouse and children under the age of 21, who
is a member of a qualified group, such as a trade association, church group,
union, social or fraternal organization, who wishes to have the advantage of
an individually lower sales charge through either a Letter of Intent or a
Right of Accumulation, may do so if he, in conjunction with other members of
that group, wishes to purchase shares of the Fund so that the entire purchases
by the group will afford a lower sales charge to each individual participant.
Group purchases must be made through a common remitter. The Fund will send
the common remitter, at or before the completion of each purchase of shares
for group members, written notice of receipt of the total amount received by
the Fund on the group's behalf. Also, if in a current calendar quarter, a
payment is not received by the Fund on behalf of a group member on whose
behalf a purchase was made in the preceding calendar quarter, the Fund will
send the investor written notice that a current payment has not been received
in his or her behalf. Further, if the Fund does not receive a payment from
the common remitter on behalf of the group within ten days on the date
specified for delivery of the payment, the Fund will send each group member a
written confirmation of his or her next three succeeding investments promptly
after they are made.
<PAGE>
Automatic Investment Plan
- -------------------------
The Automatic Investment Plan enables shareholders to make regular
monthly investments in shares through automatic charges to their bank checking
accounts. With shareholder authorization and bank approval, Star Bank, N.A.
will automatically charge the bank account for the amount specified, which
will be automatically invested in shares at the public offering price on the
date specified by the shareholder. Bank accounts will be charged on the day
or a few days before investments are credited, depending on the bank's
capabilities, and shareholders will receive a quarterly confirmation statement
showing the transactions during the calendar quarter. Participation in the
plan will begin within 30 days after receipt of a completed section 7 of the
Account Application and a voided check from your checking account. If your
bank account cannot be charged due to insufficient funds, a stop-payment
order, or the closing of your bank account, the plan may be terminated and the
related investment reversed. The shareholder may change the amount of the
investment or discontinue the plan at any time by writing to American Data
Services, Inc.
Check Withdrawal Plan
- ---------------------
An investor with a minimum account balance of $5,000 who is not currently
participating in the Automatic Investment Plan may have sufficient shares
automatically redeemed at regular monthly or quarterly intervals to provide
payments of $25 or more. This minimum amount is not necessarily a recommended
amount. This privilege may be exercised by a written request to American Data
Services, Inc. specifying the amount of the check to be received each month
(or each quarter as desired). Share certificates cannot be issued while the
Plan is in effect. With the Custodian's approval, payment amounts may be
revised at any time by the investor. All shares owned or purchased will be
credited to the Check Withdrawal Plan and a sufficient number of shares will
be sold from the investor's account to meet the requested withdrawal payments.
All income dividends and capital gains distributions on shares held will be
reinvested in additional shares at net asset value on the ex-dividend date.
Since the withdrawal payments represent the proceeds from the sales of shares,
there will be a reduction of invested capital to the extent that withdrawal
payments exceed the income dividends and capital gains distributions paid and
reinvested in shares held in the account. While no charge is contemplated on
each withdrawal payment at present, the right is reserved at any future time
to deduct $1.00 from each withdrawal payment. At present, the expenses
incurred in connection with this privilege are paid by the Fund. This Plan,
upon written notice to the Custodian, may be terminated at any time without
penalty. Any subsequent investments in this Plan must be $1,000 or more.
However, making additional purchases while the Plan is in effect may be
inadvisable due to sales charges and tax liabilities.
<PAGE>
The following information supplements the information in the prospectus
under "Repurchase and Redemption of Shares."
FURTHER INFORMATION REGARDING SALE OF SHARES
--------------------------------------------
The Fund calculates the offering price and net asset value at the close
of the New York Stock Exchange generally 4:00 p.m., on days when the New York
Stock Exchange is open. On other days, the Fund will generally be closed and
pricing calculations will not be made. The New York Stock Exchange is
scheduled to be open Monday through Friday throughout the year except for New
Year's Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Orders for redemption and
purchase will not be processed if received when the Fund is closed.
REDEMPTION AND REPURCHASE OF SHARES
-----------------------------------
Payment for shares redeemed may be postponed, or the right of redemption
may be suspended, for any period during which the New York Stock Exchange is
closed other than customary weekend and holiday closings, or periods during
which, by rule of the Securities and Exchange Commission, trading on the New
York Stock Exchange is deemed restricted; or for any period during which an
emergency as determined by order of the Commission exists as a result of
which, disposal by the Fund of securities owned by it is not reasonably
practicable; or it is not reasonably practicable for the Fund fairly to
determine the value of its net assets; or for such other periods as the
Commission may, by order, permit for the protection of security holders of the
Fund.
The Fund has reserved the right to redeem Fund shares in kind, rather
than in cash, should this be necessary. However, by filing an appropriate
election under Rule l8f-1 pursuant to the Investment Company Act of 1940 and
the adoption of such election as a fundamental policy which can be changed
only upon the approval of a majority vote of the outstanding voting securities
of the Fund, the Fund has obligated itself upon a request for redemption to
redeem shares solely for cash up to the lesser of $250,000 or 1% of the net
asset value of the Fund in compliance with a request for redemption by any one
shareholder during any 90 day period.
The following information supplements the information in the prospectus
under "Management of the Fund."
<PAGE>
MANAGEMENT OF THE FUND
----------------------
Officers and Directors
- ----------------------
The names, ages, addresses of the officers and directors of the Fund, and
their principal business occupations for the past five years are listed below.
All officers and directors serve the Fund and Philadelphia Fund, Inc., a
registered investment company, in identical capacities. Each Director who is
an "interested person" of the Fund, as defined in the Investment Company Act
of 1940, is indicated by an asterisk. All of the officers and directors
aggregately own 3.7% of the securities of the Fund. Each director, except
Donald H. Baxter, receives $50 from Eagle Growth Shares for each quarterly
Board of Director's meeting they attend. The Fund paid legal fees of $1,288 to
Parson and Brown. Donald P. Parson, a partner of the firm, is a director of
the Fund. In addition, each director receives from the Philadelphia Fund a
$2,000 annual fee and $1,150 for each quarterly Board of Director's meeting
they attend.Donald H. Baxter does not receive any annual or meeting fees as a
director from either fund.
Kenneth W. McArthur, Director (60) 93 Riverwood Parkway, Toronto, Ontario,
Canada M8Y 4E4
Chairman, Shurway Capital Corp. (private investment company); formerly,Vice
President and Director, Nesbitt Investment Management; formerly, President,
Chief Executive Officer and Director, Fahnestock & Co. Inc. (securities
broker); formerly Senior Vice President and Chief Financial Officer, Nesbitt
Thomson Inc. (holding company).
Thomas J. Flaherty, Director (71) 400 Ocean Road, House No. 175, Vero Beach,
FL 32963
Retired. Formerly Executive Vice President, Philadelphia Fund, Inc. and Eagle
Growth Shares, Inc.; formerly, President and Director, Universal Programs,
Inc. and Eagle Advisory Corporation (investment advisors).
Donald P. Parson, Director (54)* c/o Parson & Brown, 666 Third Avenue, New
York, NY 10017
Partner, Parson & Brown, Attorney at Law; Director ITSN, Inc. (interactive
satellite kiosks); formerly Partner, Whitman & Ransom, Attorneys at Law.
Donald H. Baxter, Director and President* (52) 1200 North Federal Highway,
Suite 424, Boca Raton, FL 33432
Director, President, and Treasurer, Baxter Financial Corporation; Director,
Sunol Molecular Corp. (biotechnolgy); Executive Managing Member, Crown Capital
Asia Limited Liability Company (private investment company); Executive
<PAGE>
Managing Member, Baxter Biotech Ventures Limited Company (private investment
company); formerly Portfolio Manager, Nesbitt Thomson Asset Management Inc.
Robert A. Utting, Director (72) c/o The Royal Bank of Canada, 1 Place Ville
Marie, Montreal, Quebec, Canada H3C 3A9
President, R. A. Utting & Associates Inc. (insurance); Chairman and Director,
The Mortgage Insurance Company of Canada; formerly, Vice Chairman, Royal Bank
of Canada.
Robert L. Meyer, Director (55) c/o Ehrlich Meyer Associates, Inc., 25 Griffin
Avenue, Bedford Hills, NY 10507
President, Ehrlich Meyer Associates, Inc.; formerly Principal Officer,
Convergent Capital Corporation (holding company); formerly Director, Vice
President, and Senior Vice President, Fahnestock & Co. Inc.
James Keogh, Director (79) 202 West Lyon Farm Drive, Greenwich, CT 06831
Writer/Editor;Retired. formerly Executive Editor, TIME (newsmagazine);
formerly, Director, United States Information Agency; formerly, Executive
Director, The Business Round Table.
Ronald F. Rohe, Vice President, Secretary, and Treasurer (53) 1200 North
Federal Highway, Suite 424, Boca Raton, FL 33432
Chief Operating Officer and Marketing Director, Baxter Financial Corporation;
formerly Registered Representative, Paine Webber Incorporated.
Brokerage
- ---------
Donald H. Baxter, President of Baxter Financial Corporation, the Fund's
investment advisor, is responsible for the selection of brokers to execute
Fund portfolio transactions. Mr. Baxter seeks to obtain the best price and
execution of Fund portfolio transactions and selects brokers with this goal in
mind. In selecting brokers, Mr. Baxter also considers the commission rate
being paid by the Fund. Commissions on listed securities are based on
competitive rates. Mr. Baxter seeks to assure himself that the commissions
paid by the Fund are reasonable in relation to the rates paid by other similar
institutions which are comparable in size and portfolio characteristics to the
Fund, and commensurate with the services being provided by the broker. To
accomplish this, Mr. Baxter negotiates commission levels with brokers with
whom the Fund does business; compares the quoted commission levels
<PAGE>
received, and applies his knowledge regarding the general levels of
commissions prevailing from time to time. Mr. Baxter also considers the value
of research services provided to the Fund by brokers. Mr. Baxter is
authorized to permit the payment of commissions in excess of those which may
have been charged by another broker if he has determined, in good faith, that
the amount of such commission is reasonable in relation to the brokerage or
research services provided by the broker acting for the Fund. During the
fiscal year ended November 30, 1995, the Fund paid total brokerage commissions
of $0 to brokers that provided research services.
Receipt of research information, including statistical and market
analyses, economic and financial studies from securities firms, electronic
quotation services, and on-line electronic analysis software, enables Baxter
Financial Corporation to supplement its own research and analysis activities
by making available the views of other securities firms and is a factor
considered in selecting brokers for the Fund. Allocations of brokerage for
the receipt of research and statistical information are made in the best
judgement of Mr. Baxter and not in accordance with any formula.
Baxter Financial Corporation serves as investment advisor to two
registered investment companies, the Fund and Philadelphia Fund, Inc. and
manages other private investment accounts as well. Receipt of research
information by Baxter Financial Corporation may also be of benefit to
Philadelphia Fund, Inc. and these other private accounts.
During the fiscal years ended November 30, 1995, 1994, and 1993, the
Fund paid total brokerage commissions of $13,719, $14,521, and $29,590,
respectively. The decreased level of commissions incurred by the Fund in 1994
and 1995 was due to the portfolio manager's elimination of a strategy of
investing in an array of stocks believed to have unduly depressed stock prices
due to tax loss selling at the end of the calendar year.
On over-the-counter transactions, the Fund generally deals with the
principal market makers and no commissions are paid to a broker except in
situations where execution through the broker is likely to result in a savings
to the Fund.
ADDITIONAL INFORMATION ABOUT
THE INVESTMENT ADVISOR
----------------------------------
The following information supplements the information in the prospectus
under "Management of the Fund."
The current Investment Advisory Agreement between Baxter Financial
Corporation and the Fund was approved by the Fund's shareholders on March 19,
1991 and became effective on April 1, 1991. The agreement requires Baxter
Financial Corporation to
<PAGE>
provide the Fund with a continuous review of and recommendations regarding
investment of the Fund's assets. The agreement continues in force until March
31, 1997, and may be continued thereafter from year to year if renewed
annually by a majority vote of the Board of Directors of the Fund, or by a
vote of the holders of a majority of the outstanding voting securities of the
Fund, but in either case, in order to effect any such continuance the terms of
the agreement must also be approved by a majority vote, cast in person, of
those Fund Directors who are not parties to the agreement nor interested
persons of any such party, as defined by the Investment Company Act of 1940,
at a meeting called for the purpose of considering the approval of the
agreement. The agreement terminates automatically if it is transferred or
assigned by either party, which would include a change of control of the
Advisor, and may be terminated by either party without penalty on 60 days
written notice.
The current Investment Advisory Agreement contains no expense limitation.
However, as long as the Fund offers its shares for sale in the state of
California it will be required to comply with applicable California
regulations governing its expense ratio. The current California regulation,
in summary, provides as follows: Fund aggregate annual expenses normally may
not exceed 2.5% of the first $30,000,000 of average net assets of the Fund, 2%
of the next $70,000,000 of average net assets and 1.5% of the remaining
average net assets. In calculating the "aggregate annual expenses" of the
Fund for purposes of compliance with the California regulation, interest,
taxes, brokerage commissions, any excess custodian costs attributable to
foreign investments, extraordinary expenses, including litigation expenses,
are excluded. In no event, though, shall Baxter Financial Corporation be
required to reimburse the Fund, for any such excess for any fiscal year, in an
amount greater than the total fees paid or payable to Baxter Financial
Corporation for advisory and administrative services rendered to the Fund.
The Fund pays all of its own operating expenses, including: custodian and
transfer agent fees, insurance premiums, registration fees, cost of Directors'
and stockholders' meetings, distribution expenses, legal and accounting fees,
printing, and postage.
The current Administration Agreement between the Fund and Baxter
Financial Corporation requires Baxter Financial Corporation to supervise and
provide for the administrative operations of the Fund, including the provision
of office space, utilities, equipment, and clerical, secretarial, and
administrative personnel. The fee payable to Baxter Financial Corporation
under the Administrative Agreement is at the annual rate of .25 percent of the
net asset value of the Fund, calculated and payable monthly, at 1/12th the
annual rate. The Administration Agreement is subject to approval by a
majority vote of disinterested directors of the Fund. It may be terminated in
the same manner, without penalty, upon 60 days written notice to Baxter
Financial Corporation, and by Baxter Financial Corporation upon 60 days notice
to the Fund. American Data Services, Inc. provides the Fund with certain
accounting services.
<PAGE>
For the fiscal year ended November 30, 1995, Baxter Financial Corporation
earned investment advisory fees of $19,256, and, as administrator, earned
$6,418 for administrative services rendered. Over the same period,
reimbursable expenses of the Fund amounted to 4.44% of the average net assets
exceeding the above described expense limitations. The investment advisory
fees and administrative services fees earned by Baxter Financial Corporation,
$25,674 was reimbursed to the Fund by Baxter Financial Corporation. Expenses
of the Fund for fiscal year ended November 30, 1995 were 3.44% of average net
assets after reimbursement of expenses.
For the fiscal year ended November 30, 1994, Baxter Financial Corporation
earned investment advisory fees of $18,503, and, as administrator, earned
$6,167 for administrative services rendered. Over the same period,
reimbursable expenses of the Fund amounted to 4.71% of the average net assets
exceeding the above described expense limitations. The investment advisory
fees and administrative services fees earned by Baxter Financial Corporation,,
$24,670 was reimbursed to the Fund by Baxter Financial Corporation. Expenses
of the Fund for fiscal year ended November 30, 1994 were 3.71% of average net
assets after reimbursement of expenses.
For the fiscal year ended November 30, 1993, Baxter Financial Corporation
earned investment advisory fees of $22,089, and, as administrator, earned
$7,363 for administrative services rendered. Over the same period,
reimbursable expenses of the Fund amounted to 3.67% of the average net assets
exceeding the above described expense limitations. The investment advisory
fees and administrative services fees earned by Baxter Financial Corporation,
$29,452 was reimbursed to the Fund by Baxter Financial Corporation. Expenses
of the Fund for fiscal year ended November 30, 1993 were 2.67% of average net
assets after reimbursement of expenses.
UNDERWRITERS
------------
Baxter Financial Corporation serves as the principal underwriter of the
Fund's shares, which are offered on a continuous and "best efforts" basis.
During the last three fiscal years of the Fund, Baxter Financial
Corporation retained total underwriting and dealer commissions of $278,
$3,172, and $10,780 in 1995, 1994, and 1993, respectively, after allowing $8,
$141, and $401, respectively, to dealers who sold Fund shares in each of
these years.
<PAGE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
----------------------------------------
Tait, Weller & Baker, Philadelphia PA, serve as the independent certified
public accountants of the Fund. As such, that firm conducts an audit of the
Fund's annual and semi-annual reports to stockholders and prepares the Fund's
tax returns.
The following information supplements the information in the prospectus
under "Performance".
CALCULATION OF PERFORMANCE DATA
-------------------------------
Following are quotations of the annualized total returns for the
one, five, and ten year periods ended November 30, 1995 using the standardized
method of calculation pursuant to SEC Guidelines:
Average Annual Total Returns
----------------------------
One-Year..................... 7.54%
Five-Year.................... 6.76%
Ten-Year..................... 5.78%
As the following formula indicates, the average annual total return
is determined by multiplying a hypothetical initial purchase order of $1,000
by the average annual compounded rate of return (including capital
appreciation/depreciation and dividends and distributions paid and reinvested)
for the stated period, less any recurring fees charged to a shareholder
account. The results are annualized and presented accordingly. The
calculation assumes that the maximum sales load is deducted from the initial
$1,000 purchase order and that all dividends and distributions are reinvested
at the net asset value on the reinvestment dates during the period. The
quotation assumes that the account was completely redeemed at the end of each
one, five, and ten year period, as well as the deduction of all applicable
charges and fees.
The SEC Guidelines provide that "average annual total return" be
computed according to the following formula:
n
P (1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeeming value of a hypothetical
<PAGE>
$1,000 payment made at the beginning of 1, 5,
or 10 year periods at the end of the 1, 5, or
10 year periods or fractional portions thereof.
Non-standardized performance figures may also be presented in
connection with Fund advertisements. Performance figures calculated in this
manner may exclude charges which might otherwise reduce return figures,
including, for example, the sales load or Fund operating expenses, or such
figures may reflect Fund performance over periods of time other than the one,
five, and ten year periods. Non-standardized total return figures, when
furnished, shall be accompanied by standardized total return figures which
shall reflect Fund performance over the following time periods: (1) one-year
to date and May 1, 1987 to date, the latter being the date on which Mr. Donald
H. Baxter assumed exclusive portfolio management responsibilities pertaining
to the Fund, or (2) one, five, and ten year periods as of the most recent
fiscal year end of the Fund. However, notwithstanding the foregoing,
standardized total return figures for one, five, and ten year periods shall
always be presented in the Fund's Statement of Additional Information.
COMPARISONS AND ADVERTISEMENTS
------------------------------
To help investors better evaluate how an investment in the Fund
might satisfy their investment objective, Fund advertisements may discuss
total return as reported by various financial publications, or they may also
compare total return to total return as reported by other investments,
indices, and averages. Without limitation, the following publications,
indices, and averages may be used:
(a) Dow Jones Composite Average or its component averages -- an
unmanaged index presently composed of 30 industrial corporation stocks (Dow
Jones Industrial Average), 15 utility company stocks, and 20 transportation
company stocks. Comparisons of performance assume reinvestment of dividends.
(b) Standard & Poor's 500 Stock Index or its component indices --
an unmanaged index presently composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks, and 20 transportation stocks. Comparisons of
performance assume reinvestment of dividends.
(c) The New York Stock Exchange composite or component indices --
unmanaged indices of all industrial, utilities, transportation, and finance
stocks listed on the New York Stock Exchange.
(d) Lipper -- Mutual Fund Performance Analysis and Lipper Mutual
Fund Indices -- measures total return and
<PAGE>
average current yield for the mutual fund industry. Ranks individual mutual
fund performance over specified time periods assuming reinvestment of all
distributions, exclusive of sales charges.
(e) Financial publications, including Business Week, Changing
Times, Financial World, Forbes, Fortune, Money Magazine, Wall Street Journal,
Barron's, which rate fund performance over various time periods.
FINANCIAL STATEMENTS
--------------------
The financial statements of the Fund for the fiscal year ended November
30, 1995, including the Portfolio of Investments, Statement of Assets and
Liabilities, Sample Price Computation, Statement of Operations, Statement of
Changes in Net Assets, Notes to Financial Statements, Financial Highlights,
and Independent Auditor's Report, as set forth in the Fund's Annual Report to
Stockholders for fiscal year ended November 30, 1995, are incorporated herein
by reference.
<PAGE>
PART C
Other Information
- -----------------
Item 24. Financial Statements and Exhibits
(a) Financial statements:
Portfolio of Investments,
November 30, 1995
Statements of Assets and Liabilities,
November 30, 1995
Statement of Operations for the year
ended November 30, 1995
Statement of Changes in Net Assets for
the years ended November 30, 1995 and 1994
Notes to Financial Statements
Independent Auditor's Report
Financial Highlights Ten Years Ended 11/30/95
The financial statements described above are contained in
Registrant's Annual Report to Stockholders for the fiscal year ended
November 30, 1995, which was filed with the Commission on January
26, 1996, and are incorporated herein by reference.
(b) Exhibits:
(1) Certificate of Incorporation.
Incorporated herein by reference to Exhibit (1) to the
Registration Statement filed under the Investment Company
Act of 1940 on Form N- 8B-1 and as amended to date as
filed as Exhibit to Form S-5 under Securities Act of 1933.
(2) By-Laws, as amended.
(3) Not applicable.
<PAGE>
(4) Specimen of Certificate of Common Stock.
Incorporated herein by reference to Exhibit (4)(1) to
Registration Statement filed under the Investment Company
Act of 1940 on Form N- 8B-1 and as amended to date as
filed as Exhibit to Form S-5 under Securities Act of 1933.
(5) Investment Advisory Agreement.
(6a) Underwriting Agreement with Baxter Financial Corporation.
(6b) Dealer Selling Agreement.
(7) Not applicable.
(8) Custody Agreement with Star Bank, N.A.
(9) Administration Agreement and Amendment to Administration
Agreement.
(9a) Transfer Agency and Service Agreement with American Data
Services, Inc.
(9b) Fund Accounting Service Agreement with American Data
Services, Inc.
(10) Opinion of Counsel
Filed as Exhibit 3 to Pre-Effective Amendment No. 2 to
Form S-5 and incorporated herein by reference.
(11) Consent of Tait, Weller & Baker Independent Certified
Public Accountants.
(12) None.
(13) None.
(14) Model retirement plans.
(a) Prototype Profit Sharing/Money Purchase Pension
Retirement Plan
(b) Amendment to the Profit Sharing/Money Purchase
Pension Retirement Plan
<PAGE>
(c) Custodian Agreement with Application/Adoption
Agreements
(d) Individual Retirement Custodial Account under
Sections 408(a) of the Internal Revenue Code.
(15) None.
(16) Schedule for Computation of Performance Quotations
Item 25. Persons Controlled by or Under Common Control with Registrant
- -------- -------------------------------------------------------------
Not applicable; no person either directly or indirectly is
controlled by or under common control with the registrant.
Item 26. Number of Holders of Securities.
- -------- --------------------------------
As of December 31, 1995:
(1) (2)
Number of Record
Title of Class Holders
-------------- ----------------
Common Stock; 1689
$0.10 par value
Item 27. Indemnification.
- -------- ----------------
Section 56 of the Registrant's By-Laws provides for indemnification,
as set forth below.
With respect to the indemnification of the Officers and Directors of the
Corporation:
(a) The Corporation shall indemnify each Officer and Director made
party to a proceeding, by reason of service in such capacity, to the fullest
extent, and in the manner provided, under section 2-418 of the Maryland
General Corporation law: (i) unless it is proved that the person seeking
indemnification did not meet the standard of conduct set forth in subsection
(b)(1) of such section; and (ii) provided, that the Corporation shall not
indemnify any Officer or Director for any liability to the Corporation or its
security holders arising from the willful
<PAGE>
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such person's office.
(b) The provisions of clause (i) of paragraph (a) herein
notwithstanding, the Corporation shall indemnify each Officer and Director
against reasonable expenses incurred in connection with the successful defense
of any proceeding to which such Officer or Director is a party by reason of
service in such capacity.
(c) The Corporation, in the manner and to the extent provided by
applicable law, shall advance to each Officer and Director who is made party
to a proceeding by reason of service in such capacity the reasonable expenses
incurred by such person in connection therewith.
Item 28. Business and Other Connection of Investment Advisor.
- -------- ----------------------------------------------------
Baxter Financial Corporation is investment advisor to the Fund, to
Philadelphia Fund, Inc., and to other institutional and individual investment
accounts; and acts as underwriter of shares of the Fund and Philadelphia Fund,
Inc.
DONALD H. BAXTER - Director, President, and Treasurer, Baxter Financial
Corporation; President and Director, Philadelphia Fund, Inc. and Eagle Growth
Shares, Inc.; Director, Sunol Molecular Corp. (biotechnolgy); Executive
Managing Member, Crown Capital Asia Limited Liability Company; Executive
Managing Member, Baxter Biotech Ventures Limited Company.
RONALD F. ROHE - Chief Operating Officer, Baxter Financial Corporation; Vice
President, Philadelphia Fund, Inc. and Eagle Growth Shares, Inc.; formerly
Registered Representative, Paine Webber Inc.
The address of Baxter Financial Corporation, Philadelphia Fund, Inc. and
Eagle Growth Shares, Inc, is 1200 North Federal Highway, Suite 424, Boca
Raton, FL 33432.
Item 29. Principal Underwriters.
- -------- -----------------------
(a) Baxter Financial Corporation, 1200 North Federal Highway, Suite
424, Boca Raton, Florida 33432 serves as principal underwriter of the Fund.
Baxter Financial Corporation also serves as investment advisor to the Fund and
Philadelphia Fund, Inc., and to other private accounts.
(b) See Item 28.
(c) Not applicable
<PAGE>
Item 30. Location for Accounts and Records.
- -------- ----------------------------------
All books and records of the Registrant are maintained and are in
the possession of The Fund at 1200 North Federal Highway, Suite 424,
Boca Raton, FL 33432, except those which are kept by Star Bank,
N.A., the Fund's custodian, and American Data Services, Inc., the
Fund's transfer agent, and dividend disbursing agent.
Item 31. Management Services.
- -------- --------------------
NONE
Item 32. Undertakings.
- -------- -------------
Registrant hereby undertakes to furnish to each person to whom a
prospectus is delivered a copy of the registrant's latest Annual
Report to Stockholders upon request and without charge.
<PAGE>
Signatures
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Eagle Growth Shares, Inc.,
certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933, and has duly caused this Post-Effective Amendment to its Registration
Statement (Commission File Nos. 2-34540 and 811-1935) to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boca
Raton, and the State of Florida on the 15 day of March 1996.
Eagle Growth Shares, Inc.
(Registrant)
By:/s/Donald H. Baxter
------------------------
Donald H. Baxter, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement (File No. 2-34540) has been signed below by the
following persons in the capacity and on the date indicated.
Signature Title Date
- --------- ----- ----
President, Principal
/s/Donald H. Baxter Executive Officer and March 11, 1996
- ----------------------- Director
Donald H. Baxter
/s/Ronald F. Rohe Treasurer, Principal March 11, 1996
- ----------------------- Financial Officer
Ronald F. Rohe
/s/Kenneth W. McArthur Director March 11, 1996
- -----------------------
Kenneth W. McArthur
/s/Donald P. Parson Director March 11, 1996
- -----------------------
Donald P. Parson
/s/Robert A. Utting Director March 11, 1996
- -----------------------
Robert A. Utting
/s/Robert L. Meyer Director March 11, 1996
- -----------------------
Robert L. Meyer
/s/James Keogh Director March 11, 1996
- -----------------------
James Keogh
/s/Thomas J. Flaherty Director March 11, 1996
- -----------------------
Thomas J. Flaherty
<PAGE>
EXHIBIT INDEX
-------------
PAGE
----
24(b)(2) By-Laws, as amended. 51
24(b)(5) Investment Advisor Agreement 86
24(b)(6a) Underwriting Agreement with Baxter
Financial Corporation 93
24(b)(6b) Dealer Selling Agreement 100
24(b)(8) Custody Agreement with Star Bank, N.A. 103
24(B)(9) Administrative Agreement and Amendment
to Administrative Agreement 145
24(b)(9a) Transfer Agency and Services Agreement
with American Data Services, Inc. 151
24(b)(9b) Fund Accounting and Services Agreement
with American Data Services, Inc. 169
24(b)(11) Consent of Tait, Weller & Baker 177
24(b)(14a) Prototype Profit Sharing/Money
Purchase Pension Retirement Plan 178
24(b)(14b) Amendment to the Profit Sharing/Money
Purchase Pension Retirement Plan 224
24(b)(14c) Custodian Agreement with Application/
Adoption Agreements 227
24(b)(14d) Individual Retirement Custodial Account
under Sections 408(a) of the Internal
Revenue Code. 256
24(b)(16) Schedule for Computation of
Performance Quotations 286
<PAGE>
EAGLE GROWTH SHARES, INC.
------------------------
BY-LAWS
-------
OFFICES
-------
1. The principal office shall be in the City of Baltimore, County of
Baltimore City, State of Maryland, and the name of the resident agent in
charge thereof is The Corporation Trust Incorporated.
2. The corporation shall also have an office in Boca Raton, Florida
and also offices at such other places as the Board of Directors may from
time to time determine as the business of the corporation may require.
STOCKHOLDERS' MEETINGS
----------------------
3. Annual Meetings, if held, shall be held at the office of the
corporation in Boca Raton, Florida or at such other place in the United States
as the Board of Directors may determine. Meetings of stockholders for any
other purpose may be held at such place within the United States and at such
time as shall be stated in the notice of the meeting, or in a duly executed
waiver of notice thereof.
4. The Corporation is not required to hold an Annual Meeting in any
year in which the Corporation is not required to convene a meeting to elect
directors under the Investment Company Act of 1940. If the Corporation is
required under the Investment Company Act of 1940 to hold a stockholder
meeting to elect directors, the meeting shall be designated an Annual Meeting
of
<PAGE>
Stockholders for that year, and shall be held no later than 60 days after the
occurrence of the event requiring the meeting; except if an Order is granted
by the Securities and Exchange Commission exempting the Corporation from the
operation of Section 16(a) of the Investment Company Act of 1940 or a no-
action position of similar effect is obtained, then such Meeting shall
be held no later than 120 days after the occurrence of the event requiring
the Meeting. Otherwise, Annual Meetings shall be held only if called by the
Board of Directors of the Corporation and, if called, shall be held at such
time as provided in Section 5 of these By-Laws.
5. If an Annual Meeting is held for any reason other than to elect
directors pursuant to the requirements of the Investment Company Act of 1940,
such meeting shall be held on the first Wednesday of the fourth month next
succeeding the end of the fiscal year in any year in which an annual meeting
is held, if not a legal holiday, and if a legal holiday, then on the next
secular day following, at 11:00 o'clock A.M., or at such date and time as may
be fixed by the Board of Directors within a period not exceeding 16 days after
or 15 days before the first Wednesday of the fourth month next succeeding the
end of the fiscal year.
6. Written notice of annual meetings shall be served upon or mailed
to each stockholder entitled to vote thereat at such address as appears on the
books of the corporation, not more than ninety but at least ten days prior to
a meeting.
-2-
<PAGE>
7. At least ten days before every election of directors, a complete
list of the stockholders entitled to vote at said election, arranged in
alphabetical order, with the residence of each and the number of voting shares
held by each, shall be prepared by the secretary. Such list shall be open at
the place where the election is to be held for said ten days, to the
examination of any stockholder, and shall be produced and kept at the time and
place of election during the whole time thereof, and subject to the inspection
of any stockholder who may be present.
8. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Articles of
Incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors. Special meetings of stockholders shall be called by the secretary
upon the written request of the holders of shares entitled to not less than
ten percent of all the votes entitled to be cast at such meeting. Such
request shall state the purpose or purposes of such meeting and the matters
proposed to be acted on thereat. The secretary shall give notice stating the
purpose or purposes of the meeting to all stockholders entitled to vote at
such meeting and the corporation shall pay the costs of preparing and mailing
such notice of the meeting. No special meeting will be called upon the
request of the holders of shares entitled to cast less than a majority of all
votes entitled to cast at such
-3-
<PAGE>
meeting to consider any matter which is substantially the same as a matter
voted upon at any special meeting of the stockholders held during the
preceding twelve months.
9. Written notice of a special meeting of stockholders, stating the
time and place and object thereof, shall be served upon or mailed to each
stockholder entitled to vote thereat at such address as appears on the books
of the corporation, at least ten days before such meeting.
10. Business transacted at all special meetings shall be confined to
the objects stated in the notice.
11. The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall be
requisite and shall constitute a quorum at all meetings of the stockholders
for the transaction of business except as otherwise provided by statute, by
the Articles of Incorporation or by these By-laws. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present
or represented any business may be transacted which might have been transacted
at the meeting as originally notified.
12. When a quorum is present at any meeting, a majority of all the
votes cast, by stockholders present in person
-4-
<PAGE>
or represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
of the Articles of Incorporation or of these By-laws, a different vote is
required in which case such express provision shall govern and control the
decision of such question.
13. At any meeting of the stockholders every stockholder having the
right to vote shall be entitled to vote in person, or by written proxy
subscribed by such stockholder and bearing a date not more than eleven months
prior to said meeting, unless said proxy provides for a longer period. Each
stockholder shall have one vote for each share of stock having voting power,
registered in his name on the books of the corporation, and except where the
transfer books of the corporation shall have been closed or a date shall have
been fixed as a record date for the determination of its stockholders entitled
to vote, no share of stock shall be voted on at any election of directors
which shall have been transferred on the books of the corporation within
twenty days next preceding such election of directors.
DIRECTORS
---------
14. The number of directors which shall constitute the whole board
shall be such number, not less than three, as the Board of Directors shall, by
a resolution duly adopted by a majority of the directors then in office,
including a majority of the directors who are otherwise affiliated with the
corporation or its investment adviser or the underwriter of its shares or any
-5-
<PAGE>
entity which controls, is controlled by, or is under common control with such
investment adviser or underwriter, specify. Subject to Section 3 of these
Bylaws, the directors shall be elected at annual meetings of the stockholders,
if held, or at special meetings of stockholders called for that purpose, and
each director shall be elected to serve until his successor shall have been
elected and shall have qualified.
15. The directors may hold their meetings and keep the books of the
corporation within the State of Maryland, or at the office of the corporation
in Boca Raton, Florida or at such other places as they may from time to time
determine. Members of the Board of Directors or a committee of the Board may
participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time.
16. If the office of any director or directors becomes vacant by
reason of death, resignation, retirement, disqualification, removal from
office, or otherwise, a majority of the remaining directors may choose a
successor or successors, who shall hold office for the unexpired term in
respect to which such vacancy occurred or until the next election of
directors, provided that immediately after filling any such vacancy at least
two thirds of the directors then holding office shall have been elected by the
stockholders. In the event that at any time less than a majority of the
directors then holding office were elected by the stockholders, a meeting of
the stockholders for the
-6-
<PAGE>
purpose of electing directors to fill existing vacancies shall be called and
held promptly, and in any event within sixty days of the occurrence of such
condition.
17. The property and business of the corporation shall be managed by
its Board of Directors which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the
Articles of Incorporation or by these By-laws directed or required to be
exercised or done by the stockholders, subject, however, to such limitations
set forth in the Articles of Incorporation or the By-laws of the corporation.
INVESTMENT RESTRICTIONS
-----------------------
18. (a) The corporation shall not borrow money except for temporary
or emergency purposes. The proceeds of any loan may not be used to purchase
investment securities. All borrowings hereunder shall be from banks and may
be secured or unsecured. No borrowing hereunder shall be made in amount in
excess of 5 percent of the gross assets of the corporation taken at cost.
(b) No short sales shall be made for the account of the
corporation.
(c) The assets of the corporation shall not be loaned to other
persons, except through the purchase of debt securities of a type commonly
held by institutional investors.
(d) The corporation shall not purchase any securities for its
portfolio on margin except such short-term credits as are necessary for the
clearance of transactions.
-7-
<PAGE>
(e) The corporation shall not purchase the securities of any
issuer if such purchase will cause more than five percent (5%) of the total
assets of the corporation to be invested in the securities of any one issuer
provided that such limitations shall not apply to obligations of the
Governments of the United States of America or Canada or to obligations of any
corporation organized under a general Act of Congress, if such corporation is
an instrumentality of the United States.
(f) The corporation shall not purchase the voting securities of
any issuer if such purchase at the time thereof would cause more than ten
percent (10%) of the securities of any such issuer to be held by the
corporation.
(g) No more than 25 percent of the value of the assets of the
corporation will be invested in securities of companies in any one industry.
(h) The corporation may not engage in the purchase of liquid
interests in real estate including liquid interests in real estate investment
trusts.
(i) The corporation may not engage in the purchase and sale of
commodities or commodity contracts, except that the corporation may buy and
sell financial futures contracts and options thereon.
(j) The corporation may not participate on a joint or several
basis in any trading account in securities.
(k) The corporation will not underwrite securities of other
issuers, except that the corporation may
-8-
<PAGE>
acquire portfolio securities under circumstances where if sold, it might be
deemed to be an underwriter for purposes of the Securities Act of 1933. No
more than 10 percent of the value of the corporation's assets will at any time
be invested in such securities.
(l) The corporation shall not invest in the securities of other
investment funds except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase other than the
customary broker's commission, or as may be acquired in a reorganization, or
merger with another investment company.
19. (a) The corporation shall not purchase or retain in the
portfolio of the corporation securities issued by an issuer any of whose
officers, directors or security holders is an officer or director of the
corporation or of the manager of the corporation if after the purchase of the
securities of such issuer by the corporation one or more of such officers or
directors owns beneficially more than one-half of one percent (1/2%) of the
shares or securities or both, of such issuer and such officers and directors
owning more than one-half of one percent (1/2%) of such shares or securities
together own beneficially more than five percent (5%) of such shares or
securities.
(b) The corporation shall not invest funds of the corporation in
the securities of companies which have a record of less than three (3) years
continuous operation if such purchase
-9-
<PAGE>
at the time thereof would cause more than five percent (5%) of the total
corporation assets to be invested in the securities of such company or
companies. Such period of three years may include the operation of any
predecessor company or companies, partnership or individual enterprise if the
company whose securities are proposed as an investment for funds of the
corporation has come into existence as the result of a merger, consolidation,
reorganization or the purchase of substantially all of the assets of such
predecessor company or companies, partnership or
individual enterprise.
(c) No officer or director of the corporation or of the manager
of the corporation shall deal for or on behalf of the corporation with
themselves, as principal or agent, or with any corporation or partnership in
which they have a financial interest.
(i) The prohibition contained in Subsection (c) herein
shall not prohibit the following:
(1) The officers and directors of the corporation from
having a financial interest in the corporation, underwriter, manager of the
corporation or any investment adviser to the manager of the corporation.
(2) The purchase of securities for the portfolio of
the corporation or sale of securities owned by the corporation through a
security dealer, any of whose officers, directors, or partners is an officer
or director of the corporation, provided such transactions are handled in the
-10-
<PAGE>
capacity of the broker only and provided commissions charged do not exceed
customary brokerage charged for such services.
(3) The employment of legal counsel, registrar,
transfer agent, dividend disbursement agent or custodian or trustee having a
partner, officer or director who is an officer or director of the corporation,
provided only customary fees are charged for services rendered to or for the
benefit of the corporation.
(4) The purchase of the portfolio of the corporation
of securities issued by an issuer having an officer, director or security
holder who is an officer or director of the corporation or of the manager of
the corporation, unless at the time of such purchase, one or more of such
officers and directors owns beneficially more than one-half of one percent
(1/2%) of the shares or securities or both, or such issuer and such officers
and directors owning more than one-half of one percent (1/2%) of such shares
or securities together own beneficially more than five percent (5%) of such
shares or securities.
(d) The corporation may not purchase securities of foreign
issuers if such purchase will subject it to the Interest Equalization Tax.
(e) The corporation shall not purchase the securities of any
issuer if such purchase at the time thereof would cause more than ten percent
(10%) of the securities of any such issuer to be held by the corporation.
-11-
<PAGE>
(f) The officers and directors of the corporation, the officers
and directors of the underwriter, and the officers and directors of any
manager or investment adviser with which the corporation has contracted for
services may not take long or short positions in securities issued by the
corporation provided, however, that such prohibition shall not prevent the
following: (1) the underwriter from purchasing from the corporation shares
issued by the corporation, provided that orders to purchase from the
corporation are entered with the corporation by the underwriter upon receipt
by the underwriter of purchase orders for shares of the corporation and
provided such purchases are not in excess of purchase orders received by the
underwriter, and (2) the purchase from the corporation of shares issued by
the corporation by the officers and directors of the corporation, underwriter
or investment adviser at the price available to the public at the moment of
such purchase, and (3) the underwriter from purchasing from shareholders
shares issued by the corporation.
(g) Securities owned by the corporation and cash representing
the proceeds from shares of securities owned by the corporation and of shares
issued by the corporation, payments of principal upon securities owned by the
corporation or capital distribution in respect of shares owned by the
corporation shall be held by a custodian which shall be a bank or trust
company having not less than Two Million Dollars ($2,000,000) aggregate
-12-
<PAGE>
capital, surplus and undivided profits provided such a custodian can be found
ready and willing to act.
(h) Nothing in Section 19 (g) of these Bylaws shall be construed
to mean that the corporation may keep its cash in only one bank. The
corporation may keep its cash in one or more banks or trust companies located
within the United States so long as such banks or trust companies have
sufficient capital in accordance with the capital requirements set forth in
Section 19 (g) of these By-laws.
(i) Upon the registration or inability to serve of the custodian
the Board of Directors will use its best efforts to obtain a successor
custodian and will direct that the cash and securities owned by the
corporation be delivered directly to the successor custodian, and in the event
that no successor custodian can be found, the Board of Directors will submit
to the stockholders, before permitting delivery of cash and securities owned
by the corporation to other than a successor custodian, the question of
whether the corporation shall be liquidated or shall function without a
custodian, provided that such limitation shall not prevent the termination of
any agreement between the corporation and a custodian by the vote of a
majority of the shareholders of the corporation.
(j) The Board of Directors shall submit to the shareholders of
the corporation and to any federal or state regulatory agency which may so
require, reports, not less often than semi-annually, of the operations of the
corporation, based
-13-
<PAGE>
at least annually upon an audit by independent public accountants, which
reports clearly set forth, in addition to the information customarily
furnished on a balance sheet and profit and loss statement, a statement of all
amounts paid to securities dealers, legal counsel, transfer agent, disbursing
agent, registrar or custodian, where such payments are made to a firm,
corporation, partnership, bank or trust company having a partner, officer or
director who is an officer or director of the corporation.
(k) Assets of the corporation shall not be pledged, mortgaged or
hypothecated to an extent greater than 15 percent of the gross assets of the
corporation taken at market value.
COMMITTEES OF DIRECTORS
-----------------------
20. The Board of Directors may, by resolution or resolutions passed
by a majority of the whole board, designate one or more committees, each
committee to consist of two or more of the directors of the corporation,
which, to the extent provided in said resolution or resolutions, shall have
and may exercise the powers of the Board of Directors in the management of the
business and affairs of the corporation, except the power to declare
dividends, issue stock or to recommend to stockholders any action requiring
stockholder approval, and may have power to authorize the seal of the
corporation to be affixed to all papers which may require it. Such committee
or committees shall have
-14-
<PAGE>
such name or names as may be determined from time to time by resolution
adopted by the Board of Directors.
21. The committees shall keep regular minutes of their proceedings
and report the same to the board when required.
COMPENSATION OF DIRECTORS
-------------------------
AND COMMITTEE MEMBERS
---------------------
22. Directors and members of committees, as such, shall not receive
any stated salary for their services, but by resolution of the board a fixed
sum not exceeding $200 may be allowed for attendance at each meeting thereof;
provided that nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
MEETINGS OF THE BOARD
---------------------
23. Regular meetings of the board and organizational meetings of each
newly elected board may be held upon five (5) days' notice to each director
either personally or by mail or by telegram at such time and place either
within or without the State of Maryland as shall from time to time be
determined by the board.
24. Special meetings of the board may be called by the president on
two days' notice to each director, either personally or by mail or by
telegram; special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of two directors.
25. At all meetings of the board one-third of the directors then in
office but not less than two shall be necessary
-15-
<PAGE>
and sufficient to constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Articles of Incorporation or by
these By-laws. If a quorum shall not be present at any meeting of directors,
the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present. Any action required or permitted to be taken at any meeting of the
Board of Direct
ors or of any committee thereof may be taken without a meeting, if a written
consent to such action is signed by all members of the Board or of such
committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or Committee.
NOTICES
-------
26. Whenever under the provisions of the statutes or of the Articles
of Incorporation or of these By-laws, notice is required to be given to any
director or stockholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, by depositing the same in
the post office or letter box, in a post-paid sealed wrapper, addressed to
such director or stockholder at such address as appears on the books of the
corporation, and such notice shall be deemed to be given at the time when the
same shall be thus mailed.
-16
<PAGE>
27. Whenever any notice is required to be given under the provisions
of the statutes or of the Articles of Incorporation, or of these By-laws, a
waiver thereof in writing signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken in connection with any corporate action by
any provisions of the statutes or of the Articles of Incorporation or of these
By-laws, the meeting and vote of stockholders may be dispensed with, if all
the stockholders who would have been entitled to vote upon the action if such
meeting were held, shall consent in writing to such corporate action being
taken.
OFFICERS
--------
28. The officers of the corporation shall be chosen by the directors
and shall be a president, a secretary and a treasurer. The Board of Directors
may also choose one or more vice-presidents, assistant secretaries, and
assistant treasurers. Two or more offices except that of president and vice-
president may be held by the same person, provided however that where the
offices of president and secretary are held by the same person, such person
shall not hold any other office, and further provided that no person shall
execute, acknowledge or verify any instrument in more than one capacity, if
such instrument is required by law, the Articles of Incorporation or these By-
laws to be executed, acknowledged or verified by two or more officers.
-17-
<PAGE>
The board shall designate the principal accounting officer of the corporation
who may be any one of the officers elected or appointed under this Bylaw No.
28 or under By-law No. 30.
29. The Board of Directors shall choose a president from its members,
a secretary and a treasurer, none of whom except the president need be a
member of the board.
30. The board may appoint such other officers and agents as it shall
deem necessary, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time
by the board.
31. The salaries of all officers and agents of the corporation shall
be fixed by the Board of Directors.
32. The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy shall be filled by
the Board of Directors.
33. The Board of Directors may in its discretion require any officer,
employee or agent to give the corporation a bond in such sum and with such
surety as shall be satisfactory to the Board for the faithful performance of
his duties and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books,
-18-
<PAGE>
papers, vouchers, money or other property of whatever kind in his possession
or under his control belonging to the corporation.
THE PRESIDENT
-------------
34. The President shall be a director and shall be the chief
executive officer of the corporation; he shall preside at all meetings of the
stockholders and directors, shall be ex officio a member of all standing
committees, shall have general and active management of the business of the
corporation, and shall see that all orders and resolutions of the Board are
carried into effect. The President shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the corporation.
FINANCIAL VICE PRESIDENT
------------------------
35. The Financial Vice President shall be the chief investment
officer of the corporation; he shall be a member of the Action Committee and
shall supervise the portfolio activities of the corporation. He shall perform
such other duties as the Board of Directors may from time to time designate.
PRESIDENT PRO TEM
-----------------
36. In the absence or disability of both the president and vice-
president, the board may appoint a president pro tem.
-19-
<PAGE>
VICE-PRESIDENTS
---------------
37. The vice-presidents in the order designated by the Board of
Directors or in the absence of such designation in the order of their
seniority shall, in the absence or disability of the president, perform the
duties and exercise the powers of the president, and shall perform such other
duties as the Board of Directors shall prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
---------------------------------------
38. The secretary shall attend all sessions of the board and all
meetings of the stockholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. He shall give, or cause to
be given, notice of all meetings of the stockholders and special meetings of
the Board of Directors, and shall perform such other duties as may be
prescribed by the Board of Directors or president, under whose supervision he
shall be. He shall keep in safe custody the seal of the corporation and, when
authorized by the board or by any officer authorized by the By-laws to execute
instruments under seal, shall affix the same to any instrument requiring it
and, when so affixed, it shall be attested by his signature or by the
signature of the treasurer or an assistant secretary.
39. The assistant secretaries in the order designated by the Board of
Directors or in the absence of such designation in the order of their
seniority shall, in the absence or
-20-
<PAGE>
disability of the secretary, perform such other duties as the Board of
Directors shall prescribe.
THE TREASURER AND ASSISTANT TREASURERS
--------------------------------------
40. The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors.
41. He shall disburse the funds of the corporation as may be ordered
by the board, taking proper vouchers for such disbursements, and shall render
to the president and directors, at the regular meetings of the board, or
whenever they may require it, an account of all his transactions as treasurer
and of the financial condition of the corporation. He shall have alternative
authority of equal scope with the secretary to affix and attest the seal of
the corporation. He shall perform such other duties as the Board of Directors
shall prescribe.
42. The assistant treasurers in the order of their seniority shall,
in the absence or disability of the treasurer, perform the duties and exercise
the powers of the treasurer and shall perform such other duties as the Board
of Directors shall prescribe.
ACCOUNTANTS
-----------
43. Annually within thirty days before or after the beginning of the
fiscal year or before an annual meeting of
-21-
<PAGE>
stockholders held in such fiscal year the Board of Directors shall elect an
independent public accountant, individual or firm, to act as accountants for
the corporation. Such selection shall be submitted for ratification or
rejection at the next succeeding annual meeting of the stockholders. Any
vacancy occurring between annual meetings due to the death or resignation of
the accountant may be filled by the Board of Directors. Any such appointment
shall be subject to termination by vote of a majority in interest of the
outstanding capital stock of the corporation at any meeting called for such
purpose. In event any selection of an accountant has been rejected by the
stockholders or employment terminated thereof in accordance herewith, the
vacancy so occurring may be filled by a vote of a majority in interest of the
outstanding capital stock of the corporation either at the meeting at which
the rejection or termination occurred, or if not so filled then at a
subsequent meeting which shall be called for the purpose.
SALE AND REDEMPTION OF SHARES
-----------------------------
44. The shares of the capital stock of the corporation may be issued
to such persons and at such prices from time to time as the Board of Directors
may determine. Such issuance shall be on a non-assessable basis and, unless
it be pro rata to then existing stockholders as a stock or optional dividend,
stock split, or stock combination, shall be only in exchange for cash or for
such other property as the Board of Directors may deem proper, which shall in
no event be less than the market value as
-22-
<PAGE>
herein defined in subsection (a) hereunder nor the par value of such shares,
whichever shall be greater. All orders for purchase of shares shall be
subject to acceptance by the corporation or its duly authorized
representative, and the management may in its discretion reject any order for
the purchase of shares except shares purchasable with cash dividends as
hereinafter provided. The value of property received in exchange for the
issuance of shares shall be that resulting from an appraisal of such property
by the Board of Directors in such manner as shall be deemed by it to reflect
its fair value and when so determined in good faith shall be conclusive. Any
excess received by the corporation upon the issuance and sale of the shares of
the capital stock of the corporation over the then par value thereof shall be
carried on the books of the corporation as paid-in surplus.
(a) The market value of a share of the capital stock of the
corporation shall be determined as soon as possible after the close of the New
York Stock Exchange, on each business day on which the Exchange is open, such
market price taking effect as of the close of the New York Stock Exchange and
shall be applicable to all orders received prior to its effectiveness. The
market value of a share of the capital stock of the corporation shall be the
net asset value thereof, and each of the aforesaid determinations shall be
made as set forth in subsection (d) hereunder. In addition, in its
discretion, the Board of Directors may make or cause to be made a more
frequent determination of the market value where it deems necessary or to
-23-
<PAGE>
comply with any applicable provision of federal or state law, which
determination shall become effective at the time established by the Board of
Directors; be based on a calculation as set forth in subsection (d) hereunder;
or on an adjustment of the market value established immediately prior thereto,
such adjustment to be made in such manner as the Board of Directors shall deem
reasonable to reflect any material changes in the fair value of securities and
other assets held by the corporation and any other material changes in the
assets or liabilities of the corporation and the number of its outstanding
shares which shall have taken place since the immediately preceding
determination of market value.
(b) So long as it has assets legally available to do so and such
right is not suspended under the provisions of the Investment Company Act of
1940, the corporation agrees to redeem any shares of its capital stock
tendered to it at the next effective redemption price; provided, however, if
portfolio securities must be liquidated to meet any redemption there may be
deducted from the redemption price a reasonable estimate of brokerage and
other costs of such liquidation. In addition, the distributors of the shares
of the corporation's stock (if any) may, but are not required to, maintain a
bid to repurchase the shares tendered at the next calculated and effective
redemption price. The redemption price as defined in subsection (c) of this
Section 44 shall become effective in accordance with said subsection.
Payment for such shares shall be made within seven
-24-
<PAGE>
days after the date upon which such shares are properly tendered. If the
determination of the redemption price is postponed beyond the date on which it
would normally occur by reason of a declaration by the Board of Directors
suspending determination of net asset value pursuant to subsection (e)
hereunder, the right of the stockholder to have his shares redeemed by the
corporation shall be similarly suspended and he may withdraw his certificate
or certificates (where certificates have been issued) or his redemption
request (where no certificate has been issued) from deposit if he so elects,
or if he does not so elect,
the redemption price shall be the net asset value determined as of the close
of the New York Stock Exchange, on the first business day after the
suspension, upon which such a determination is made. Payment for such shares
may at the option of the Board of Directors, or such officer or officers as
they may duly authorize for the purpose, in their complete discretion be made
in cash, or in kind, or partially in cash and partially in kind. In case of
payment in kind the Board of Directors, or their delegate, shall have absolute
discretion as to what security or securities shall be distributed in kind and
the amount of the same, and the securities shall be valued for purposes of
distribution at the figure at which they were appraised in computing the net
asset value of the Fund's shares, provided that any stockholder who cannot
legally acquire securities so distributed in kind by reason of the
prohibitions of the Investment Company Act of 1940 shall receive cash. Shares
so redeemed by the corporation shall
-25-
<PAGE>
become authorized but unissued shares and may be resold by the corporation.
(c) The redemption price of a share of the capital stock of the
corporation shall be determined and become effective each time the market
value of a share is determined and becomes effective under the provisions of
subsection (a) of this Section 44. Such redemption price shall be the net
asset value thereof, determined as set forth in subsection (d) hereunder.
(d) The net asset value of a share of the capital stock of the
corporation shall be the quotient resulting from dividing the net assets of
the corporation as of the valuation time by the number of the then outstanding
shares. The net assets of the corporation shall be calculated in the
following manner:
(1) The gross assets shall be valued as follows:
(A) Portfolio securities traded on a stock exchange
shall be appraised at the most recent quoted sales price. Securities not
traded on the day of valuation and securities traded over-the-counter shall be
valued at the prevailing quoted bid price; cash and cash equivalents at face
value. Securities for which no quotation is available and "restricted
securities" shall be valued at their fair value as determined by the Board of
Directors or a specially delegated officer in good faith. Interest will be
accrued and dividends will be taken into accounts on ex dividend dates.
-26-
<PAGE>
(B) All other assets of the corporation including
cash, prepaid and accrued items, and other receivables, shall be appraised in
such manner as will reflect their fair value.
(2) From the gross assets shall be deducted the liabilities
of the corporation, including accrued items, and other payables, and proper
reserves, if any, as may be determined by the Board of Directors.
(3) The resulting difference shall be the net assets of the
corporation.
(e) The Board of Directors may declare a suspension of the
determination of net asset value for the whole or any part of any period (i)
during which the New York Stock Exchange is closed other than customary week-
end and holiday closings, (ii) during which trading on the New York Stock
Exchange is restricted, (iii) during which an emergency exists as a result of
which disposal by the corporation of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the corporation fairly to
determine the value of its net assets, or (iv) during any other period when
the Securities and Exchange Commission (or any succeeding governmental
authority) may for the protection of security holders of the corporation by or
der permit suspension of the right of redemption or postponement of the date
of payment on redemption; provided that applicable rules and regulations of
the Securities and Exchange Commission (or any succeeding
-27-
<PAGE>
governmental authority) shall govern as to whether the conditions prescribed
in (ii), (iii) or (iv) exist. Such suspension shall take effect at such time
as the Board of Directors shall specify but not later than the close of
business on the business day next following the declaration, and thereafter
there shall be no determination of asset value until the Board of Directors
shall declare the suspension at an end, except that the suspension shall
terminate in any event on the first day on which said Stock Exchange shall
have reopened or the period specified in (ii) or (iii) shall have expired (as
to which in the absence of an official ruling by said Commission or succeeding
authority), the determination of the Board of Directors shall be conclusive.
45. The corporation shall appoint one or more distributors or agents
or both for the sale of the shares of the corporation, and may allow such
person or persons a commission on the sale of such shares and may enter into
such contract or contracts with such person or persons as the Board of
Directors of this corporation in its discretion may deem reasonable and
proper. Any such contract or contracts for the sale of the shares of this
corporation may be made with any person even though such person may be an
officer, other employee, director or stockholder of this corporation or a
corporation, partnership, trust or association in which any such officer,
other employee, partner, director or stockholder may be the investment adviser
and manager of the corporation, provided however, the maximum load or
commission to be charged upon the sale of shares issued
-28-
<PAGE>
by the corporation shall be not greater than nine percent (9%) of the offering
price to the public of such shares. As used in this Section, "offering price
to the public" shall mean the net asset value as defined in Section 44 (d) of
these By-Laws plus the load or commission charge adjusted to the nearest full
cent. Nothing herein shall be construed to prevent the management from
disposing of shares of stock of the corporation at no sales load or at a sales
load within the limitations set forth herein in connection with the merger,
consolidation or acquisition of substantially all the capital stock or assets
of any other investment company at any time.
CERTIFICATES OF STOCK
---------------------
46. The certificates of stock of the corporation shall be numbered
and shall be entered in the books of the corporation as they are issued. They
shall exhibit the holder's name and number of shares and shall be signed by
the president or a vice president and the treasurer or an assistant treasurer
or the secretary or an assistant secretary. If any stock certificate is
signed (1) by a transfer agent or an assistant transfer agent or (2) by a
transfer clerk acting on behalf of the corporation and a registrar, the
signature of any such officer may be facsimile. Certificates of stock shall
not be issued unless a shareholder so directs by written notice to the
corporation.
TRANSFERS OF STOCK
------------------
47. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly
-29-
<PAGE>
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
CLOSING OF TRANSFER BOOKS
-------------------------
48. The Board of Directors may fix in advance a record date, not
exceeding ninety days and not prior to the close of business on the day the
record date is fixed for the payment of any dividend, or for the allotment of
rights, or when any change or conversion or exchange of capital stock shall go
into effect, or a date in connection with obtaining such consent, as a record
date for the determination of the stockholders entitled to receive payment of
any such dividend, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of capital stock,
or to give such consent. The Board of Directors may fix in advance a record
date, not exceeding ninety and not less than ten days preceding the date of
any meeting of stockholders as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting, and any
adjournment thereof. If an Annual Meeting is held to elect directors pursuant
to the requirements of the Investment Company Act of 1940, the Board shall fix
the record date within the time required for holding such Annual Meeting as
provided in Section 4 of these By-Laws, but not more than 90 nor less than 10
days prior to such Meeting.
-30-
<PAGE>
Only such stockholders who shall be stockholders of record on the date so
fixed shall be entitled to such notice of, and to vote at, such meeting and
any adjournment thereof, or to receive payment of such dividend, or to receive
such allotment of rights, or to exercise such rights, or to give such consent,
as the case may be, notwithstanding any transfer of any stock on the books of
the corporation after any such record date fixed as aforesaid.
REGISTERED STOCKHOLDERS
-----------------------
49. The corporation shall be entitled to treat the holder of record
of any share or shares of stock as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to
or interest in such share on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided by
the laws of Maryland.
LOST CERTIFICATE
----------------
50. The Board of Directors may direct a new certificate to be issued
in place of any certificate alleged to have been lost or destroyed upon
furnishing proof of such loss or destruction satisfactory to the board and
furnishing the corporation a bond in such sum as the board may direct as
indemnity against any claim that may be made against the corporation by reason
of the issue of such new certificate.
DIVIDENDS
---------
51. Dividends upon the capital stock of the corporation, if any, may
be declared by the Board of Directors or
-31-
<PAGE>
at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Articles of Incorporation and the applicable laws of Maryland.
52. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for such
other purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created. Whenever dividends are paid out of sources
other than accumulated undistributed net income or net income for the current
or preceding fiscal year, such fact and the basis of such determination shall
be clearly revealed to the shareholders at the time of payment. For such
purpose profits or losses realized upon the sale of securities or other
property shall be excluded from net income.
53. The Board of Directors may provide by resolution that all
dividends disbursed shall be reinvested at net asset value, except that
provision shall be made to distribute any dividend to shareholders in cash if
such shareholders so elect in writing on a form provided by the corporation or
approved by the board.
-32-
<PAGE>
FISCAL YEAR
-----------
54. The fiscal year shall end the last day in November in each year.
SEAL
----
55. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Maryland." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced otherwise.
INDEMNIFICATION OF
OFFICERS AND DIRECTORS
----------------------
56. With respect to the indemnification of the Officers and Directors
of the Corporation:
(a) The Corporation shall indemnify each Officer and Director
made party to a proceeding, by reason of service in such capacity, to the
fullest extent, and in the manner provided, under section 2-418 of the
Maryland General Corporation law: (i) unless it is proved that the person
seeking indemnification did not meet the standard of conduct set forth in
subsection (b)(1) of such section; and (ii) provided, that the Corporation
shall not indemnify any Officer or Director for any liability to the
Corporation or its security holders arising from the willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person's office.
-33-
<PAGE>
(b) The provisions of clause (i) of paragraph (a) herein
notwithstanding, the Corporation shall indemnify each Officer and Director
against reasonable expenses incurred in connection with the successful defense
of any proceeding to which such Officer or Director is a party by reason of
service in such capacity.
(c) The Corporation, in the manner and to the extent provided by
applicable law, shall advance to each Officer and Director who is made party
to a proceeding by reason of service in such capacity the reasonable expenses
incurred by such person in connection therewith.
AMENDMENTS
----------
57. These By-Laws may be altered, amended, or repealed by a vote of a
majority of all the votes cast at a regular meeting of the stockholders at
which quorum of the outstanding voting securities of the corporation is
present in person or by proxy at any regular meeting of the stockholders, or
at any special meeting thereof if notice of such alteration, amendment, or
repeal be contained in the notice of such meeting.
Section 18 of these By-Laws may be amended only by the vote at the
duly called annual or a special meeting of the stockholders of the corporation
(a) of 67 per cent or more of the voting securities present at such meeting,
if the holders of more than 50 per cent of the outstanding voting securities
of the corporation are present or represented by proxy or (b) of more
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<PAGE>
than 50 per cent of the outstanding voting securities of the corporation,
whichever is the less.
In addition, these By-Laws may be altered, amended, or repealed except
Section 18 by a majority vote of the directors in office.
-35-
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made April 1, 1991, between EAGLE GROWTH SHARES,
INC., a Maryland corporation (herein called the "Fund") and
BAXTER FINANCIAL CORPORATION, a Florida corporation, (herein
called the "Adviser").
The purpose of this Agreement is to set forth all the terms
and conditions upon which the Adviser will furnish investment
advisory services to the Fund in the conduct of its business as
an investment company.
In consideration of the mutual promises herein contained,
the parties hereto, intending to be legally bound, agree as
follows:
1. The Adviser shall conduct a continuous review of the
Fund's investment portfolio and also on a continuous basis
provide the Fund with investment advice and recommendations
regarding the investment and reinvestment of the Fund's assets,
including in the opinion of the Adviser, what securities should
be purchased or sold by the Fund, what portion of the Fund's
assets should remain uninvested, the extent to which the Fund
shall lend its portfolio securities, engage in the writing or
purchase of options and otherwise exercise its investment powers.
<PAGE>
All investment advice and recommendations provided by the Adviser
under this Agreement shall be consistent with the investment
objectives, investment policies and investment limitations of the
Fund as set forth in its registration statements filed with the
Securities and Exchange Commission ("Commission"), Articles of
Incorporation, Bylaws and the directions of the Board of
Directors of the Fund, and authorized duly organized committees
created by the Board of Directors, as currently stated, and as
may be hereinafter supplemented and amended during the term of
this Agreement. The Adviser shall have discretionary authority
to effect securities transactions for the Fund.
2. Upon the request of the Fund, the Adviser will report
to the Fund and furnish the Fund with information about the
transactions effected for the Fund and the bases of any
recommendations or advice given the Fund concerning the
investment portfolio of the Fund.
3. The Adviser shall provide the Fund with statistical
analyses and research studies with respect to various issues,
issuers and industries, and reports, statistical and factual
analyses and studies relating to general economic and financial
trends at the request of the Fund.
<PAGE>
4. It shall be the responsibility of the Adviser to
ascertain that all services required to be provided to the Fund
under this Agreement are fully furnished in a timely manner.
5. The Fund shall pay to the Adviser an annual fee equal
to the sum of the following: .75 percent of the net asset value
of the Fund which does not exceed two hundred million dollars
($200,000,000), plus .625 percent of the net asset value of the
Fund which exceeds two hundred million dollars ($200,000,000) but
does not exceed four hundred million dollars ($400,000,000), plus
.50 percent of the net asset value of the Fund which exceeds four
hundred million dollars ($400,000,000), such net assets to be
calculated as of the last business day of the month for which the
fee is being calculated. The fee provided for in this Section 5
shall be paid on the fifth business day of the month next
succeeding the month for which the fee has been calculated. The
fee provided for herein shall be paid monthly at a rate equal to
1/12th of the annual rate. In computing such fee the net asset
value of the Fund shall be the appraised value of the assets
determined in accordance with the principles relating thereto set
forth in the Bylaws of the Fund as may be amended from time to
time (which provisions are incorporated herein by reference) less
all liabilities including commissions, reserves and accruals as
determined in the discretion of the Board of Directors of the
<PAGE>
Fund. In the event that this Agreement shall commence or
terminate on other than the first day or last day of a month, the
fee payable under this Section 5 for such month(s) shall be pro
rated on a daily basis.
6. The Fund shall pay all of its own costs and operating
expenses of every kind and nature, including, but not limited to,
printing expenses, fees and expenses of its independent public
accountant, legal fees, costs of reports to its stockholders and
reports to the Commission, registration statements, the
preparation of the Fund's tax returns, costs of custodian,
dividend disbursing and transfer agent, and costs in connection
with meetings of its Board of Directors and stockholders.
7. It is understood and agreed that directors, officers,
agents and stockholders of the Fund are or may be interested in
Adviser as stockholders, employees, agents or otherwise, and that
stockholders, employees and agents of the Adviser are or may be
interested in the Fund as directors, officers, stockholders or
otherwise. It is understood and agreed further that the Adviser
may be interested in the Fund as a stockholder or otherwise.
8. This Agreement will become effective on April 1, 1991
or on such other date as may be agreed by the Fund and the
<PAGE>
Adviser after approval by a vote of the holders of a majority of
the outstanding voting securities of the Fund and following
approval by a vote of a majority of the Board of Directors of the
Fund, including approval of the terms of this Agreement by a
majority of those directors who, under Sections 15(c) and
2(a)(19) of the Investment Company Act of 1940 ("1940 Act") are
not parties to this Agreement or interested persons of any such
party, cast in person at a meeting specifically called to approve
the terms of this Agreement. This Agreement shall remain in
force until March 31, 1993 and will continue thereafter from year
to year so long as such continuance is specifically approved at
least annually by a majority vote of the Board of Directors of
the Fund, or by a vote of the holders of a majority of the
outstanding voting securities of the Fund; provided, however,
that in order to effect any such continuance, the terms of this
Agreement must also be approved by a majority vote, cast in
person, of those directors of the Fund who, under Sections 15(c)
and 2(a)(19) of the 1940 Act are not parties to this Agreement or
interested persons of any such party, at a meeting called for the
purpose of considering the approval of this Agreement. This
Agreement may be terminated at any time, without payment of
penalty, by the Board of Directors of the Fund or by a vote of
the holders of a majority of the outstanding voting securities of
the Fund, upon not more than sixty (60) days written notice to
<PAGE>
Adviser, and it may be terminated by the Adviser, without
penalty, upon not more than sixty (60) days written notice to the
Fund. Any notice provided for herein shall be deemed duly given
if mailed to the regular executive office of the Fund or Adviser
as the case may be. This Agreement shall automatically terminate
in the event of its "assignment", as defined by the 1940 Act,
unless the Commission grants an exemption from those provisions
of the 1940 Act which would otherwise operate to terminate the
Agreement automatically in the event of its assignment.
9. This Agreement shall not be amended nor shall it or any
rights hereunder be assigned, transferred or in any manner
hypothecated except as specifically provided herein; nor shall
any new contract between the Fund and Adviser become effective
without the affirmative vote of a majority of the outstanding
voting securities of the Fund; provided that the foregoing
limitations shall not prevent any minor amendments to the
<PAGE>
Agreement which may be required by Federal or state regulatory
bodies.
IN WITNESS WHEREOF the parties hereto, intending to be
legally bound, have caused this Agreement to be executed on the
day and year first above written.
EAGLE GROWTH SHARES, INC.
Attest:
/s/Linda J. Budshaw By:/s/Ronald F. Rohe
- ----------------------------- -------------------------
Asst. Secretary
BAXTER FINANCIAL CORPORATION
Attest:
/s/Warren W. Flaschar By:/s/Donald H. Baxter
- ----------------------------- -------------------------
Secretary
<PAGE>
UNDERWRITING AGREEMENT
BETWEEN
EAGLE GROWTH SHARES, INC.
AND
BAXTER FINANCIAL CORPORATION
THIS AGREEMENT entered into this 19th day of March, 1991, by
and between EAGLE GROWTH SHARES, INC., a Maryland corporation
with its principal office located at 1200 North Federal Highway,
Suite 424, Boca Raton, Florida 33432 (hereinafter called the
"Fund"), and BAXTER FINANCIAL CORPORATION, a Florida corporation
with its principal office located at 1200 North Federal Highway,
Suite 424, Boca Raton, Florida 33432 (hereinafter called the
"Company").
W I T N E S S E T H:
-------------------
In consideration of the mutual covenants contained herein,
the parties, intending to be legally bound, hereby agree as
follows:
1. The Fund hereby appoints the Company as agent of the
Fund to offer and sell the shares of the capital stock of the
Fund ("Shares") in accordance with the Fund's registration
<PAGE>
statement, as amended from time to time, on a "best efforts"
basis. The Company may offer and sell the Shares directly and
through securities dealers selected by the Company, provided that
any such dealer shall have entered into a sales agreement with
the Company the form of which has been approved by the Fund as
provided in section 7 herein.
2. The Fund shall not sell the Shares except: (a) to fill
orders for Shares received from the Company or a co-underwriter
approved by the Fund as provided in Section 8 herein, if any, or
(b) in connection with a merger or consolidation with another
investment company, or the acquisition of all, or substantially
all, of the assets of another investment company, or (c) to fill
orders for Shares received by the Fund's custodian directly from
investors, and (d) to the custodian of Eagle Growth Shares
Investing Programs.
3. Orders for the purchase of Shares placed by the Company
shall be subject to the provisions of paragraphs (f) and (g) of
section 26 of the Rules of Fair Practice of the NASD, the
provisions of which are hereby incorporated by reference.
<PAGE>
4. The purchase price of the Shares shall be equal to the
current net asset value thereof, plus sales commissions ("public
offering price"), as set forth in the registration statement of
the Fund, as amended from time to time. Purchase orders received
by the Company not later than the close of the New York Stock
Exchange ("NYSE") on each day when the Fund is open for business
shall be priced at the public offering price calculated after
receipt of such orders by the Company provided that the Fund
receives such orders from the Company prior to the close of
business of the Fund on such day. It shall be the responsibility
of the Company to transmit purchase orders which it receives
prior to the close of the NYSE to the Fund prior to the close of
business of the Fund on such day. Purchase orders received by
the Company after the close of the NYSE shall be priced at the
public offering price next calculated.
5. The Fund shall bear the costs of typesetting, printing
and mailing prospectuses, statements of additional information,
reports and other communications sent to its own stockholders,
and shall also pay its own legal and auditing fees incurred in
connection with preparation of amendments to its registration
statement, as well as the fees and costs associated with the
registration and qualification of the Shares in any state or other
<PAGE>
jurisdiction in which the Shares may be offered for sale. The
Company shall pay all costs and expenses, including attorneys'
fees incurred in connection with its own qualification as a
broker-dealer in any state and the costs of printing and mailing
prospectuses and statements of additional information to
prospective investors.
6. The Fund shall register the Shares at its own expense
under the applicable laws of such jurisdictions, and in such
amounts, as the Company considers appropriate. The Company shall
cooperate with the Fund in the preparation and filing of
applications for registration and qualification of the Shares
under applicable law.
7. The Company shall submit to the Fund for approval, prior
to its use, the form of all dealers' sales contracts, sales
literature and advertisements prepared by or for the Company for
dissemination in connection with the sale of the Shares. The
costs of preparing, printing and disseminating such materials
shall be borne by the Company, except to the extent provided in
section 5 herein.
<PAGE>
8. This Agreement shall become effective on April 1, 1991,
if approved, by the vote of a majority of the Board of Directors
of the Fund, including a majority of those Directors who are
neither parties to this Agreement nor interested persons of any
such party, by a vote cast in person at a meeting called for the
purpose of voting on such approval, and shall continue in effect
for two years after its effective date, and may be continued in
effect thereafter for successive periods of not more than one
year, provided that each such continuance shall be approved by
the Board of Directors of the Fund in the manner set forth in
this section 8. The Fund may terminate this Agreement, without
penalty, at any time upon 60 days written notice to the Company.
This Agreement shall automatically terminate in the event of its
assignment unless the Securities and Exchange Commission has
issued an Order exempting the Fund and the Company from the
provisions of the 1940 Act, which otherwise would have caused the
termination of this Agreement. The Company may terminate this
Agreement, without penalty, upon 60 days written notice to the
Fund.
9. No amendment to this Agreement shall become effective
unless its terms have been approved by the Board of Directors of
the Fund, as provided in section 8 herein.
<PAGE>
10. Nothing contained in this Agreement shall make the
Company, or its officers, directors, or shareholders, liable for
any loss sustained by the Fund or by any other person on account
of any act or omission of the Company under this Agreement,
provided that nothing herein contained shall protect the Company
against any liability to the Fund or its shareholders to which
the Company would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard
of its duties hereunder.
11. As used in this Agreement, the term "1940 Act" means
the Investment Company Act of 1940, as amended, and terms
"interested persons," and "assignment," shall have the respective
meanings specified in the 1940 Act. The term "NASD" shall mean
the National Association of Securities Dealers, Inc.
12. This Agreement shall be construed in accordance with
the laws of the State of Florida, except to the extent such laws
are preempted by the 1940 Act.
<PAGE>
13. Any notice required to be given hereunder shall be
sent via first class mail to the address of the party as set
forth above.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers on the day and
year first above written.
Attest: EAGLE GROWTH SHARES, INC.
/s/Linda J. Budshaw /s/Ronald F. Rohe
- ---------------------------- ------------------------------
Linda J. Budshaw, Ronald F. Rohe, Vice President
Assistant Secretary
Attest: BAXTER FINANCIAL CORPORATION
/s/Warren W. Flaschar /s/Donald H. Baxter
- ----------------------------- ------------------------------
Warren W. Flaschar, Secretary Donald H. Baxter, President
<PAGE>
Baxter Financial Corporation
1200 North Federal Highway
Suite #424
Boca Raton, Florida 33432
407-395-2155
[Logo]
Gentlemen:
Baxter Financial Corporation, General distributor of the capital stock of
Eagle Growth Shares, Inc. (hereafter referred to as the Fund), cordially
invites you to become a member of the Selling Group which distributes the
Fund's shares. We base our offer of membership to you on our understanding
that you are a member of the National Association of Securities Dealers, Inc.,
and also on the understanding that you agree to act in accordance with the
following terms:
1. You and we agree to abide by Rule 26 of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc., and all other
rules and regulations that are now or may become applicable to
transactions hereunder.
2. Orders for shares received from you and accepted by us will be executed
at the public offering price applicable to each order as established
by the then effective prospectus and Statement of Additional
Information of the Fund. The procedure relating to the handling of
orders shall be subject to instructions which we shall forward from
time to time to all members of the Selling Group. All orders are
subject to acceptance by us and we reserve the right in our sole
discretion to reject any order.
3. You shall, except as otherwise described in the Fund's current
prospectus, at the time of sale, deduct from the public offering price,
concessions as follows:
(a) On individual transactions of $9,999 or less................8.25%
(b) On individual transaction of $10,000 - $24,999, inclusive...7.50%
(c) On individual transaction of $25,000 - $49,999, inclusive...6.00%
(d) On individual transaction of $50,000 - $99,999, inclusive...3.85%
(e) On individual transaction of $100,000 or more...............0.00%
In addition, the discounts set forth in then current prospectus and
Statement of Additional Information, and the reduced concessions
enumerated in (b) through (e) above, shall apply in any instance where
the purchaser, pursuant to a Letter of Intention, makes two or more
purchases of shares from the same dealer in any thirteen month period
which, in the aggregate, total $10,000 or more in offering price and
also to any subsequent purchases by the same stockbroker where the
aggregate of all shares previously purchased and held together with
subsequent purchases equals or exceeds the quantity discount brackets
set forth in (b) through (e) above. This foregoing right of
accumulation is also applicable where the investor holds shares of
Eagle Growth Shares, Inc. and/or Philadelphia Fund, Inc., including
shares held under Eagle Growth Shares or Philadelphia Fund Single
Payment Investing Programs and Systematic Investing Programs upon which
all scheduled payments have been made is $10,000 or more.
<PAGE>
4. As a member of the Selling Group, you agree to purchase shares only
from us as agent for the Fund or from your customers. Purchases from
us shall be made only for the purpose of covering purchase orders
already received from your customers (who may be any persons other than
a securities dealer or broker) or for your own bona fide investments.
Purchases from your customers shall be at a price not less than the net
asset value next calculated after the receipt by us of a proper order.
Nothing herein contained shall prevent you from selling any shares for
the account of the record holder to us as agent for the Fund or to the
Fund itself at the bid price quoted by us, and charging your customer a
fair commission for handling the transaction.
5. You agree that you will not withhold placing customers' orders so as to
profit yourself as a result of such withholding.
6. You agree to sell shares only (a) to your customers at the public
offering price then applicable in accordance with the terms of the
currently effective prospectus and Statement of Additional Information
(b) to us as agent for the Fund at the redemption price as described in
the prospectus and Statement of Additional Information. This
redemption price is the net asset value determined as of the close of
business on the New York Stock Exchange. Such price will be applicable
to proper orders tendering certificates of stock for repurchase
received by us prior to the time of such calculation. The prospectuses
describe the method that shall be employed in determining this price.
Shares for which certificates have not been issued may not be tendered
for repurchase through you.
7. Settlements shall be made promptly, but in no case later seven business
days after our acceptance of the order or, if so specified by you, we
will make delivery by draft on you with certificates in negotiable form
attached, the amount of which draft you agree to pay on presentation to
you. If payment is not so received or made, the right is reserved
forthwith to cancel the sale or, at our option, to have the shares
purchased or redeemed by the Fund at the then prevailing net asset
value, in which latter case you will agree to be responsible for any
loss resulting to the Fund or to us from your failure to make payment
as aforesaid.
8. If any shares sold to you under the terms of this agreement are
repurchased by the Fund or by us as agent for the Fund or are tendered
to the Fund for purchase at net asset value under the terms of its by-
laws within seven business days after the date of our confirmation to
you of your original purchase order therefor, you agree to pay
forthwith to us the full amount of the concession allowed to you on the
original sale and we agree to pay such amount to the Fund when received
by us. We also agree to pay the Fund the amount of our share of the
"load" on the original sale of such shares. We shall notify you of
such repurchase within ten days from the date on which the certificates
are delivered to us or to the Fund, where certificates have been
issued; if certificates have not been issued, we will notify you within
ten days of said liquidation.
9. All sales will be subject to receipt of shares by us from the Fund.
The Fund and/or we reserve the right in our discretion without notice
to you to suspend sales or withdraw the offering of shares entirely, to
change the offering price as provided in the prospectus or to modify or
cancel this agreement, which shall be construed in accordance with the
laws of the State of Florida.
<PAGE>
10. No person is authorized to make any representations concerning the Fund
or their shares except those contained in the effective prospectus, the
current Statement of Additional Information and any such information as
may be released by the Fund as information supplemental to the
prospectus and the Statement of Additional information. In purchasing
shares from us you shall rely solely on the representations contained
in the effective prospectus, the current Statement of Information and
supplemental information above mentioned.
11. Additional copies of any prospectus, the current Statement of
Additional Information and of any printed information issued as
supplemental literature to said documents will be supplied by us to
members of the Selling Group in reasonable quantities upon request.
Each prospective investor shall be entitled to a copy of the current
Statement of Additional Information without charge upon request.
12. In no transaction shall you have the authority whatever to act as agent
of the Fund or of us or of any other member of the Selling Group, and
nothing in this agreement shall constitute either of us the agent of
the other or shall constitute you or the Fund the agent of the other.
In all transactions in these shares between you and us, you are as
acting as principal, or as agent for an undisclosed principal, and we
as agent for the Fund.
13. Shares sold to us (where certificates have been issued) shall be
delivered directly to American Data Services, Inc. the Fund's Agent,
and all communications to us shall be sent to 1200 North Federal
Highway, Suite #424, Boca Raton, FL 33432. Any notice to you shall be
duly given if mailed or telegraphed to you at your address as
registered from time to time with the National Association of
Securities Dealers, Inc.
14. This agreement shall supersede and replace all prior sales agreements
between us relating to the shares of Eagle Growth Shares, Inc.
BAXTER FINANCIAL CORPORATION
By /s/Donald H. Baxter
-------------------------
Donald H. Baxter, President
Date________________________________
- -----------------------------------------------------------------------------
The undersigned accepts your invitation to become a member of the Selling
Group and agrees to abide by the foregoing terms and conditions. The
undersigned acknowledges receipt of Eagle Growth Shares, Inc. prospectus for
use in connection with this offering.
___________________________________ ___________________________________
(Dealer) (Employer I.D. Number)
___________________________________ ___________________________________
(Address) (Authorized Signature)
___________________________________ ___________________________________
(Telephone) (Date)
<PAGE>
CUSTODY AGREEMENT
-----------------
Agreement made as of the 1 day of February, 1995,
between Eagle Growth Shares, Inc., (the "Fund"), an open-end
diversified investment company corporation organized under the
laws of Maryland and having its office at 1200 North Federal
Highway, Suite 424, Boca Raton, FL 33432, and Star Bank, N.A.
(the "Custodian"), a national banking association having its
principal office and place of business at Star Bank Center, 425
Walnut Street, Cincinnati, Ohio 45202, which Agreement provides
for the furnishing of custodian services to the Fund. Custodian
agrees to retain custody of U.S. Government Securities and
securities issued and sold primarily in the United States.
Pursuant to Paragraph 6 of Article IX of this Agreement,
Custodian hereby appoints Bankers Trust Company as Sub-Custodian
to retain custody of foreign securities in accordance with the
terms and conditions of the Agreement dated as of 10/17/94
between Bankers Trust Company and Star Bank, N.A. attached
hereto as Appendix D (the "Sub-Custodian Agreement"). The Fund
hereby acknowledges such appointment and expressly agrees to the
terms and conditions set forth in the Sub-Custodian Agreement.
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter
set forth the Fund, on behalf of the Fund, and the Custodian
agree as follows:
ARTICLE I
DEFINITIONS
-----------
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1. "Authorized Person" shall be deemed to include the Chairman,
President, Secretary, Treasurer, Controller, and the Senior Vice
President, or any other person, whether or not any such person
is an officer or employee of the Fund, duly authorized by the
Board of Directors of the Fund to give Oral Instructions and
Written Instructions on behalf of the Fund and listed in the
Certificate annexed hereto as Appendix A or such other
Certificate as may be received
<PAGE>
by the Custodian from time to time, subject in each case to any
limitations on the authority of such person as set forth in
Appendix A or any such Certificate.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency
securities, its successor or successors and its nominee or
nominees, provided the Custodian has received a certified copy
of a resolution of Board of Directors of the Fund specifically
approving deposits in the Book-Entry System.
3. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement
to be given to the Custodian which is signed on behalf of the
Fund by an officer of the Fund and is actually received by the
Custodian.
4. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
Exchange Commission, its successor or successors and its nominee
or nominees. The term "Depository" shall further mean and
include any other person or clearing agency authorized to act as
a depository under the Investment Company Act of 1940, its
successor or successors and its nominee or nominees, provided
that the Custodian has received a certified copy of a resolution
of the Board of Directors of the Fund specifically approving DTC
and such other person or clearing agency as a depository.
5. "Dividend and Transfer Agent" shall mean the dividend and
transfer agent active, from time to time, in such capacity
pursuant to a written agreement with the Fund, changes in which
the Fund shall immediately report to the Custodian in writing.
6. "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to
principal and/or interest by the government of the United States
or agencies or instrumentalities thereof, commercial paper,
obligations (including certificates of deposit, bankers'
acceptances, repurchase and reverse repurchase agreements with
respect to the same) and bank time deposits of domestic banks
that are members of Federal Deposit Insurance Corporation, and
short-term corporate obligations where the purchase and sale of
such securities normally require settlement in federal funds or
<PAGE>
their equivalent on the same day as such purchase or sale, all
of which mature in not more than thirteen (13) months.
7. "Officers" shall be deemed to include the Chairman, the
President, the Secretary, the Treasurer, the Controller, and
Senior Vice President of the Fund listed in the Certificate
annexed hereto as Appendix A or such other Certificate as may be
received by the Custodian from time to time.
8. "Oral Instructions" shall mean oral instructions actually
received by the Custodian from an Authorized Person (or from a
person which the Custodian reasonably believes in good faith to
be an Authorized Person) and confirmed by Written Instructions
from Authorized Persons in such manner so that such Written
Instructions are received by the Custodian on the next business
day.
9. "Prospectus" shall mean the Fund's then currently effective
prospectus and statement of additional information, as filed
with and declared effective from time to time by the Securities
and Exchange Commission.
10. "Security or Securities" shall mean Money Market
Securities, common or preferred stocks, options, financial
futures and options thereon, bonds, debentures, corporate debt
securities, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments
representing rights to receive, purchase or subscribe for the
same, or evidencing or representing any other rights or interest
therein, or any property or assets.
11. "Written Instructions" shall mean communication actually
received by the Custodian from one Authorized Person or from one
person which the Custodian reasonably believes in good faith to
be an Authorized Person in writing or by telex or any other such
system whereby the receiver of such communication is able to
verify by codes or otherwise with a reasonable degree of
certainty the authenticity of the senders of such communication.
12. "Foreign Securities" include securities issued and sold
primarily outside of the United States by a foreign government,
a national of any foreign country or a corporation or other
organization incorporated or organized under the laws of any
foreign country and
<PAGE>
securities issued or guaranteed by the Government of the United
States or by any state or any political subdivision thereof or by
any agency thereof by any entity organized under the laws of the
United States or of any state thereof which have been issued and
sold primarily outside the United States.
ARTICLE II
APPOINTMENT OF CUSTODIAN
------------------------
1. The Fund, hereby constitutes and appoints the Custodian as
custodian of all the Securities and monies at any time owned by
the Fund during the period of this Agreement (the "Fund
Assets").
2. The Custodian hereby accepts appointment as such Custodian
and agrees to perform the duties thereof as hereinafter set
forth.
ARTICLE III
DOCUMENTS TO BE FURNISHED BY THE TRUST
--------------------------------------
The Fund hereby agrees to furnish to the Custodian the following
documents:
1. A copy of its Articles of Incorporation certified by its
Secretary.
2. A copy of its By-Laws certified by its Secretary.
3. A copy of the resolution of its Board of Directors appointing
the Custodian certified by its Secretary.
4. A copy of the most recent Prospectus of the Fund.
5. A Certificate of the President and Secretary setting forth
the names and signatures of the present officers of the Fund.
ARTICLE IV
CUSTODY OF CASH AND SECURITIES
------------------------------
1. The Fund will deliver or cause to be delivered to the
Custodian all Fund Assets, including cash received for the
issuance of its shares, at any time during the period of this
<PAGE>
Agreement. The Custodian will not be responsible for such Fund
Assets until actually received by it or its' sub-custodians.
Upon such receipt, the Custodian shall hold in safekeeping and
physically segregate at all times from the property of any other
persons, firms or corporations all Fund Assets received by it
from or for the account of the Fund. The Custodian will be
entitled to reverse any credits made on the Fund's behalf where
such credits have been previously made and monies are not
finally collected within 90 days of the making of such credits.
The Custodian is hereby authorized by the Fund, acting on behalf
of the Fund, to actually deposit any Fund Assets in the
Book-Entry System or in a Depository, provided, however, that
the Custodian shall always be accountable to the Fund for the
Fund Assets so deposited. Fund Assets deposited in the
Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for
customers, including but not limited to accounts in which the
Custodian acts in a fiduciary or representative capacity.
2. The Custodian shall credit to a separate account or accounts
in the name of the Fund all monies received by it for the
account of the Fund, and shall disburse the same only:
(a) In payment for Securities purchased for the account of the
Fund, as provided in Article V;
(b) In payment of dividends or distributions, as provided in
Article VI hereof;
(c) In payment of original issue or other taxes, as provided
in Article VII hereof;
(d) In payment for shares of the Fund redeemed by it, as
provided in Article VII hereof;
(e) Pursuant to Certificates (i) directing payment and setting
forth the name and address of the person to whom the payment is
to be made, the amount of such payment and the purpose for which
payment is to be made (the Custodian not being required to
question such direction) or
(f) In reimbursement of the expenses and liabilities of the
Custodian, as provided in paragraph 10 of Article IX hereof.
<PAGE>
3. Promptly after the close of business on each day the Fund is
open and valuing its portfolio, the Custodian shall furnish the
Fund with a detailed statement of monies held for the Fund under
this Agreement and with confirmations and a summary of all
transfers to or from the account of the Fund during said day.
Where Securities are transferred to the account of the Fund
without physical delivery, the Custodian shall also identify in
its records as belonging to the Fund a quantity of Securities in
a fungible bulk of Securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account
on the books of the Book-Entry System or Depository. At least
monthly and from time to time, the Custodian shall furnish the
Fund with a detailed statement of the Securities held for the
Fund under this Agreement.
4. All Securities held for the Fund, which are issued or
issuable only in bearer form, except such Securities as are held
in the Book-Entry System, shall be held by the Custodian in that
form; all other Securities held for the Fund may be registered
in the name of the Fund, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from
time to time determine, or in the name of the Book-Entry System
or Depository or their successor or successors, or their nominee
or nominees. The Fund agrees to furnish to the Custodian
appropriate instruments to enable the Custodian to hold or
deliver in proper form for transfer, or to register in the name
of its registered nominee or in the name of the Book-Entry
System or Depository, any Securities which it may hold for the
account of the Fund and which may from time to time be
registered in the name of the Fund. The Custodian shall hold
all such Securities which are not held in the Book-Entry System
by a Depository or a Sub-Custodian in a separate account or
accounts in the name of the Fund segregated at all times from
those of any other fund maintained and operated by the Fund and
from those of any other person or persons.
5. Unless otherwise instructed to the contrary by a
Certificate, the Custodian shall with respect to all Securities
held for the Fund in accordance with this Agreement on a timely
basis:
(a) Collect all income due or payable to the Fund with respect
to the Fund Assets;
<PAGE>
(b) Present for payment and collect the amount payable upon
all Securities which may mature or be called, redeemed, or
retired, or otherwise become payable;
(c) Surrender Securities in temporary form for definitive
Securities;
(d) Execute, as Custodian, any necessary declarations or
certificates of ownership under the Federal income tax laws or
the laws or regulations of any other taxing authority, including
any foreign taxing authority, now or hereafter in effect; and
(e) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the
account of the Fund all rights and similar securities issued
with respect to any Securities held by the Custodian hereunder.
6. Upon receipt of a Certificate and not otherwise, the
Custodian directly or through the use of the Book-Entry System
or the Depository shall:
(a) Execute and deliver to such persons as may be designated
in such Certificate proxies, consents, authorizations, and any
other instruments whereby the authority of the Fund as owner of
any Securities may be exercised;
(b) Deliver any Securities held for the Fund in exchange for
other Securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, merger, consolidation
or recapitalization of any corporation, or the exercise of any
conversion privilege;
(c) Deliver any Securities held for the account of the Fund to
any protective committee, reorganization committee or other
person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or
other instruments or documents as may be issued to it to
evidence such delivery; and
(d) Make such transfers or exchanges of the assets of the Fund
and take such other steps as shall be stated in said Certificate
to be for the purpose of effectuating any duly
<PAGE>
authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund.
(e) Deliver any securities held for the Fund to the depository
agent in connection with tender or other similar offers for
portfolio securities of the Fund as directed by the Fund.
7. The Custodian shall promptly deliver to the Fund all
notices, proxy material and executed but unvoted proxies
pertaining to shareholder meetings of Securities held by the
Fund. The Custodian shall not vote or authorize the voting of
any Securities or give any consent, waiver or approval with
respect thereto unless so directed by a Certificate or Written
Instruction.
8. The Custodian shall promptly deliver to the Fund all
material received by the Custodian and pertaining to Securities
held by the Fund with respect to tender or exchange offers,
calls for redemption or purchase, expiration of rights, name
changes, stock splits and stock dividends, or any other activity
involving ownership rights in such Securities.
ARTICLE V
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
--------------------------------------------
1. Promptly after each purchase of Securities by the Fund, the
Fund shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities, a
Certificate or Written Instructions, and (ii) with respect to
each purchase of Money Market Securities, Written Instructions,
a Certificate or Oral Instructions, specifying with respect to
each such purchase: (a) the name of the issuer and the title of
the Securities, (b) the principal amount purchased and accrued
interest, if any, (c) the date of purchase and settlement, (d)
the purchase price per unit, (e) the total amount payable upon
such purchase and (f) the name of the person from whom or the
broker through whom the purchase was made. The Custodian shall
upon receipt of Securities purchased by or for the Fund, pay out
of the monies held for the account of the Fund the total amount
payable to the person from whom or the broker through whom the
<PAGE>
purchase was made, provided that the same conforms to the total
amount payable as set forth in such Certificate, Written
Instructions or Oral Instructions.
2. Promptly after each sale of Securities by the Fund for the
account of the Fund, the Fund shall deliver to the Custodian (i)
with respect to each sale of Securities which are not Money
Market Securities, a Certificate or Written Instructions, and
(ii) with respect to each sale of Money Market Securities,
Written Instructions, a Certificate or Oral Instructions,
specifying with respect to each such sale: (a) the name of the
issuer and the title of the Security, (b) the principal amount
sold, and accrued interest, if any, (c) the date of sale, (d)
the sale price per unit, (e) the total amount payable to the
Fund upon such sale and (f) the name of the broker through whom
or the person to whom the sale was made. The Custodian shall
deliver the Securities upon receipt of the total amount payable
to the Fund upon such, provided that the same conforms to the
total amount payable as set forth in such Certificate, Written
Instructions or Oral Instructions. Subject to the foregoing,
the Custodian may accept payment in such form as shall be
satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers
in Securities.
3. The Custodian shall upon receipt of Proper instructions
establish and maintain a segregated account or accounts for and
on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities
maintained in an account in a Depository or Book-Entry System,
i) in accordance with the provisions of any Agreement among
the Fund, the Custodian and a broker-dealer registered under the
Exchange Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating
to compliance with the rules of The Options Clearing Corporation
and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Fund,
<PAGE>
ii) for purposes of segregating cash or government securities
in connection with options purchased, sold or written by the
Fund or commodity futures contracts or options thereon purchased
or sold by the Fund,
iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666,
or any subsequent release or releases or rule of the Securities
and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and
iv) for other proper corporate purposes, but only, in the case
of clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board of
Directors or of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purposes of such segregated account
and declaring such purposes to be proper corporate purposes.
4. On contractual settlement date, the account of the Fund will
be charged for all purchases settling on that day, regardless of
whether or not delivery is made. On contractual settlement
date, sale proceeds will likewise be credited to the account of
the Fund irrespective of delivery.
In the case of "sale fails", the Custodian may request the
assistance of the Fund in making delivery of the failed
Security.
5. Liability for Payment in Advance of Receipt of Securities
Purchased -- Except as specifically stated otherwise in this
Contract, in any and every case where payment for purchase of
securities for the account of the Fund is made by the Custodian
in advance of receipt of the securities purchased in the absence
of specific written instructions from the Fund to so pay in
advance, the Custodian shall be absolutely liable to the Fund
for such securities to the same extent as if the securities had
been received by the Custodian.
<PAGE>
ARTICLE VI
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
-------------------------------------
1. The Fund shall furnish to the Custodian a copy of the
resolution of the Board of Directors, certified by the
Secretary, either (i) setting forth the date of the declaration
of any dividend or distribution in respect of shares of the
Fund, the date of payment thereof, the record date as of which
Fund shareholders entitled to payment shall be determined, the
amount payable per share to Fund shareholders of record as of
that date and the total amount to be paid by the Dividend and
Transfer Agent of the Fund on the payment date, or (ii)
authorizing the declaration of dividends and distributions in
respect of shares of the Fund on a daily basis and authorizing
the Custodian to rely on Written Instructions or a Certificate
setting forth the date of the declaration of any such dividend
or distribution, the date of payment thereof, the record date as
of which Fund shareholders entitled to payment shall be
determined, the amount payable per share to Fund shareholders of
record as of that date and the total amount to be paid by the
Dividend and Transfer Agent on the payment date.
2. Upon the payment date specified in such resolution, Written
Instructions or Certificate, as the case may be, the Custodian
shall arrange for such payments to be made by the Dividend and
Transfer Agent out of monies held for the account of the Fund.
ARTICLE VII
SALE AND REDEMPTION OF SHARES OF THE FUND
-----------------------------------------
1. The Custodian shall receive and credit to the account of the
Fund such payments for shares of the Fund issued or sold from
time to time as are received from the distributor for the Fund's
shares, from the Dividend and Transfer Agent of the Fund, or
from the Fund.
<PAGE>
2. Upon receipt of Written Instructions, the Custodian shall
arrange for payment of redemption proceeds to be made by the
Dividend and Transfer Agent out of the monies held for the
account of the Fund in the total amount specified in the Written
Instructions.
3. Availability of Federal Funds --Upon mutual agreement
between the Fund and the Custodian, the Custodian shall, upon
receipt of Proper Instructions, make federal funds available to
the Fund as of specified times agreed upon from time to time by
the Fund and the Custodian in the amount of checks received in
payment for Shares of the Fund which are deposited into the
Fund's account.
ARTICLE VIII
INDEBTEDNESS
------------
In connection with any borrowings, the Fund will cause to be
delivered to the Custodian by a bank or broker (including the
Custodian, if the borrowing is from the Custodian), requiring
Securities as collateral for such borrowings, a notice or
undertaking in the form currently employed by any such bank or
broker setting forth the amount which such bank or broker will
loan to the Fund against delivery of a stated amount of
collateral. The Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such borrowing: (a)
the name of the bank or broker, (b) the amount and terms of the
borrowing, which may be set forth by incorporating by reference
an attached promissory note, duly endorsed by the Fund, acting
on behalf of the Fund, or other loan agreement, (c) the date and
time, if known, on which the loan is to be entered into, (d) the
date on which the loan becomes due and payable, (e) the total
amount payable to the Fund on the borrowing date, (f) the market
value of Securities collateralizing the loan, including the name
of the issuer, the title and the number of shares or the
principal amount of any particular Securities and the Custodian
shall deliver on the borrowing date specified in a Certificate
the specified collateral and the executed promissory note, if
any, against delivery by the lending bank or broker of the total
amount of the loan payable provided that the same conforms to
the total amount payable as set forth in
<PAGE>
the Certificate. The Custodian may, at the option of the lending
bank or broker, keep such collateral in its possession, but such
collateral shall be subject to all rights therein given the
lending bank or broker, by virtue of any promissory note or loan
agreement. The Custodian shall deliver in the manner directed by
the Fund from time to time such Securities as additional
collateral as may be specified in a Certificate to collateralize
further any transaction described in this paragraph. The Fund
shall cause all Securities released from collateral status to be
returned directly to the Custodian and the Custodian shall receive
from time to time such return of collateral as may be tendered to
it. In the event that the Fund fails to specify in a Certificate
or Written Instructions the name of the issuer, the title and
number of shares or the principal amount of any particular
Securities to be delivered as collateral by the Custodian, the
Custodian shall not be under any obligation to deliver any
Securities. The Custodian may require such reasonable conditions
with respect to such collateral and its dealings with third-party
lenders as it may deem appropriate.
ARTICLE IX
CONCERNING THE CUSTODIAN
------------------------
1. Except as otherwise provided herein, the Custodian shall not
be liable for any loss, damage, including counsel fees,
resulting from its action or omission to act or otherwise,
except for any such loss or damage arising out of its own
negligence, willful misconduct, or breach of this agreement.
The Fund, only from Fund Assets (or insurance purchased by the
Fund with respect to its liabilities on behalf of the Fund
hereunder), shall defend, indemnify and hold harmless the
Custodian and its directors, officers, employees and agents with
respect to any loss, claim, liability or cost (including
reasonable attorneys' fees) arising or alleged to arise from or
relating to the Fund's duties hereunder or any other action or
inaction of the Fund or its Directors, officers, employees or
agents, except such as may arise from the negligent action,
omission, willful misconduct or breach of this agreement by the
Custodian, its directors, officers, employees or agents. The
Custodian shall defend, indemnify and hold harmless the Fund and
its Directors, officers, employees or agents with respect to any
loss, claim, liability
<PAGE>
or cost (including reasonable attorneys' fees) arising or alleged
to arise from or relating to the Custodian's duties with respect
to the Fund hereunder or any other action or inaction of the
Custodian or its directors, officers, employees, agents, nominees
or Sub-Custodians as to the Fund, except such as may arise from
the negligent action, omission or willful misconduct of the Fund,
its Directors, officers, employees or agents. The Custodian may,
with respect to questions of law, apply for and obtain the advice
and opinion of counsel to the Fund at the expense of the Fund, or
of its own counsel at its own expense, and shall be fully
protected with respect to anything done or omitted by it in good
faith in conformity with the advice or opinion of counsel to the
Fund, and shall be similarly protected with respect to anything
done or omitted by it in good faith in conformity with advice or
opinion of its counsel, unless counsel to the Fund shall, within
a reasonable time after being notified of legal advice received
by the Custodian, have a differing interpretation of such question
of law. The Custodian shall be liable to the Fund for any
proximate loss or damage resulting from the use of the Book-Entry
System or any Depository arising by reason of any negligence,
misfeasance or misconduct on the part of the Custodian or any of
its employees, agents, nominees or Sub-Custodians but not for any
special, incidental, consequential, or punitive damages; provided,
however, that nothing contained herein shall preclude recovery by
the Fund, on behalf of the Fund, of principal and of interest to
the date of recovery on, Securities incorrectly omitted from the
Fund's account or penalties imposed on the Fund, in connection
with the Fund, for any failures to deliver Securities.
In any case in which one party hereto may be asked to
indemnify the other or hold the other harmless, the party from
whom indemnification is sought (the "Indemnifying Party") shall
be advised of all pertinent facts concerning the situation in
question, and the party claiming a right to indemnification (the
"Indemnified Party") will use reasonable care to identify and
notify the Indemnifying Party promptly concerning any situation
which presents or appears to present a claim for indemnification
against the Indemnifying Party. The Indemnifying Party shall
have the option to defend the Indemnified Party against any
claim which may be the subject of the indemnification, and in
the event the Indemnifying Party so
<PAGE>
elects, such defense shall be conducted by counsel chosen by the
Indemnifying Party and satisfactory to the Indemnified Party and
the Indemnifying Party will so notify the Indemnified Party and
thereupon such Indemnifying Party shall take over the complete
defense of the claim and the Indemnifying Party shall sustain no
further legal or other expenses in such situation for which
indemnification has been sought under this paragraph. The
expenses of any additional counsel retained by the Indemnified
Party shall be borne by the Indemnified Party. In no case shall
any party claiming the right to indemnification confess any claim
or make any compromise in any case in which the other party has
been asked to indemnify such party (unless such confession or
compromise is made with such other party's prior written consent).
The obligations of the parties hereto under this paragraph shall
survive the termination of this Agreement.
2. Without limiting the generality of the foregoing, the
Custodian, acting in the capacity of Custodian hereunder, shall
be under no obligation to inquire into, and shall not be liable
for:
(a) The validity of the issue of any Securities purchased by
or for the account of the Fund, the legality of the purchase
thereof, or the propriety of the amount paid therefor;
(b) The legality of the sale of any Securities by or for the
account of the Fund, or the propriety of the amount for which
the same are sold;
(c) The legality of the issue or sale of any shares of the
Fund, or the sufficiency of the amount to be received therefor;
(d) The legality of the redemption of any shares of the Fund,
or the propriety of the amount to be paid therefor;
(e) The legality of the declaration or payment of any
dividend by the Fund in respect of shares of the Fund;
(f) The legality of any borrowing by the Fund on behalf of the
Fund, using Securities as collateral;
<PAGE>
3. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount due to the Fund
from the Dividend and Transfer Agent of the Fund nor to take any
action to effect payment or distribution by the Dividend and
Transfer Agent of the Fund of any amount paid by the Custodian
to the Dividend and Transfer Agent of the Fund in accordance
with this Agreement.
4. Income due or payable to the Fund with respect to Fund
Assets will be credited to the account of the Fund as follows:
(a) Dividends will be credited on the first business day
following payable date irrespective of collection.
(b) Interest on fixed rate municipal bonds and debt securities
issued or guaranteed as to principal and/or interest by the
government of the United States or agencies or instrumentalities
thereof (excluding securities issued by the Government National
Mortgage Association) will be credited on payable date
irrespective of collection.
(c) Interest on fixed rate corporate debt securities will be
credited on the first business day following payable date
irrespective of collection.
(d) Interest on variable and floating rate debt securities and
debt securities issued by the Government National Mortgage
Association will be credited upon the Custodian's receipt of
funds.
(e) Proceeds from options will be credited upon the
Custodian's receipt of funds.
5. Notwithstanding paragraph 5 of this Article IX, the
Custodian shall not be under any duty or obligation to take
action to effect collection of any amount, if the Securities
upon which such amount is payable are in default, or if payment
is refused after due demand or presentation, unless and until
(i) it shall be directed to take such action by a Certificate
and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any
such action or, at the Custodian's option, prepayment.
6. The Custodian may appoint one or more financial or banking
institutions, as Depository or Depositories or as Sub-Custodian
or Sub-Custodians, including, but not limited
<PAGE>
to, banking institutions located in foreign countries, of
Securities and monies at any time owned by the Fund, upon terms
and conditions approved in a Certificate. Current Depository(s)
and Sub-Custodian(s) are noted in Appendix B. The Custodian shall
not be relieved of any obligation or liability under this
Agreement in connection with the appointment or activities of
such Depositories or Sub-Custodians. Any such Sub-Custodian
shall be qualified to serve as such for assets of investment
companies registered under the Investment Company Act of 1940,
as amended ("1940 Act"). The Custodian shall promptly forward
to the Fund all documents it receives from any Sub-Custodian
appointed hereunder which are provided to assist directors of
registered investment companies fulfill their responsibilities
under Rule 17f-5 under the 1940 Act. Further, the Custodian
shall promptly inform the Fund in writing if it receives any
written statement of the Fund's account maintained by any
Sub-Custodian which contains an error.
7. The Custodian shall not be under any duty or obligation to
ascertain whether any Securities at any time delivered to or
held by it for the account of the Fund are such as properly may
be held by the Fund under the provisions of the Articles of
Incorporation and the Fund's By-Laws.
8. The Custodian shall treat all records and other information
relating to the Fund and the Fund Assets as confidential and
shall not disclose any such records or information to any other
person unless (a) the Fund shall have consented thereto in
writing or (b) such disclosure is compelled by law.
9. The Custodian shall be entitled to receive and the Fund
agrees to pay to the Custodian, for the Fund's account from Fund
Assets only, such compensation as shall be determined pursuant
to Appendix C attached hereto, or as shall be determined
pursuant to amendments to such Appendix approved by the
Custodian and the Fund, on behalf of the Fund. The Custodian
shall be entitled to charge against any money held by it for the
account of the Fund the amount of any loss, damage, liability or
expense, including counsel fees, for which it shall be entitled
to reimbursement under the provisions of this Agreement as
determined by
<PAGE>
agreement of the Custodian and the Fund or by the final order of
any court or arbitrator having jurisdiction and as to which all
rights of appeal shall have expired. The expenses which the
Custodian may charge against the account of the Fund include, but
are not limited to, the expenses of Sub-Custodians incurred in
settling transactions involving the purchase and sale of
Securities of the Fund.
10. The Custodian shall be entitled to rely upon any
Certificate. The Custodian shall be entitled to rely upon any
Oral Instructions and any Written Instructions actually received
by the Custodian pursuant to Article IV or V hereof. The Fund
agrees to forward to the Custodian Written Instructions from
Authorized Persons confirming Oral Instructions in such manner
so that such Written Instructions are received by the Custodian,
whether by hand delivery, telex or otherwise, on the first
business day following the day on which such Oral Instructions
are given to the Custodian. The Fund agrees that the fact that
such confirming instructions are not received by the Custodian
shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the
Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions.
11. The Custodian will (a) set up and maintain proper books of
account and complete records of all transactions in the accounts
maintained by the Custodian hereunder in such manner as will
meet the obligations of the Fund under the Investment Company
Act of 1940, with particular attention to Section 31 thereof and
Rules 31 a-1 and 31 a-2 thereunder and those records are the
property of the Fund, and (b) preserve for the periods
prescribed by applicable Federal statute or regulation all
records required to be so preserved. The books and records of
the Custodian shall be open to inspection and audit at
reasonable times and with prior notice by Officers and auditors
employed by the Fund.
12. The Custodian and its Sub-Custodians shall promptly send to
the Fund, for the account of the Fund, any report received on
the systems of internal accounting control of the
<PAGE>
Book-Entry System or the Depository and with such reports on their
own systems of internal accounting control as the Fund may
reasonably request from time to time.
13. The Custodian performs only the services of a custodian and
shall have no responsibility for the management, investment or
reinvestment of the Securities from time to time owned by the
Fund. The Custodian is not a selling agent for shares of the
Fund and performance of its duties as a custodial agent shall
not be deemed to be a recommendation to the Custodian's
depositors or others of shares of the Fund as an investment.
14. Anything to the contrary in their Contract notwithstanding,
the Custodian shall be liable to the Fund for any loss or damage
to the Fund resulting from use of a Sub-Custodian, Depository or
Book-Entry System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents, Sub-Custodians
or of any of its or their employees or from failure of the
Custodian or any such agent or Sub-Custodians to enforce
effectively such rights as it may have against a Sub-Custodian,
the Depository or Book-Entry System; at the election of the
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claim against such Sub-Custodian,
the Depository or Book-Entry System or any other person which
the Custodian may have as a consequence of any such loss or
damage if and to the extent that the Fund has not made whole for
any such loss or damage.
15. Opinion of Fund's Independent accountant -- The Custodian
shall take all reasonable action, as the Fund may from time to
time request, to obtain from year to year favorable opinions
from the Fund's independent accountants with respect to its
activities hereunder in connection with the preparation of the
Fund's Form N-1A, and Form N-SAR or other annual reports to the
Securities and Exchange Commission and with respect to any other
requirements of such Commission.
<PAGE>
ARTICLE X
TERMINATION
-----------
1. Either of the parties hereto may terminate this Agreement
for any reason by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less
than ninety (90) days after the date of giving of such notice.
If such notice is given by the Fund, on behalf of the Fund, it
shall be accompanied by a copy of a resolution of the Board of
Directors, certified by the Secretary or any Assistant
Secretary, electing to terminate this Agreement and designating
a successor custodian or custodians. In the event such notice
is given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a
resolution of its Board of Directors, certified by the
Secretary, designating a successor custodian or custodians to
act on behalf of the Fund. In the absence of such designation by
the Fund, the Custodian may designate a successor custodian
which shall be a bank or trust company having not less than
$2,000,000 aggregate capital, surplus, and undivided profits.
Upon the date set forth in such notice this Agreement shall
terminate, and the Custodian, provided that it has received a
notice of acceptance by the successor custodian, shall deliver,
on that date, directly to the successor custodian all Securities
and monies then owned by the Fund and held by it as Custodian.
Upon termination of this Agreement, the Fund shall pay to the
Custodian on behalf of the Fund such compensation as may be due
as of the date of such termination. The Fund agrees on behalf
of the Fund that the Custodian shall be reimbursed for its
reasonable costs in connection with the termination of this
Agreement.
2. If a successor custodian is not designated by the Fund, on
behalf of the Fund, or by the Custodian in accordance with the
preceding paragraph, or the designated successor cannot or will
not serve, the Fund shall upon the delivery by the Custodian to
the Fund of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and
monies then owned by the Fund, be deemed to be the custodian
for the Fund, and the Custodian shall thereby be relieved of all
duties and responsibilities pursuant to this Agreement, other than
<PAGE>
the duty with respect to Securities held in the Book-Entry System
which cannot be delivered to the Fund to hold such Securities
hereunder in accordance with this Agreement.
ARTICLE XI
MISCELLANEOUS
-------------
1. Appendix A sets forth the names and the signatures of all
Authorized Persons. The Fund agrees to furnish to the
Custodian, on behalf of the Fund, a new Appendix A in form
similar to the attached Appendix A, if any present Authorized
Person ceases to be an Authorized Person or if any other or
additional Authorized Persons are elected or appointed. Until
such new Appendix A shall be received, the Custodian shall be
fully protected in acting under the provisions of this Agreement
upon Oral Instructions or signatures of the present Authorized
Persons as set forth in the last delivered Appendix A.
2. No recourse under any obligation of this Agreement or for
any claim based thereon shall be had against any organizer,
shareholder, Officer, Director, past, present or future as such,
of the Fund or of any predecessor or successor, either directly
or through the Fund or any such predecessor or successor,
whether by virtue of any constitution, statute or rule of law or
equity, or be the enforcement of any assessment or penalty or
otherwise; it being expressly agreed and understood that this
Agreement and the obligations thereunder are enforceable solely
against Fund Assets, and that no such personal liability
whatever shall attach to, or is or shall be incurred by, the
organizers, shareholders, Officers, Directors of the Fund or of
any predecessor or successor, or any of them as such, because of
the obligations contained in this Agreement or implied therefrom
and that any and all such liability is hereby expressly waived
and released by the Custodian as a condition of, and as a
consideration for, the execution of this Agreement.
3. The obligations set forth in this Agreement as having been
made by the Fund have been made by the Board of Directors,
acting as such Directors for and on behalf of the Fund, pursuant
to the authority vested in them under the laws of the State of
Maryland, the Articles of Incorporation and the By-Laws of the
Fund This Agreement has been executed by Officers of the
<PAGE>
Fund as officers, and not individually, and the obligations
contained herein are not binding upon any of the Directors,
Officers, agents or holders of shares, personally, but bind only
the Fund and then only to the extent of Fund Assets.
4. Such provisions of the Prospectus of the Fund and any other
documents (including advertising material) specifically
mentioning the Custodian (other than merely by name and address)
shall be reviewed with the Custodian by the Fund.
5. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall
be sufficiently given if addressed to the Custodian and mailed
or delivered to it at its offices at Star Bank Center, 425
Walnut Street, M. L. 6118, Cincinnati, Ohio 45202, attention
Mutual Fund Custody Department, or at such other place as the
Custodian may from time to time designate in writing.
6. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be
sufficiently given when delivered to the Fund or on the second
business day following the time such notice is deposited in the
U.S. mail postage prepaid and addressed to the Fund at its
office at 1200 North Federal Highway, Suite 424, Boca Raton, FL
33432 or at such other place as the Fund may from time to time
designate in writing.
7. This Agreement with the exception of Appendices A & B may
not be amended or modified in any manner except by a written
agreement executed by both parties with the same formality as
this Agreement, and authorized and approved by a resolution of
the Board of Directors.
8. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
by the Fund or by the Custodian, and no attempted assignment by
the Fund or the Custodian shall be effective without the written
consent of the other party hereto.
9. This Agreement shall be construed in accordance with the
laws of the State of Ohio.
<PAGE>
10. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective Officers, thereunto
duly authorized as of the day and year first above written.
ATTEST: Eagle Growth Shares, Inc.
/s/Ronald F. Rohe By:/s/Donald H. Baxter
- ----------------------- ----------------------
Ronald F. Rohe
Title: President
-------------------
ATTEST: Star Bank, N.A.
/s/Mark Dowling By:/s/Nancy V. Kelly
- ----------------------- ------------------------
Title: Vice President & Trust Officer
-------------------------------
<PAGE>
APPENDIX A
Board of Directors
------------------
Authorized Persons Specimen Signatures
------------------ -------------------
Chairman: Donald H. Baxter /s/Donald H. Baxter
------------------ -------------------
President: Donald H. Baxter /s/Donald H. Baxter
------------------ -------------------
Secretary: Ronald F. Rohe /s/Ronald F. Rohe
------------------ -------------------
Treasurer: Ronald F. Rohe /s/Ronald F. Rohe
------------------ -------------------
Controller:
------------------ -------------------
Adviser Employees:
Keith A. Edelman /s/Keith A. Edelman
------------------ -------------------
Diane M. Sarro /s/Diane M. Sarro
------------------ -------------------
------------------ -------------------
American Data Services, Inc.
Employees:
Michael J. Wagner /s/Michael J Wagner
------------------ -------------------
Sally Lent /s/Sally Lent
------------------ -------------------
------------------ -------------------
------------------ -------------------
<PAGE>
APPENDIX B
The following Depository(s) and Sub-Custodian(s) are employed
currently by Star Bank, N.A. for securities processing and
control . . .
The Depository Trust Company (New York)
7 Hanover Square
New York, NY 10004
The Federal Reserve Bank
Cincinnati and Cleveland Branches
Bankers Trust Company
16 Wall Street
New York, NY 10005
(For Foreign Securities and certain non-DTC eligible
Securities)
<PAGE>
APPENDIX C
Star Bank, N.A.
Custody Fee Schedule
Star Bank, N.A., as Custodian, will receive monthly compensation
for services according to the terms of the following Schedule:
I. Portfolio Transaction Fees:
--------------------------
(a) For each repurchase agreement transaction $7.00
(b) For each portfolio transaction processed
through DTC or Federal Reserve $7.00
(c) For each portfolio transaction processed
through our New York custodian $25.00
(d) For each GNMA/Amortized Security Purchase $25.00
(e) For each GNMA Prin/Int Paydown, GNMA Sales $8.00
(f) For each option/future contract written,
exercised or expired $20.00
(g) For each Cedel/Euro clear transaction $100.00
(h) For each Disbursement (Fund expenses only) $5.00
A transaction is a purchase/sale of a security, free receipt/free
delivery (excludes initial conversion), maturity, tender or
exchange:
II. Monthly Market Value Fee
------------------------
Based upon Month-end at a rate of: Million
-------
.0005 (5 Basis Points) on First $10
.0003 (3 Basis Points) on Next $10
.0002 (2 Basis Points) on Next $20
.0001.5 (1.5 Basis Points) on Balance
III. Monthly Minimum Fee $650.00
-------------------
IV. Out-of-Pocket Expenses
----------------------
The only out-of-pocket expenses charged to your account will
be shipping fees or transfer fees.
V. IRA Documents
-------------
Per Shareholder/year to hold each IRA Document $8.00
For purposes of calculating the fee, all assets being held by Star
Bank N.A., as Custodian, and under management by Baxter Financial
Corp will be included.
<PAGE>
Star Bank, N.A.
Cash Management Fee Schedule
Services Unit Cost Monthly Cost
-------- --------- ------------
DDA Account Maintenance $10.00
Deposits .35
Deposited Items .10
Checks Paid .15
Balance Reporting - P.C. Access 50.00
ACH Origination .08($40 min.)
Controlled Disbursement 110.00
Deposited Items Returned 5.00
NSF 20.00
Data Transmission 110.00
Data Capture .10
(varies depending upon what
information needs to be captured)
Drafts Cleared .179
Lockbox Maintenance 50.00
Lockbox items Processed
(with copy of check) .30
(without copy of check) .24
Wires - Outgoing (Repetitive) 10.00
(Non-Repetitive) 11.00
- Incoming (With Notification) 7.50
PC - initiated wire (outgoing)
(Repetitive) 8.00
(Non-Repetitive) 8.00
Stop Payments 20.00
*Uncollected Charge Star Bank Prime Rate as of first of month
plus 4%
*Fees for uncollected balances are figured on the monthly average.
On a monthly basis any earnings credits generated from uninvested
custody balances will be applied against 100% of the cash
management services fees. Earnings credits are based on the
average yield on the 91 day U.S. Treasury Bill for the preceding
thirteen weeks less 10% reserve.
<PAGE>
Star Bank, N.A.
Global Custody
Fee Schedule
1. Annual Charge on Fund Assets Non-Emerging Markets:
--------------------------------------------------
- 10 basis points on the first $25 million
- 12 basis points on the next $25 million
- Remainder to be negotiated
2. Transaction Fee For Non-Emerging Markets:
-----------------------------------------
- $125 per Security Purchase/sale until funds asset value
reaches $25 million
- $75 per security purchase/sale once funds asset value
exceeds $25 million
Non-Emerging Markets:
---------------------
- - Cedel (Eurobonds) - Australia - Austria
- - Euroclear (Eurobonds) - Belgium - Hong Kong
- Canada - Indonesia
- Denmark - Malaysia
- France - Mexico
(Equities)
- Germany - Philippines
- Italy - Singapore
- Ireland - Spain
- Japan - Sweden
- Luxembourg - Thailand
- Netherlands
- New Zealand
- Norway
- Switzerland
- United Kingdom
<PAGE>
Asset and Transaction Fee - Emerging Markets:
- ---------------------------------------------
Country Annual Asset Fee Transactions
------- ---------------- ------------
Argentina 45 Basis Points $175
Bangladesh 35 Basis Points $175
Brazil 50 Basis Points $125
Chile 30 Basis Points $125
Columbia 40 Basis Points $150
Finland 15 Basis Points $125
Greece 50 Basis Points 20 Basis Points
India 45 Basis Points $175
Mexico (Bonds) 30 Basis Points $125
Pakistan 30 Basis Points $175
Peru 55 Basis Points $175
Portugal 15 Basis Points $125
Shanghai 25 Basis Points $100
Shenzen 25 Basis Points $100
South Korea 15 Basis Points $125
Sri Lanka 25 Basis Points $100
Turkey 30 Basis Points $125
Venezuela 35 Basis Points $125
3. Base Fee - $525 per Account (per month)
4. Communications (Globe *Link) - Free of Charge
* THE ABOVE FEE SCHEDULE ASSUMES THE CLIENT WILL DEAL DIRECTLY
WITH STAR BANK AND ALL FOREIGN SECURITY TRANSACTIONS WILL BE
SETTLED IN U.S. DOLLARS.
Notes
- -----
1. Fees are billed monthly.
2. Fees for the receipt of positions relating to the initial
asset transaction will be waived with the exception of Spain
and Indonesia were re-registration fees will be assessed.
3. Cash movements relating to third party FX trades will be
assessed at $15 per U.S. wire movement and $50 per non U.S.
wire movement. For FX trades concluded with BTCo., this charge
will be waived.
4. Fees for investment in countries not listed will be negotiated
separately.
5. Fees for stamp duty and registration, charged by local
authorities, not included as part of trade cost will be
billed separately.
<PAGE>
APPENDIX D
CUSTODIAN AGREEMENT
AGREEMENT dated as of October 17, 1994 between BANKERS TRUST
COMPANY (the "Custodian") and Star Bank, N.A. (the "Customer").
WHEREAS, the Customer serves as custodian with respect to the
assets of various investors, including investment companies
registered under the Investment Company Act of 1940 ("1940 Act")
and any series thereof (each investor, including each series of a
registered investment company, an "Investor");
WHEREAS, the Customer wishes to retain the Custodian to
provide certain global subcustodian services to the Customer and
the Custodian is willing to provide such services;
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein conatined, it is agreed among the parties hereto
as follows:
1. Employment of Custodian. The Customer hereby employs the
Custodian as custodian of all assets of an Investor which the
Customer delivers to the Custodian and accepted by the Custodian
or any of its subcustodians (as that term is defined in Section
5) anywhere in the world (the "Property") pursuant to the terms
and conditions set forth herein. Without limitation, such
Property shall include stocks and other equity interests of every
type, evidences of indebtedness, other instruments representing
same or rights or obligations to received, purchase, deliver or
sell same and other non-cash investment property of the Customer
("Securities") and cash from whatever source and in whatever
currency ("Cash"). The Custodian shall not be responsible for
any property of the Customer held or received by the Customer or
others and not delivered to the Custodian or any of its
Subcustodians. In delivering any assets to the Custodian, the
Customer shall specify the Investor which owns beneficially such
assets, and shall provide such other information as the Custodian
shall reasonably request.
2. Custody Account. The Custodian agrees to establish and
maintain one or more custody accounts each in the name of the
Customer, on behalf of, and in the name of the Investor
(individually an "Account", collectively the "Accounts") for any
and all Property from time to time received and accepted by the
Custodian or any of its Subcustodians for the account of the
Customer. The Customer acknowledges its responsibility as a
principal for all of its obligations to the Custodian arising
under or in connection with this Agreement, notwithstanding that
it may be acting on behalf an Investor and warrants its authority
to
<PAGE>
deposit in the Accounts any Property received therefor by the
Custodian or any Subcustodian and to give, and authorize others
to give instructions related thereto. The Customer agrees theat
the Custodian shall not be subject to, nor shall its rights and
obligations under this Agreement or with respect to the Accounts
be affected by, any agreement between the Customer and any other
person.
The Custodian shall hold, keep safe and protect as custodian
in the Account, on behalf of the Customer, all Property. All
transactions, including, but not limited to, foreign exchange
transactions, involving the Property shall be executed or
settled solely in accordance with Instructions (as that term is
defied in Section 10), except that until the Custodian receives
Instructions to the contrary, the Custodian will:
(a) collect all interest and dividends and all other
income and payments whether paid in cash or in kind,
on the Property, as the same become payable and
credit the same to the appropriate Account;
(b) present for payment all Securities held in the
Account which are called, redeemed or retired or
otherwise become payable and all coupons and
other income items which call for payment upon
presentation to the extent that the Custodian or its
Subcustodian is actually notified of such
opportunities and hold the cash received in the
appropriate Account pursuant to this Agreement;
(c) exchange Securities where the exchange is purely
ministerial (including, without limitation, the
exchange of temporary securities for those in
definitive form and the exchange of warrants, or
other documents of entitlement to securities, for
the Securities themselves);
(d) whenever notification of a rights entitlement or a
fractional interest resulting from a rights issue,
stock dividend or stock split is received for the
Account and such rights entitlement or fractional
interest bears an expiration date, if after
endeavoring to obtain the Customer's Instructions
such Instructions are not received in time for the
Custodian to take timely action, sell in the
discretion of the Custodian (which sale the Customer
hereby authorizes the Custodian to make)
such rights entitlement or fractional interest and
credit the appropriate Account with the net proceeds
of such sale;
<PAGE>
(e) execute in the Customer's name for the appropriate
Account, whenever the Custodian deems it
appropriate, such ownership and other certificates
as may be required to obtain the payment of income
from the Property; and
(f) pay for the Account, any and all taxes and levies in
the nature of taxes imposed on income on the
Property by any governmental authority. In the
event there is insufficient Cash available in an
Account to pay such taxes and levies, the Custodian
shall notify the Customer of the amount of the
shortfall and the Customer, at its option, may
deposit additional Cash in the Account or take steps
to have sufficient Cash available. The Customer
agrees, when and if requested by the Custodian and
required in connection with the payment of any such
taxes to cooperate with the Custodian in furnishing
information, executing documents or otherwise.
The Custodian shall deliver, subject to Section 12 below, any
and all Property in the Account in accordance with Instructions
and in connection therewith, the Customer will accept delivery
of Securities of the same class and denomination in place of
those contained in the Account. Neither the Custodian nor any
Subcustodian shall have any duty or responsibility to see to the
application of any Property withdrawn from the Account upon
Instructions.
Except as otherwise may be agreed upon by the parties hereto,
the Custodian shall not be required to comply with any
Instructions to settle the purchase of any Securities for an
Account unless there is sufficient Cash in the Account at the
time or to settle the sale of any Securities from the Account
unless such Securities are in deliverable form. Notwithstanding
the foregoing, if the purchase price of such Securities exceeds
the amount of Cash in the Account at the time of such purchase,
the Custodian may, in its sole discretion, advance the amount of
the difference in order to settle the purchase of such
Securities. The amount of any such advance shall be deemed a
loan from the Custodian to the Customer payable on demand and
bearing interest accruing from the date such loan is made to but
not including the date such loan is repaid at a rate per annum
customarily charged by the Custodian on similar loans.
3. Records, Ownership of Property and Statements. The
ownership of the Property whether Securities, Cash and/or other
property, and whether held by the Custodian or a Subcustodian or
in a Securities Depository (as described in Section 5) as
hereinafter authorized, shall be clearly recorded on the
Custodian's books as belonging to the Account and not for the
Custodian's own interest.
<PAGE>
The Custodian shall keep accurate and detailed accounts of all
investments, receipts, disbursements and other transactions for
each Account. All accounts, books and records of the Custodian
relating thereto shall be open to inspection and audit at all
reasonable times during normal business hours by any person
designated by the Customer. The Custodian will supply to the
Customer from time to time, as mutually agreed upon, a statement
in respect to any Property in the Accounts held by the Custodian
or by a Subcustodian. In the absence of the filing in writing
with the Custodian by the Customer of exceptions or objections to
any such statement within sixty (60) days of the mailing thereof,
the Customer shall be deemed to have approved such statement;
absent manifest error or ommission, and in such case or upon
written approval of the Customer of any such statement, the
Custodian shall, to the extent permitted by law, be released,
relieved and discharged with respect to all matters and things
set forth in such statement as though such statement had been
settled by the decree of a court of competent jurisdiction in an
action in which the Customer and all persons having any equity
interest in the Customer were parties.
4. Maintenance of Property Outside of the United States.
Pursuant to Instrustions, Property in an Account may be held in a
country or other jurisdiction outside of the United States;
provided that (a) with respect to Securities, such country or
other jurisdiction shall be one in which the principal trading
market for such Securities is located or the country or other
jurisdiction in which such Securities are to be presented for
payment or are acquired for the Account and (b) with respect to
Cash, the amount thereof to be maintained in any country or other
jurisdiction shall be an amount which is deemed necessary to
settle transactions relating to Securities purchased for the
Account in such country or jurisdiction or which is received in
connection with the holding of such Securities in the Account.
Instructions to settle Securities transactions shall be deemed to
authorize the holding of such Securities and Cash in that
country.
<PAGE>
5. Subcustodians and Securities Systems. The Customer
authorizes and instructs the Custodian to hold the Property in
each Account in custody accounts which have been established by
the Custodian with (a) one of its U.S. branches or another U.S.
bank or trust company or branch thereof located in the U.S. which
is itself qualified under the 1940 Act to act as custodian
(individually. a "U.S. Subcustodian"), or a U.S. securities
depository or clearing agency, including the Federal book-entry
system, in which the Custodian or a U.S. Subcustodian
participates (individually, a "U.S. Securities System") or (b)
one of its non-U.S. branches or majority-owned subsidiaries, a
non-U.S. branch or majority-owned subsidiaryof a U.S bank or non-
U.S. bank or trust company, acting as custodian (individually, a
"non-U.S. Subcustodian"; U.S. Subcustodians and non-U.S.
Subcustodians, collectively, "Subcustodians"), or a non-U.S.
depository or clearing system in which the Custodian or any
Subcustodian participates (individually a "non-U.S. Securities
System"; U.S. Securities Systems and non-U.S. Securities
Systems, collectively, "Securities Systems"), PROVIDED that in
each case in which a U.S. Subcustodian or U.S. Securities System
is employed, each such Subcustodian or Securities System shall
have been approved by Instructions; PROVIDED FURTHER, that in
each case in which a non-U.S. Subcustodian or non-U.S. Securities
System is employed (a) such Subcustodian or Securities System
either is (i) a qualified U.S. bank as defined by rule 17f-5
under the 1940 Act ("Rule 17f-5") or (ii) an "eligible foreign
custodian" within the meaning of Rule 17f-5 or such Subcustodian
or Securities System is the subject of an order granted by the
U.S. Securities and Exchange Commission exempting such agent or
the subcustody arrangements thereto from all or part of the
provisions of Rule 17f-5 and (b) the agreement between the
Custodian and such non-U.S. Subcustodian has been approved by
Instructions; it being understood that the Custodian shall have
no liability or responsibility for determining whether the
approval of any Subcustodian or Securities System has been proper
under the 1940 Act or any rule or regulation thereunder.
Upon receipt of Instruction, the Custodian agrees to cease
the employment of any Subcustodian or Securities System with
respect to the Customer, and if desirable and practicable,
appoint a replacement subcustodian or securities system in
accordance with the provisions of this Section 5. In addition
the Custodian may, at any time in its discretion, upon written
notification to the Customer, terminate the employment of any
Subcustodian or Securities System.
Upon request of the Customer, the Custodian shall deliver to
the Customer annually a certificate stating: (a) the identity of
each non-U.S. Subcustodian and non-U.S. Securities System then
acting on behalf of the Custodian and the name and address of the
governmental agency or other regulatory authority that supervises
or regulates such non-U.S. Subcustodian and non-U.S. Securities
System; (b) the countries in which each non-U.S. Subcustodian or
<PAGE>
non-U.S. Securities System is located; and (c) so long as Rule
17f-5 requires an investment company board of directors/trustees
to directly approve its foreign custody arrangements, such other
information relating to such non-U.S. Subcustodians and non-U.S.
Securities Systems as may reasonably requested by the Customer to
ensure compliance with Rule 17f-5. So long as Rule 17f-5
requires and investment company board of directors/trustees to
directly approve its foreign custody arrangements, the Custodian
also shall furnish annually to the Customer information
concerning such non-U.S. Subcustodians and non-U.S. Securities
Systems similar in kind and scope as that furnished to the
Customer in connection with execution of this Agreement.
Custodian agrees to provide Customer with notice of any material
adverse changes in the facts or circumstances upon which such
information is based as soon as practicable after it becomes
aware of any such material adverse changes in the normal course
of its custodial activities.
6. Use of Subcustodian. With respect to Securities in
an Account which are maintained by the Custodian in the custody
of a Subcustodian pursuant to Section 5, or maintained by the
Custodian or Subcustodian in the custody of a Securities System,
pursuant to Section 5.
(a) The Custodian will identify on its books as belonging
to the Customer, on behalf of, and in the name of, an
Investor, any Securities held by such Subcustodian or
Securities System.
(b) In the event that a Subcustodian permits any of the
Securities placed in its care to be held in a
Securities System, such Subcustodian will be required
by its agreement with the Custodian to identify on its
books such Securities as being held for the account of
the Custodian for its customers.
(c) Any Securities in an Account held by a Subcustodian
will be subject only to the instructions of the
Custodian or its agents; and any Securities
held in a Securities System for the account of the
Custodian or a Subcustodian will be subject only to the
instructions of the Custodian or such subcustodian, as
the case may be.
(d) Securities deposited with a Subcustodian will be
maintained in an account holding only assets for
customers of the Custodian.
(e) Any agreement the Custodian shall enter into with a
Subcustodian with respect to the holding of Securities
shall require that (i) the Account will be adequately
indemnified or its losses adequately insured; (ii) the
Securities are not subject to any
<PAGE>
right, charge, security interest lien or claim of any
kind in favor of such Subcustodian or its creditors
except a claim for payment in accordance with such
agreement for their safe custody or administration and
expenses related thereto and (iii) beneficial ownership
of such Securities be freely transferable without the
payment of money or value other than for safe custody
or administration and expenses related thereto. (iv)
adequate records will be maintained identifying the
Property held pursuant to such Agreement as belonging
to the Custodian, on behalf of its customers and (v) to
the extent permitted by applicable law, officers of or
auditors employed by, or other representatives of or
designated by, the Custodian, including the independent
public accountants of or designated by the Customer be
given access to the books and records of such
Subcustodian relating to its actions under its
agreement pertaining to any Property held by it
thereunder or, if such access is not permitted by law,
confirmation of or pertinent information contained in
such books and records shall be furnished to such
persons designated by the Custodian.
7. Holding of Securities, Nominees, etc. Securities in an
Account which are held by the Custodian or any subcustodian may
be held by such entity in the name of the Customer, in its own
name, in the name of its nominee or in bearer form. Securities
which are held with a Subcustodian or are eligible for deposit
in a Securities System as provided above may be maintained
with the Subcustodian or Securities System, as the case may be,
in an account for the Custodian's or Subcustodian's customers.
The Custodian or Subcustodian, as the case may be, may combine
certificates of the same issue held by it as fiduciary or as a
custodian. In the event that any Securities in the name of the
Custodian or its nominee or held by one of its Subcustodians and
registered in the name of such Subcustodian or its nominee are
called for partial redemption by the issuer of such Security,
the Custodian may, subject to the rules or regulations
pertaining to allocation of any Securities System in which
such Securities have been deposited, allot, or cause to be
allotted, the called portion to the respective beneficial
holders of such class of security in any manner the Custodian
deems to be fair and equitable.
8. Proxies, etc. With respect to any proxies, notices,
reports or other communications relative to any of the Securities
in the Account, the Custodian shall perform such services
relative thereto as may be agreed upon between the Custodian and
the Customer. Neither the Custodian nor its nominees or agents
shall vote upon or in respect of any of the Securities in the
Account, execute any form of proxy to vote thereon, or give any
consent or
<PAGE>
take any action (except as provided in Section 2) with respect
thereto except upon the receipt of Instructions from the Customer
relative thereto.
9. Settlement Procedures. Settlement and payment for
Securities received for the Account and delivery of Securities
maintained for an Account may be effected in accordance with
the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or
market in which the transaction occurs, including, without
limitation, delivering Securities to the purchaser thereof or to
a dealer therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving later
payment for such Securities from such purchaser or dealer, and
in accordance with the standard operating procedures of the
Custodian in effect from time to time for that jurisdiction or
market.
Notwithstanding that the Custodian may settle purchases and
sales of securities or credit income from Securities, on a
contractual basis, as outlined in the Investment Manager User
Guide as provided to the Customer by the Custodian, the Custodian
may, at its sole option, reverse such credits or debits to the
appropriate Account in the event that the transaction does not
settle, or the income is not received, in a timely manner, and
the Customer agrees to hold the Custodian harmless from any
losses which may result therefrom.
10. Instructions. The term "Instructions" means instructions
from the Customer in respect of any of the Custodian's duties
hereunder which have been received by the Custodian at its
address set forth in Section 15 below in writing or by tested
telex signed or given by such one or more person or persons as
the Customer shall have from time to time authorized in writing
to give the particular class of Instructions in question and
whose name and (if applicable) signature and office address have
been filed with the Custodian, or which have been transmitted
electronically through an electronic on-line service and
communications system offered by the Custodian or other
electronic instruction system acceptable to the Custodian, or
upon receipt of such other form of instructions as the Customer
may from time to time authorize in writing and which the
Custodian agrees to accept. The Custodian shall have the right
to assume in the absence of notice to the contrary from the
Customer that any person whose name is on file with the Custodian
pursuant to this Section 10 has been authorized by the Customer
to give the Instructions in question and that such authorization
has not been revoked.
11. Standard of Care. The Custodian shall be responsible for
the performance of only such duties as are set forth herein or
contained in Instructions given to the Custodian which are not
contrary to the provisions of this Agreement. The Custodian
will use reasonable care with respect to the safekeeping of
Property in
<PAGE>
each Account and in carrying out its obligations under the
Agreement. So long as and to the extent that it has exercised
reasonable care, the Custodian shall not be responsible for the
title, validity or genuineness of any Property or other property
or evidence of title thereto received by it or delivered by it
pursuant to this Agreement and shall be held harmless in acting
upon, and may conclusively rely on, without liability for any
loss resulting therefrom, any notice, request, consent,
certificate or other instrument reasonably believed by it to be
genuine and to be signed or furnished by the proper party or
parties, including, without limitation, Instructions, and shall
be indemnified by the Customer for any losses, damages, costs and
expenses (including, without limitation, the fees and expenses of
counsel) incurred by the Custodian and arising out of action
taken or omitted in good faith by the Custodian hereunder or
under any Instructions. The Custodian shall be liable to the
Customer for any loss which shall occur directly as the result of
the failure of any Subcustodian to exercise reasonable care with
respect to the safekeeping of such Securities. With respect to
Securities Systems, the Custodian shall only be liable for losses
arising from the employment of such Securities System caused by
the Bank's own failure to exercise reasonable care. In the event
of any loss to the Customer by reason of failure of the Custodian
or any Subcustodian to utilize reasonable care, the Custodian
shall be liable to the Customer to the extent of Customer's
actual damages at the time such loss was discovered without
reference to any special conditions or circumstances. In no
event shall the Custodian be liable for any consequential or
special damages. The Custodian shall be entitled to rely, and
may act, on advice of counsel (who may be counsel for the
Customer) on all matters and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
In the event the Customer subscribes to an electronic on-line
service and communications system offered by the Custodian, the
Customer shall be fully responsible for the security of the
Customer's connecting terminal, assess thereto and the proper and
authorized use thereof and the initiation and application of
continuing effective safeguards with respect thereto and agree to
defend and indemnify the Custodian and hold the Custodian
harmless from and against any and all losses, damages, costs and
expenses (including the fees and expenses of counsel) incurred by
the Custodian as a result of any improper or unauthorized use of
such terminal by the Customer or by any others.
All collections of funds or other property paid or
distributed in respect to Securities in an Account, including
funds involved in third-party foreign exchange transactions,
shall be made at the risk of the Customer. The Custodian shall
have no liability for any loss occasioned by delay in the actual
receipt of notice by the Custodian or by its subcustodian of any
payment, receipt or other transaction regarding Securities in an
Account respect of which
<PAGE>
the Custodian has agreed to take action as provided in Section 2
hereof. The Custodian shall not be liable for any loss resulting
from, or caused by, or resulting from acts of governmental
authorities (whether de jure or de facto), including, without
limitation, nationalization, expropriation, and the imposition of
currency restrictions; acts of war, terrorism, insurrection or
revolution; strikes or work stoppages; the inability of a local
clearing and settlement system to settle transactions for reasons
beyond the control of the Custodian; hurricane, cyclone,
earthquake, volcanic eruption, nuclear fusion, fission,
radioactivity or other acts of God.
The provisions of this Section shall survive termination of
this Agreement.
12. Fees and Expenses. The Customer agrees to pay to the
Custodian such compensation for its services pursuant to this
Agreement as may be mutually agreed upon in writing from time to
time and the Custodian's out-of-pocket or incidental expenses,
including (but not limited to) legal fees. The Customer
hereby agrees to hold the Custodian harmless from any liability
or loss resulting from any taxes or other governmental charges,
and any expense related thereto, which may be imposed, or
assessed with respect to any Property in any Account and also
agrees to hold the Custodian, its Subcustodians, and their
respective nominees harmless from any liability as a record
holder of Property in the Account. The Custodian is authorized
to charge any non-custodial account of the Customer for such
fees and other expenses described in this section. The
provisions of this Section shall survive the termination of this
Agreement.
13. Amendment, Modifications, etc. No provisions of this
Agreement may amended, modified or waived except in writing
signed by the parties hereto.
14. Termination. This Agreement may be terminated by the
Customer or the Custodian (in its entirety or with respect to any
Account) by ninety (90) days' written notice to the other;
provided that notice by the Customer shall specify the
names of the persons to whom the Custodian shall deliver the
Securities in each applicable Account and to whom the Cash in
such Account shall be paid. If notice of termination is given by
the Custodian, the Customer shall, within ninety (90) days
following the giving of such notice, deliver to the Custodian a
written notice specifying each Account to be terminated and the
names of the persons to whom the Custodian shall deliver the
Securities in such Accounts and to whom the Cash in such Accounts
shall be paid. In either case, the Custodian will deliver such
Securities and Cash in each Account to the persons so specified,
after deducting therefrom any amounts which the Custodian
determines to be owing by that Account. In addition, the
Custodian may in its discretion withhold from such delivery from
an Account such Cash and Securities as may be
<PAGE>
necessary to settle transactions pending at the time of such
delivery. If within ninety (90) days following the giving of a
notice of termination by the Custodian, the Custodian does not
receive from the Customer a written notice specifying the names
of the persons to whom the Cash in each applicable Account shall
be paid, the Custodian, at its election, may deliver such
Securities and pay such Cash to a bank or trust company doing
business in the State of New York to be held and disposed of
pursuant to the provisions of this Agreement, or may continue to
hold such Securities and Cash until a written notice as aforesaid
is delivered to the Custodian.
15. Notices. Except as otherwise provided in this Agreement,
all requests, demands or other communications between the
parties or notices in connection herewith (a) shall be in
writing, had delivered or sent by telex, telegram, facsimile or
cable, or other means of electronic communication agreed upon by
the parties hereto addressed, if to the Customer, to its address
set forth on the signature page hereof and, if to the Custodian,
to c/o BTNY Services, Inc., 34 Exchange Place, Jersey City, New
Jersey 07302, Attention: Global Securities Services, (Telex No.
420066 Area 19 Answerback: BANTRUS) (Facsimile No.
201-860-7290), or in either case to such other address as shall
have been furnished to the receiving party pursuant to the
provisions hereof and (b) shall be deemed effective when
received, or, in the case of a telex, when sent to the proper
number and acknowledged by a proper answerback.
16. Security for Payment. To secure payment of all fees and
expenses payable to Custodian by a specific Account, the Customer
hereby grants to Custodian a continuing security interest in and
right to setoff against such Account and all Property held
therein from time to time in the full amount of such
obligations. To secure payment of all fees and expenses payable
to the Custodian by the Customer, the Customer hereby grants the
Custodian a continuing security interest and right of setoff
against the balance from time to time in any non-custodian
account of the Customer (the "Pledged Balances"), and Custodian
may, at any time or from time to time at Custodian's sole option
and without notice, appropriate and apply toward the payment of
such obligations, the Pledged Balances. If at any time the
Property in an Account and the Pledged Balances are insufficient
to fully collateralize such obligations, Customer shall provide
to Custodian additional collateral in form and amount
satisfactory to Custodian and shall grant to Custodian a
continuing security interest in and right of setoff against such
collateral. In any such case and without limiting the foregoing,
Custodian shall be entitled to take such other action(s) or
exercise such other options, powers and rights as Custodian now
or hereafter has a secured creditor under the New York Uniform
Commercial Code or any other applicable law.
17. Governing Law and Successors and Assigns. This Agreement
shall be governed by the law of the State of New York and shall
not
<PAGE>
be assignable by either party, but shall bind the successors in
interest of the Customer and Custodian.
18. Publicity. Customer shall furnish to Custodian at its
office referred to in Section 15 above, prior to any
distribution thereof, copies of any material prepared for
distribution to any persons who are not parties hereto that
refer in any way Custodian. Customer shall not distribute or
permit the distribution of such materials if Custodian
reasonable objects in writing within ten (10) business days (or
such other time as may be mutually agreed) after receipt
thereof. The provisions of this Section shall survive the
termination of this Agreement.
19. Submission to Jurisdiction. To the extent, if any, to
which the Customer or any of its respective properties may be
deemed to have or hereafter to acquire immunity, on the ground
of sovereignty or otherwise, from any judicial process or
proceeding to enforce this Agreement or to collect amounts due
hereunder (including, without limitation, attachment proceedings
prior to judgment or in aid of execution) in any jurisdiction,
the Customer hereby waives such immunity and agrees not to claim
the same. Any suit, action or proceeding arising out of this
Agreement may be instituted in any State or Federal court
sitting in the City of New York, State of New York, United
States of America, and the Customer irrevocably submits to the
non-exclusive jurisdiction of any such court in any such suit,
action or proceeding and waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the
laying of venue of such suit, action or proceeding brought in
such a court and any claim that such suit, action or proceeding
was brought in an inconvenient forum. The Customer hereby
irrevocably designates, appoints and empowers, as its authorized
agent to receive, for and on behalf of the Customer and its
property service of process in the State of New York when and as
such legal actions or proceedings may be brought in any of the
aforementioned courts, and such service of process shall be
deemed complete upon the date of delivery thereof to such agent
whether or not such agent gives notice thereof to the Customer
or upon the earliest of any other date permitted by applicable
law. The Customer further irrevocably consents to the service
of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by
certified air mail, postage prepaid, to the Customer at its
address set forth below or in any other manner permitted by law,
such service to become effective upon the earlier of (i) the
date fifteen (15) days after such mailing or (ii) any earlier of
date permitted by applicable law. The Customer agrees that it
will at all times continuously maintain an agent to receive
service of process in the City and State of New York on behalf
of itself and its properties with respect to this Agreement and
in the event that, for any reason, the agent named above or its
successor shall no longer serve as agent of the Customer to
receive service of
<PAGE>
process in the City and State of New York on its behalf, the
Customer shall promptly appoint a successor to so serve and shall
advise the Custodian thereof.
20. Headings. The headings of the paragraphs hereof are
included for convenience of reference only and do not form a
part of this Agreement.
STAR BANK, N.A.
By:/s/W.J. Keller Senior Vice President
------------------------------------
Title: Senior Trust Officer
Address: 425 Walnut St.
M.L. 6118
Cincinnati, Ohio 45202
BANKERS TRUST COMPANY
By:/s/
------------------------------------
Title: Vice President
---------------------------------
<PAGE>
EAGLE GROWTH SHARES, INC.
ADMINISTRATION AGREEMENT
------------------------
AGREEMENT, made as of the 1st day of January, 1989
between BAXTER FINANCIAL CORPORATION a Florida corporation
("Baxter") and EAGLE GROWTH SHARES, INC., a Maryland corporation
("Fund") for the administration of the Fund.
WHEREAS, the Fund is an open-end, diversified
management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, pursuant to an Advisory Agreement dated as of
January 1, 1989 (the "Advisory Agreement") between the Fund and
Baxter, Baxter was appointed investment adviser to the Fund; and
WHEREAS, the Fund desires to retain Baxter as
Administrator of the Fund to provide administrative services, and
Baxter is willing to render such services.
WITNESSETH:
----------
In consideration of the premises and mutual promises
hereinafter set forth, the parties hereto, intending to be
legally bound, agree as follows:
SECTION I: DELIVERY OF DOCUMENTS
---------------------
Documents Delivered. The Fund has delivered to Baxter
copies of each of the following documents and will deliver to it
all future amendments and supplements, if any:
(a) Articles of Incorporation of the Fund (such
Articles of Incorporation, as presently in effect and as amended
from time to time, are herein called the "Articles of
Incorporation");
(b) Bylaws of the Fund (such Bylaws, as presently in
effect and as amended from time to time, are herein called the
"Bylaws");
<PAGE>
(c) Registration Statement under the Securities Act of
1933 of the Fund on Form N-1A and all amendments thereto, as
filed with the Securities and Exchange Commission (the
"Commission") relating to shares of Common Stock of the Fund (the
"Registration Statement");
(d) Prospectus of the Fund (such prospectus and the
Statement of Additional Information of the Fund, as presently in
effect and as amended or supplemented from time to time, is
herein called the "Prospectus").
SECTION II: ADMINISTRATION AGREEMENT
------------------------
1. Appointment of Administrator. The Fund hereby
appoints Baxter as Administrator of the Fund on the terms and for
the period set forth in this Agreement and Baxter hereby accepts
such appointment and agrees to perform the services and duties
set forth in this Section II for the compensation provided in
Section 3.
2. Services and Duties.
--------------------
(a) As Administrator, Baxter, shall supervise the
Fund's administrative operations, other than those investment
operations which are to be managed by Baxter pursuant to the
Advisory Agreement between the Fund and Baxter.
(b) In performing its duties as Administrator of
the Fund, Baxter will act in conformity with the Articles of
Incorporation, Bylaws and Prospectus of the Fund and will conform
to and comply with the requirements of the 1940 Act and all other
applicable federal and state laws and regulations.
(c) Baxter will furnish the Fund, at Baxter's
expense, with personnel competent to perform such administrative
and clerical services as are necessary in order to provide
effective corporate administration of the Fund including, without
limitation, maintenance of its registration statements under
applicable law and reports to regulatory bodies and maintenance
of its corporate books and records, except those books and
records maintained by its transfer and dividend disbursing agent
and custodian.
(d) Baxter will arrange, but not pay, for (i) the
maintenance of shareholder records, (ii) the preparation for the
Fund of all required tax returns and reports to the Fund's
shareholders and the Commission, (iii) legal services, printing
services and services of independent accountants in connection
<PAGE>
with the periodic updating of the registration statements, and
(iv) the shareholder meetings.
(e) Baxter will furnish the Fund, at Baxter's
expense, with adequate office space, utilities, and all necessary
office equipment at such office as Baxter may select.
(f) The administrative services to be provided
the Fund pursuant to this section 2 may be delegated by Baxter,
at its own expense and not the expense of the Fund, to such other
person or company as may be selected by Baxter, provided that
Baxter shall be responsible to see that such services are
provided in a satisfactory manner.
3. Compensation. For the services to be rendered and
the obligations assumed by Baxter as Administrator pursuant to
this Section II, the Fund will pay to Baxter as full compensation
therefore a fee at an annual rate of .20 percent of the net
assets of the Fund. This fee will be computed based on net
assets on the last business day of each month and will be paid to
Baxter monthly at 1/12th of the annual rate. If this agreement
becomes effective on any day other than the first day of a month
or terminates on any day other than the last day of a month, then
the monthly fee payable to Baxter for such month(s) shall be pro
rated on a daily basis.
4. Expenses. Except as otherwise provided herein,
the Fund shall pay all of its own costs and operating expenses of
every kind and nature including, without limitation, printing
expenses, fees and expenses of its independent public accountant,
legal fees, costs of reports to its stockholders and reports to
the Commission, registration statements, the preparation of the
Fund's tax returns, costs of custodian, dividend disbursing and
transfer agent, and costs in connection with meetings of its
Board of Directors and stockholders.
SECTION III: DURATION AND TERMINATION
------------------------
Provided that the Advisory Agreement is approved by the
holders of a majority of the outstanding voting securities of the
Fund, this Agreement shall become effective upon termination of
the Administration Agreement between Fahnestock & Co. Inc. and
the Fund dated October 30, 1987 and shall continue until
terminated as provided herein. This Agreement may be terminated
by the Board of Directors of the Fund by a vote of a majority of
those members who are not interested persons of Baxter under
section 15(c) of the 1940 Act, or by Baxter at any time, without
the payment of any penalty, after 60 days written notice given by
<PAGE>
the party electing to terminate this Agreement sent via certified
mail to the principal business office of the other party to this
Agreement.
SECTION IV: MISCELLANEOUS
-------------
The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction
in effect. If the provisions of this Agreement shall be held or
made invalid by a court decision, statute, rule, or otherwise,
the remainder of this Agreement shall not be affected thereby.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as
of the day and year first above written.
ATTEST: BAXTER FINANCIAL CORPORATION
/s/Warren W. Flaschar By:/s/Donald H. Baxter
- ------------------------ ---------------------------
Secretary Donald H. Baxter, President
ATTEST: EAGLE GROWTH SHARES, INC.
/s/Doreen J. Gray By:/s/Thomas J. Flaherty, Jr.
- ------------------------ --------------------------
Secretary Thomas J. Flaherty, Jr.
Executive Vice President
<PAGE>
EAGLE GROWTH SHARES, INC.
AMENDMENT TO ADMINISTRATION AGREEMENT
-------------------------------------
AGREEMENT, made as of the first day of April, 1991
between BAXTER FINANCIAL CORPORATION, a Florida corporation
("Baxter"), and EAGLE GROWTH SHARES, INC., a Maryland corporation
("Fund"), for the administration of the Fund.
BACKGROUND
----------
Baxter and the Fund entered into an Administration
Agreement dated as of January 1, 1989, (the "Administration
Agreement"). On December 11, 1990, the Board of Directors of the
Fund agreed to increase the fee payable to Baxter under the
Administration Agreement.
In consideration of the premises and mutual promises
hereinafter set forth, the parties hereto, intending to by
legally bound, agree to amend the Administration Agreement as
follows:
1. Section 3 of Section II is amended and restated as
follows:
"Compensation. For the services to be rendered and the
obligations assumed by Baxter as Administrator pursuant
to this Section II, the Fund will pay to Baxter as full
compensation therefore a fee at an annual rate of .25
percent of the net assets of the Fund. This fee will
be computed based on net assets on the last business
day of each month and will be paid to Baxter monthly at
1/12th of the annual rate. If this agreement becomes
effective on any day other than the first day of a
month or terminates on any day other than the last day
of a month, then the monthly fee payable to Baxter for
such month(s) shall be pro rated on a daily basis."
2. Except as amended pursuant to paragraph 1 above,
all other terms and provisions of the Administration Agreement
<PAGE>
shall remain in full force and effect and are hereby ratified and
confirmed.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as
of the day and year first above written.
ATTEST: BAXTER FINANCIAL CORPORATION
/s/Warren W. Flaschar By:/s/Donald H. Baxter
- ----------------------------- -------------------------
Secretary
ATTEST: EAGLE GROWTH SHARES, INC.
/s/Linda J. Budshaw By:/s/Ronald F. Rohe
- ----------------------------- -------------------------
Asst. Secretary
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
between
EAGLE GROWTH SHARES, INC.
and
AMERICAN DATA SERVICES, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
Article 1. TERMS OF APPOINTMENT; DUTIES OF ADS................ 3
Article 2. FEES AND EXPENSES.................................. 6
Article 3. REPRESENTATIONS AND WARRANTIES OF ADS.............. 7
Article 4. REPRESENTATIONS AND WARRANTIES OF THE FUND......... 8
Article 5. INDEMNIFICATION.................................... 8
Article 6. COVENANTS OF THE FUND AND ADS......................11
Article 7. TERMINATION OF AGREEMENT...........................13
Article 8. ASSIGNMENT.........................................13
Article 9. AMENDMENT..........................................13
Article 10. NEW YORK LAWS TO APPLY.............................14
Article 11. MERGER OF AGREEMENT................................14
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
-------------------------------------
AGREEMENT made the 1 day of February, 1995, by and between Eagle Growth
Share, Inc. a Maryland corporation, having its principal office and place of
business at 1200 North Federal Highway, Suite 424, Boca Raton, Florida 33432
(the "Fund"), and American Data Services, Inc., a New York corporation having
its principal office and place of business at 24 West Carver Street.,
Huntington, New York 11743 ("ADS").
WHEREAS, the Fund desires to appoint ADS as its transfer agent, dividend
disbursing agent and agent in connection with certain other activities, and
ADS desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1. TERMS OF APPOINTMENT; DUTIES OF ADS
-----------------------------------
1.01 Subject to the terms and conditions set forth in this
agreement, the Fund hereby employs and appoints ADS to act as, and ADS agrees
to act as its transfer agent for the Fund's authorized and issued shares of
its common stock, $1.00 par value, ("Shares"), dividend disbursing agent and
agent in connection with any accumulation, open-account or similar plans
provided to the shareholders of the fund ("Shareholders") set out in the
currently effective prospectus and statement of additional information
("prospectus") of the Fund, including without limitation any periodic
investment plan or periodic withdrawal program.
<PAGE>
1.02 ADS agrees that it will perform the following services:
(a) In accordance with procedures established from time to
time by agreement between the Fund and ADS, ADS shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
therefore to the Custodian of the Fund authorized by the
Board of Directors of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation
therefore to the Custodian;
(iv) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner such
monies as instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund;
<PAGE>
(vii) Maintain records of the account for and advice the
Fund and its Shareholders as to the foregoing; and
(viii) Record the issuance of shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number
of shares of the Fund which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. ADS
shall also provide the Fund on a regular basis with the
total number of shares which are authorized and issued and
outstanding and shall have no obligation, when recording the
issuance of shares, to monitor the issuance of such shares
or to take cognizance of any laws relating to the issue or
sale of such shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in
the above paragraph (a), ADS shall: (i) Perform all of the customary services
of a transfer agent, dividend disbursing agent and, relevant agent in
connection with accumulation, open-account or similar plans (including without
limitation any periodic investment plan or period withdrawal program),
including but not limited to: maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing proxies, receiving and tabulating proxies,
mailing Shareholder reports and prospectuses to current Shareholders,
withholding taxes on U.S. resident and non-resident alien accounts, preparing
and filing U.S. Treasury Department Forms
<PAGE>
1099 and other appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders, preparing and
mailing confirmation forms and statements of account to Shareholders for all
purchases redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information and (ii) provide a
system and reports which will enable the Fund to monitor the total number of
Shares sold in each State.
(c) In addition, the Fund shall (i) identify to ADS in writing
those transactions and shares to be treated as exempt from blue sky reporting
for each State and (ii) verify the establishment of such transactions for each
state on the system prior to activation and thereafter monitor the daily
activity for each State as provided by ADS. The responsibility of ADS for the
Fund's blue sky State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by the Fund and
the reporting of such transactions to the Fund as provided above.
Procedures applicable to certain of these services may be established from
time to time by agreement between the Fund and ADS.
Article 2. FEES AND EXPENSES
-----------------
2.01 For performance by ADS pursuant to this Agreement, the Fund
agrees to pay ADS an annual maintenance fee for each Shareholder account as
set forth in the initial fee schedule attached hereto. Such fees and out-of
pocket expenses
<PAGE>
and advances identified under Section 2.02 below may be changed from time to
time subject to mutual written agreement between the Fund and ADS.
2.02 In addition to the fee paid under Section 2.01 above, the
Fund agrees to reimburse ADS for out-of-pocket expenses or advances incurred
by ADS for the items set out in the fee schedule attached hereto. In
addition, any other expenses incurred by ADS at the request or with the
consent of the Fund, will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses
within five days following the receipt of the respective billing notice.
Postage for mailing of dividends, proxies, Fund reports and other mailings to
all shareholder accounts shall be advanced to ADS by the Fund at least seven
(7) days prior to the mailing date of such materials.
Article 3. REPRESENTATIONS AND WARRANTIES OF ADS
-------------------------------------
ADS represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of The State of New York.
3.02 It is duly qualified to carry on its business in The State of
New York.
3.03 It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform
<PAGE>
its duties and obligations under this Agreement.
3.06 ADS is duly registered as a transfer agent under
the Securities Act of 1934 and shall continue to be registered throughout the
remainder of this Agreement.
Article 4. REPRESENTATIONS AND WARRANTIES OF THE FUND
------------------------------------------
The Fund represents and warrants to ADS that;
4.01 It is a corporation duly organized and existing and in good
standing under the laws of Maryland.
4.02 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement.
4.04 It is an open-end and diversified management investment
company registered under the Investment Company Act of 1940.
4.05 A registration statement under the Securities Act of 1933 is
currently or will become effective and will remain effective, and appropriate
state securities law filings as required, have been or will be made and will
continue to be made, with respect to all Shares of the Fund being offered for
sale.
Article 5. INDEMNIFICATION
---------------
5.01 ADS shall not be responsible for, and the Fund shall
indemnify and hold ADS harmless from and against, any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liability arising out of
or attributable
<PAGE>
to:
(a) All actions of ADS or its agents or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by ADS or its agents or subcontractors
of information, records and documents which (i) are received by ADS or its
agents or subcontractors and furnished to it by or on behalf of the Fund, and
(ii) have been prepared and/or maintained by the Fund or any other person or
firm on behalf of the Fund.
(d) The reliance on, or the carrying out by ADS or its agents or
subcontractors of any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
5.02 ADS shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs,
<PAGE>
charges, counsel fees, payments, expenses and liability arising out of or
attributable to any action or failure or omission to act by ADS as a result of
ADS's lack of good faith, negligence or willful misconduct.
5.03 At any time ADS may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by ADS under this
Agreement, and ADS and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. ADS, its
agents and subcontractors shall be protected and indemnified in acting upon
any paper or document furnished by or on behalf of the Fund, reasonably
believed to be genuine and to have been signed by the proper person or
persons, or upon any instruction, information, data, records or documents
provided ADS or its agents or subcontractors by machine readable input, telex,
CRT data entry or other similar means authorized by the Fund, and shall not be
held to have notice of any change of authority of any person, until receipt of
written notice thereof from the Fund. ADS, its agents and subcontractors
shall also be protected and indemnified in recognizing stock certificates
which are reasonably believed to bear the proper manual or facsimile
signatures of the officers of the Fund, and the proper countersignature of any
former transfer agent or registrar, or of a co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform
<PAGE>
its obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control, such party shall not
be liable for damages to the other for any damages resulting from such failure
to perform or otherwise from such causes.
5.05 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for
any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party of seeking
indemnification shall promptly notify the other party of such assertion, and
shall keep the other party advised with respect to all developments concerning
such claim. The party who may be required to indemnify shall have the option
to participate with the party seeking indemnification the defense of such
claim. The party seeking indemnification shall in no case confess any claim
or make any compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
Article 6. COVENANTS OF THE FUND AND ADS
-----------------------------
6.01 The Fund Shall promptly furnish to ADS the Following:
(a) a certified copy of the resolution of the Board of Directors
of the Fund authorizing the appointment of ADS and the execution and delivery
of this Agreement.
<PAGE>
(b) a copy of the Articles of Incorporation and By-Laws of the
Fund and all amendments thereto.
6.02 ADS hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.03 ADS shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as
amended, and the Rules thereunder, ADS agrees that all such records prepared
or maintained by ADS relating to the services to be performed by ADS hereunder
are the property of the Fund and will be preserved, maintained and made
available in accordance with such Section and Rules, and will be surrendered
promptly to the Fund on and in accordance with its request.
6.04 ADS and the Fund agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily disclosed to any other
person, except as may be required by law.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, ADS will endeavor to notify the Fund and to
secure instructions from an
<PAGE>
authorized officer of the Fund as to such inspection. ADS reserves the right,
however, to exhibit the Shareholder records to any person whenever it is
advised by its counsel that it may be held liable for the failure to exhibit
the Shareholder records to such person, and shall promptly notify the Fund of
any unusual request to inspect or copy the shareholder records of the Fund or
the receipt of any other unusual request to inspect, copy or produce the
records of the Fund.
Article 7. TERMINATION OF AGREEMENT
------------------------
7.01 This Agreement may be terminated by either party, upon ninety
(90) days prior written notice to the other.
7.02 Should the Fund exercise its right to terminate, all out-of-
pocket expenses associated with the movement of records and material will be
borne by the Fund. Additionally, ADS reserves the right to charge for any
other reasonable expenses associated with such termination.
Article 8. ASSIGNMENT
----------
8.01 Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party without the written consent of the
other party.
8.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
Article 9. AMENDMENT
---------
9.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution
of the Board of Directors of the Fund.
<PAGE>
Article 10. NEW YORK LAWS TO APPLY
----------------------
10.01 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the State of New
York.
Article 11. MERGER OF AGREEMENT
-------------------
11.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on behalf under their seals by and through their
duly authorized officers, as of the day and year first above written.
EAGLE GROWTH SHARES, INC.
BY:/s/Donald H. Baxter
--------------------
TITLE: President
-----------------
ATTEST:
/s/Keith A. Edelman
- ------------------------
AMERICAN DATA SERVICES, INC.
BY:/s/Michael Miola
--------------------
TITLE: President
ATTEST:
/s/Michelle LoCasio
- ------------------------
<PAGE>
FEE SCHEDULE
--- --------
(a) SHAREHOLDER SERVICE FEE:
For the services rendered by ADS in its capacity as transfer agent, the Fund
shall pay ADS, within ten (10) days after receipt of an invoice from ADS at
the beginning of each month, a fee equal to the greater of:
(1) $600.00/month;
OR,
(2) Based upon the total of all open accounts in the Fund upon the following
annual rates (billed monthly) **
Equity Fund...................................$8.00 per account
** All accounts closed during a calendar year will be considered as open
accounts for billing purposes until the end of that calendar year.
(b) TRANSACTION FEES:
Trade Entry (purchase/liquidation) and
maintenance transactions.....................$ .80 each
New account set-up............................$2.50 each
Customer service calls........................$1.25 each
Correspondence................................$1.50 each
Check preparation.............................$ .50 each
Liquidations paid by wire transfer............$3.00 each
Omnibus accounts..............................$1.25 per *
transaction
ACH charge....................................$ .30 each
SWP...........................................$1.25 each *
Other Fees:
Closed accounts - per account.................$2.00/year ***
* Not included as a Trade Entry
*** Closed accounts will remain in the shareholder files until all 1099's and
5498's have been sent to shareholders and reported (via mag media) to the IRS.
<PAGE>
(c) IRA PLAN FEES:
The following fees will be charged directly to the shareholder
account.
Annual maintenance fee......................$15.00 / account *
Incoming transfer from prior custodian......$12.00
Distribution to a participant...............$15.00
Refund of excess contribution...............$15.00
Transfer to successor custodian.............$15.00
Automatic periodic distributions............$15.00 / year per
account
* Includes Star Bank, N.A. $8.00 Custody Fee.
(d) EXPENSES:
The Fund shall reimburse ADS for any out-of-pocket expenses, exclusive of
salaries, advanced by ADS in connection with but not limited to the printing
of confirmation forms and statements, proxy expenses, travel requested by the
Fund, telephone, facsimile transmissions, stationery and supplies (related to
the Fund records), record storage, postage (plus a $0.15 service charge for
all mailings), pro-rata portion of annual 17AD-13 audit letter, telex, and
courier charges incurred in connection with the performance of its duties
hereunder. ADS shall provide the Fund with a monthly invoice of such expenses
and the Fund shall reimburse ADS within fifteen (15) days after receipt
thereof.
(e) SPECIAL REPORTS
All reports and/or analyses requested by the Fund that are not included in
the fee schedule, shall be subject to an additional charge, agreed upon in
advance, based upon the following rates:
Labor:
Senior Staff - $100.00/hr.
Junior Staff - $ 50.00/hr.
Computer time - $45.00/hr.
(f) SECURITY DEPOSITS:
The Fund will remit to ADS upon the execution of this Agreement a security
deposit of equal to one (1) month's shareholder service fee. The security
deposit computation will be based either on
<PAGE>
the total number of shareholder accounts (open and closed) of the Fund or the
minimum fee, whichever is greater on the date above written. The Fund will
have the option to have the security deposit applied to the last month's
service fee, or applied to any new contract between the Fund and ADS.
(g) CONVERSION CHARGE:
The Fund will remit to ADS upon successful completion of the conversion of
the Fund shareholder records onto the system utilized by ADS to perform stock
transfer services, the sum of $600.00. This amount is exclusive of any charge,
if any, incurred by the Fund's previous service agent into an electronic
format readable by ADS' computer system.
<PAGE>
FUND ACCOUNTING SERVICE AGREEMENT
between
EAGLE GROWTH SHARES, INC.
and
AMERICAN DATA SERVICES, INC.
1
<PAGE>
FUND ACCOUNTING SERVICE AGREEMENT
AGREEMENT made the 1 day of February, 1995 by and between EAGLE GROWTH SHARES,
INC., (the "Fund") and AMERICAN DATA SERVICES, INC. a New York corporation
("ADS").
BACKGROUND
----------
WHEREAS, the Fund is a diversified, open-end management investment
company registered with the United States Securities and Exchange Commission
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, ADS is a corporation experienced in providing accounting
services to mutual funds and possesses facilities sufficient to provide such
services; and
WHEREAS, the Fund desires to avail itself of the experience, assistance
and facilities of ADS and to have ADS perform for the Fund certain services
appropriate to the operations of the Fund, and ADS is willing to furnish such
services in accordance with the terms hereinafter set forth.
TERMS
-----
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the Fund and ADS hereby agree as follows:
1. DUTIES OF ADS.
ADS will provide the Fund with the necessary office space, communication
facilities and personnel to perform the following services for the Fund:
(a) Timely calculate and transmit to NASDAQ the Fund's daily
net asset value and communicate such value to the Fund
and its transfer agent;
(b) Maintain and keep current all books and records of the
Fund as required by Rule 31a-1 under the 1940 Act, as
such rule or any successor rule may be amended from time
to time ("Rule 31a-1"), that are applicable to the
fulfillment of ADS's duties hereunder, as well as any
other documents necessary or advisable for compliance
with applicable regulations as may be mutually agreed to
between the Fund and ADS. Without limiting the
generality of the foregoing, ADS will prepare and
maintain the following records upon receipt of
information in proper form from the Fund or its
authorized agents:
2
<PAGE>
(i) Cash receipts journal
(ii) Cash disbursements journal
(iii) Dividend record
(iv) Purchase and sales - portfolio securities
journals
(v) Subscription and redemption journals
(vi) Security ledgers
(vii) Broker ledger
(viii) General ledger
(ix) Daily expense accruals
(x) Daily income accruals
(xi) Securities and monies borrowed or loaned and
collateral therefore
(xii) Foreign currency journals
(xiii) Trial balances
(c) Provide the Fund and its investment adviser with daily
portfolio valuation, net asset value calculation and
other standard operational reports as requested from
time to time.
(d) Provide all raw data available from our fund accounting
system (PAIRS) for managements preparation of the
following:
1. Semi-annual financial statements;
2. Semi-annual form N-SAR;
3. Annual tax returns;
4. Financial data necessary to update form N-1a;
5. Annual proxy statement.
(e) Provide facilities to accommodate annual audit and any
audits or examinations conducted by the Securities and
Exchange Commission or any other governmental or quasi-
governmental entities with jurisdiction.
ADS shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have
no authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
2. COMPENSATION OF ADS.
In consideration of the services to be performed by ADS as set forth
herein, ADS shall be entitled to receive compensation and reimbursement for
all reasonable out-of-pocket expenses. The Fund agrees to pay ADS the fees and
reimbursement of out-of-pocket expenses as set forth in the fee schedule
attached hereto as Schedule A.
3. LIMITATION OF LIABILITY OF ADS.
3
<PAGE>
(a) ADS may rely upon the advice of the Fund, or of counsel for the
Fund and upon statements of the Fund's independent accountants, brokers and
other persons reasonably believed by it in good faith to be expert in the
matters upon which they are consulted and for any actions reasonably taken in
good faith reliance upon such statements and without negligence or misconduct,
ADS shall not be liable to anyone.
(b) ADS shall be liable to the Fund for any losses arising out of any
act or omission in the course of its duties, the negligence, misfeasance, bad
faith of ADS of the breach of the agreement by ADS or disregard of ADS's
obligations and duties under this agreement or the willful violation of any
applicable law.
(c) Except as may otherwise be provided by applicable law, neither
ADS nor its stockholders, officers, directors, employees or agents shall be
subject to, and the Fund shall indemnify and hold such persons harmless from
and against, any liability for and any damages, expenses or losses incurred by
reason of the inaccuracy of information furnished to ADS by the Fund or its
authorized agents. ADS shall promptly notify the Fund of the assertion of a
claim for which the Fund may be required to indemnify ADS and shall keep the
Fund advised with respect to all developments regarding such claim. The Fund
shall have the option to participate in the defense of such claim. ADS in no
case shall confess any claim or make any compromise in any case in which the
Fund may be required to indemnify ADS except with the Fund's prior written
consent.
4. REPORTS.
(a) The Fund shall provide to ADS on a quarterly basis a report of a
duly authorized officer of the Fund representing that all information
furnished to ADS during the preceding quarter was true, complete and correct
in all material respects. ADS shall not be responsible for the accuracy of any
information furnished to it by the Fund or its authorized agents, and the Fund
shall hold ADS harmless in regard to any liability incurred by reason of the
inaccuracy of such information.
(b) Whenever, in the course of performing its duties under this
Agreement, ADS determines, on the basis of information supplied to ADS by the
Fund or its authorized agents, that a violation of applicable law has occurred
or that, to its knowledge, a possible violation of applicable law may have
occurred or, with the passage of time, would occur, ADS shall promptly notify
the Fund and its counsel of such violation.
5. ACTIVITIES OF ADS.
4
<PAGE>
The services of ADS under this Agreement are not to be deemed
exclusive, and ADS shall be free to render similar services to others so long
as its services hereunder are not impaired thereby.
6. ACCOUNTS AND RECORDS.
The accounts and records maintained by ADS shall be the property of
the Fund, and shall be surrendered to the Fund promptly upon request by the
Fund in the form in which such accounts and records have been maintained or
preserved. ADS agrees to maintain a back-up set of accounts and records of the
Fund (which back-up set shall be updated on at least a weekly basis) at a
location other than that where the original accounts and records are stored.
ADS shall assist the Fund's independent auditors, or, upon approval of the
Fund, any regulatory body, in any requested review of the Fund's accounts and
records. ADS shall preserve the accounts and records as they are required to
be maintained and preserved by Rule 31a-1.
7. CONFIDENTIALITY.
ADS agrees that it will, on behalf of itself and its officers and
employees, treat all transactions contemplated by this Agreement, and all
other information germane thereto, as confidential and not to be disclosed to
any person except as may be authorized by the Fund.
8. DURATION AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective as of the date hereof and shall
remain in force for a period of three (4) years, provided however, that both
parties to this Agreement have the option to terminate the Agreement, without
penalty, upon ninety (90) days prior written notice.
Upon termination of this agreement in accordance with the foregoing,
ADS shall deliver to the Fund (at the expense of the Fund) all records and
other documents made or accumulated in the performance of its duties for the
Fund hereunder.
9. ASSIGNMENT.
This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the prior written
consent of ADS, or by ADS without the prior written consent of the Fund.
10. GOVERNING LAW.
The provisions of this Agreement shall be construed and
5
<PAGE>
interpreted in accordance with the laws of the State of New York as at the
time in effect and the applicable provisions of the 1940 Act. To the extent
that the applicable law of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the 1940 Act, the latter
shall control.
11. AMENDMENTS TO THIS AGREEMENT.
This Agreement may be amended by the parties hereto only if such
amendment is in writing and signed by both parties.
12. NOTICES.
All notices and other communications hereunder shall be in writing,
shall be deemed to have been given when received or when sent by telex or
facsimile, and shall be given to the following addresses (or such other
addresses as to which notice is given):
To the Fund: To the ADS:
Mr. Donald H. Baxter Michael Miola
President President
Eagle Growth Shares, Inc. American Data Services, Inc.
1200 N. Federal Highway, Suite 424 24 West Carver Street
Boca Raton, FL 33432 Huntington, New York 11743
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
EAGLE GROWTH SHARES, INC. AMERICAN DATA SERVICES, INC.
By:/s/Donald H. Baxter By:/s/Michael Miola
------------------------ -----------------------
Donald H. Baxter, Michael Miola
Title: President President
-----------------
6
<PAGE>
SCHEDULE A
-------- -
(a) FUND ACCOUNTING SERVICE FEE:
For the services rendered by ADS in its capacity as fund accounting
agent, as specified in Paragraph 1. DUTIES OF ADS, the Fund shall pay ADS,
within (10) days after receipt of an invoice from ADS at the beginning of each
month, a fee equal to:
NET ASSET CHARGE
--- ----- ------
1/12th of 0.04% (4 basis points) of the Fund's monthly average net
assets on first $100 million of the total average net assets for
the month of all mutual funds managed by Baxter Financial and
fund accounting processed by ADS ("Combined Average Net
Assets"), plus;
1/12th of 0.01% (1 basis points) of the Fund's monthly average net
assets on all Combined Average Net Assets for the month in
excess of $100 million.
(b) AUTOMATED PRICING
Total Basic monthly fee........................................$250.00
The Basic monthly fee will be allocated to all funds processed by ADS
based upon the Combined Average Net Assets.
Monthly quotation charge per security:
Municipal Bond.................................$14.00
Government/Corporate Bonds..................... 11.00
Options, Futures............................... 5.00
Equities....................................... 4.00
Total Corporate Actions - Basic monthly fee...................$360.00
The Basic monthly fee will be allocated to all funds processed by ADS
based upon the Combined Average Net Assets.
Paydown Factors (Monthly)....................................$ 4.00/pool
(c) EXPENSES:
The Fund shall reimburse ADS for any out-of-pocket expenses exclusive of
salaries, advanced by ADS in connection with but not limited to the printing
or filing of documents for the Fund, travel, telephone, quotation services,
facsimile transmissions, stationery and supplies, record storage, postage,
telex, and courier charges incurred in connection with the performance of its
duties hereunder. ADS shall provide the Fund with a monthly
7
<PAGE>
invoice of such expenses and the Fund shall reimburse ADS within (15) days
after receipt thereof.
(d) SPECIAL REPORTS:
All reports and/or analyses requested by the Fund that are not in the
normal course of fund accounting activities as specified in Section 1 of this
Agreement shall be subject to an additional charge, agreed upon in advance,
based upon the following rates:
Labor:
Senior staff - $100.00/hr.
Junior staff - $ 50.00/hr.
Computer time - $45.00/hr.
(e) SECURITY DEPOSIT:
The Fund will remit to ADS upon execution of this Agreement a security
deposit of equal to one (1) month's minimum fee under this Agreement, computed
upon the total combined net assets of the portfolios to be processed by ADS on
the date above written. The Fund will have the option to have the security
deposit applied to the last month's service fee, or applied to any new
contract between the Fund and ADS.
(f) CONVERSION CHARGE:
The Fund will remit to ADS upon successful completion of the conversion
of the fund accounting records onto the system utilized by ADS to perform fund
accounting services, the sum of $2,000.00. This total conversion fee will be
allocated to the funds to be processed by ADS based on the fund's percentage
of total combined net assets.
8
<PAGE>
TAIT, WELLER & BAKER
Certified Public Accountants
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information (Part B) of this amended Registration Statement on Form
N-1A of our report dated December 22, 1995 (except for Note 5 as to which the
date is December 29, 1995 relating to financial statements of Eagle Growth
Shares, Inc. for the year ended November 30, 1995. We also consent to the
reference to our report under the heading "Financial Highlights" in such
amended Registration Statement.
/s/Tait, Weller & Baker
Tait, Weller & Baker
Philadelphia, Pennsylvania
March 1, 1996
<PAGE>
BASIC PLAN DOCUMENT NO. 01
EAGLE GROWTH SHARES, INC./PHILADELPHIA FUND, INC.
PROFIT SHARING/MONEY PURCHASE PENSION
RETIREMENT PLAN
ARTICLE I. INTRODUCTION
The Employer hereby establishes this Plan and related Custodial
Account to provide retirement, death and disability benefits for
participants and their beneficiaries. This Plan is a
standardized paired prototype defined contribution plan and is
designed to permit adoption of profit sharing provisions, money
purchase pension provisions, or both. The provisions herein and
the selections made by the Employer by execution of the profit
sharing or money purchase pension Application/Adoption Agreement
or Agreements, shall constitute the Plan. It is intended that
the Plan and related Custodial Account qualify under Section 401
and 501 of the Internal Revenue Code as amended, as well as
under the provisions of the Employee Retirement Income Security
Act of 1974, as amended.
ARTICLE II. DEFINITIONS
As used in this Plan, the related Custodial Agreement and the
Application/Adoption Agreement, the following terms shall have
the meanings hereinafter set forth, unless a different meaning
is plainly required by the context:
2.1 "Application/Adoption Agreement" means the written
agreement for the establishment of this Plan and Custodial
Agreement in connection therewith. The information contained
therein shall be part of this Plan as is set forth fully herein.
2.2 "Beneficiary" means the person or persons designated by a
Participant in writing to receive benefits upon his death. The
Participant's surviving spouse must be the sole Beneficiary
unless the Participant designates a different Beneficiary and
the spouse consents thereto in the manner set forth in Section
9.4(c) hereof. If the designated Beneficiary predeceases the
Participant, or if no valid designation is in effect at the
Participant's death, the Beneficiary shall be deemed to be the
Participant's surviving spouse, or if none, the legal
representative of the Participant's estate.
2.3 "Break in Service" or "One Year Break in Service" means a
Plan Year during all or a part of which the Participant is not
employed by Employer and does not complete more than five
hundred (500) Hours of Service with Employer.
<PAGE>
2.4 "Code" means the Internal Revenue Code of 1986 as amended
from time to time.
2.5 "Compensation" means compensation as that term is defined
in Section 13.5(b) of the Plan which is actually paid to a
Participant during the Plan Year, or during the portion of the
Plan Year in which he or she is a Participant, if less than the
full Plan Year; provided, however, that if this Plan is being
adopted as part of the Employer's amendment of its plan to
comply with the Tax Reform Act of 1986, then for the Plan Year
in which this Plan is adopted and all prior Plan Years,
"Compensation" means the total earnings reportable on Form W-2
actually received by a Participant from the Employer for the
period during which he is a Participant, for the taxable year of
the Employer ending with or within the Plan Year. In the case
of a Self-Employed Individual, Compensation means the
individual's Earned Income from the Employer. Compensation
shall exclude amounts in excess of $200,000. This limitation
shall be adjusted to the amounts prescribed by the Secretary of
the Treasury in accordance with Sections 401(a)(17) and 415(d)
of the Code, except that the dollar increase in effect on
January 1 of any calendar year is effective for the Employer's
taxable year beginning within such calendar year, and the first
adjustment to the $200,000 limitation is effective on January 1,
1990. If a plan determines compensation on a period of time
that contains fewer than 12 calendar months, then the annual
compensation limit is an amount equal to the annual compensation
limit for the calendar year in which the compensation period
begins multiplied by the ratio obtained by dividing the number
of full months in the period by 12. In determining the
compensation of a Participant for purposes of this limitation,
the rules of Section 414(q)(6) of the Code shall apply, except
in applying such rules, the term "family" shall include only the
spouse of the Participant and any lineal descendants of the
Participant who have not attained age nineteen (19) before the
close of the year. If, as a result of the application of such
rules, the adjusted $200,000 limitation is exceeded, then the
limitation shall be prorated among the affected individuals in
proportion to each such individual's Compensation as determined
under this Section 2.5 prior to the application of this
limitation.
2.6 "Custodial Account" means the account established under
the Custodial Agreement entered into pursuant to Article I and
forming a part hereof.
2.7. "Custodian" means the institution identified as such in
the Application/Adoption Agreement or any successor trustee or
custodian.
2.8 "Earned Income" means the net earnings from self-
employment in any trade or business with respect to which the
Plan is established, for which personal services of the
individual are a material income-producing factor. Net earnings
will be
<PAGE>
determined without regard to items not included in gross
income and the deductions allocable to such items. Net earnings
are reduced by contributions by the Employer to a qualified plan
to the extent deductible under Section 404 of the Code. Net
earnings shall be determined with regard to the deduction
allowed to the Employer by Section 164(f) of the Code for
taxable years beginning after December 31, 1989.
2.9 "Effective Date" means the date on which the Plan became
effective, as specified in the Application/Adoption Agreement.
2.10 "Employee" means any person employed by the Employer
or of any entity required to be aggregated under Section 414(b),
(c), (m) or (o) of the Code. The term "Employee" shall also
include any Leased Employee deemed to be an employee of any
employer described in the foregoing provisions of this Section
2.10 as provided in Sections 414(n) or (o) of the Code.
2.11 "Employer" means:
(a) The corporation, self-employed individual or
organization named in the Application/Adoption Agreement (also
referred to herein as the "Applicant");
(b) Any successor corporation or organization to all or a
major portion of the property or business of the Applicant,
which elects to continue this Plan with written approval of the
Custodian; and
(c) Such subsidiaries or other affiliated corporations and
organizations of the Employer, or of its successor, which adopts
this Plan, and which is approved in writing by the Custodian.
2.12 "Entry Date" means the date selected in the
Application/Adoption Agreement on which an Employee becomes a
Participant in the Plan.
2.13 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and the regulations promulgated
thereunder by the Department of Labor or the Department of
Treasury.
2.14 "Highly Compensated Employee" means a highly
compensated active employee or a highly compensated former
employee, as described below.
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 fifty percent (50%) of the dollar limitation in
effect under Section 415(b)(1)(A) of the Code. The term Highly
Compensated Employee 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 the
employee is one of the one hundred (100) employees who received
the most compensation from the Employer during the determination
year; and (ii) employees who are five percent (5%) owners at any
time during the look-back year or determination year.
If no officer has satisfied the compensation requirement of
(iii) above during either a determination year or a look-back
year, the highest paid officer for such year shall be treated as
a Highly Compensated Employee.
For this purpose, the determination year shall be the Plan
Year. The look-back shall be the twelve (12) month period
immediately preceding the determination year.
A highly compensated former employee includes any employee who
separated from service (or was deemed to have separated) prior
to the determination year, performs no service for the Employer
during the determination year, and was a highly compensated
active employee for either the separation year or any
determination year ending on or after the employee's fifty-fifth
(55th) birthday.
If an employee is, during a determination year or look-back
year, a family member of either a five percent (5%) percent
owner who is an active or former employee or a Highly
Compensated Employee who is one of the ten (10) most Highly
Compensated Employees ranked on the basis of compensation paid
by the Employer during such year, then the family member and the
five percent (5%) owner or top-ten (10) Highly Compensated
Employee shall be aggregated. In such case, the family member
and five percent (5%) owner or top-ten (10) Highly Compensated
Employee shall be treated as a single employee receiving
compensation and Plan contributions or benefits equal to the sum
of such compensation and contributions or benefits of the family
member and five percent (5%) owner or top-ten (10) Highly
Compensated Employee. For purposes of this section, family
member includes the spouse, lineal ascendants and descendants of
the employee or former employee and the spouses of such lineal
ascendants and descendants.
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of
employees in the top-paid group, the top one hundred (100)
employees, the number of employees treated as officers and the
<PAGE>
compensation that is considered, will be made in accordance with
Section 414(q) of the Code and the regulations thereunder.
2.15 "Hour of Service" means:
(a) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer. These
hours shall be credited to the Employee for the computation
period in which the duties are performed; and
(b) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during
which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), layoff,
jury duty, military service or leave of absence. No more than
five hundred and one (501) Hours of Service shall be credited
under this paragraph for any single continuous period (whether
or not such period occurs in a single computation period).
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; and
(c) Each hour for which back pay, irrespective of mitigation
of damages, is either awarded or agreed to by the Employer. The
same Hours of Service shall not be credited both under paragraph
(a) or paragraph (b), as the case may be, and under this
paragraph (c). These hours shall be credited to the Employee
for the computation period or periods to which the award or
agreement pertains rather than the computation period in which
the award, agreement or payment is made.
Hours of Service will be credited for employment with other
members of an affiliated service group (under Section 414(m) of
the Code), a controlled group of corporations (under Section
414(b)), or a group of trades or businesses under common control
(under Section 414(c) of which the adopting Employer is a
member, and any other entity required to be aggregated with the
Employer pursuant to Section 414(o) and the regulations
thereunder. Hours of Service will also be credited for any
individual considered an employee for purposes of this Plan
under Section 414(n) or Section 414(o) and the regulations
thereunder.
Solely for determining whether a Break in Service has occurred
in a computation period, for participation and vesting purposes,
an individual who is absent from work for maternity or paternity
reasons shall receive credit for the Hours of Service which
would otherwise have been credited to such individual but for
such absence, or in any case in which such hours cannot be
determined, eight (8) Hours of Service per day of such absence.
For purposes of this paragraph, an absence from work for
maternity or paternity reasons means an absence (i) by reason of
the pregnancy of the individual, (ii) by reason of a birth of a
child of the
<PAGE>
individual, (iii) by reason of the placement of a
child with the individual in connection with the adoption of
such child by such individual, or (iv) for purposes of caring
for such child for a period beginning immediately following such
birth or placement. The Hours of Service credited under this
paragraph shall be credited (i) in the computation period in
which the absence begins if the crediting is necessary to
prevent a Break in Service in that period, or (ii) in all other
cases, in the following computation period.
2.16 "Investment Company" means Eagle Growth Shares, Inc.,
Philadelphia Fund, Inc. and any other regulated investment
companies within the meaning of Section 851(a) of the Code which
are underwritten, distributed or sponsored by Baxter Financial
Corporation, or for which Baxter Financial Corporation serves as
investment advisor, and for which the Custodian has agreed to
act as custodian for purposes of this Plan. Shares of stock of
any such Investment Company are referred to herein as
"Investment Company Shares."
2.17 "Key Employee" means any Employee or former Employee
(and the Beneficiaries of such Employee) who at any time during
the determination period was an officer of the Employer if such
individuals's annual compensation exceeds fifty percent (50%) of
the dollar limitation under Section 415(b)(1)(A) of the Code, an
owner (or one who is considered an owner under Section 318 of
the Code) of one of the ten (10) largest interests in the
Employer if such individual's compensation exceeds one hundred
percent (100%) of the dollar limitation under Section
415(c)(1)(A) of the Code, a five percent (5%) owner of the
employer, or a one percent (1%) owner of the Employer who has an
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 (4) preceding Plan Years. The determination date for
the first Plan Year is the last day of that Plan Year. For
subsequent Plan Years, the determination date is the last day of
the preceding Plan Year.
2.18 "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 service for the recipient (or for any related persons
determined in accordance with Section 414(n)(6) of the Code) on
a substantially full time basis for a period of at least one (1)
year and such services are of a type historically performed by
employees in the business field of the recipient Employer.
Contributions or benefits provided a Leased Employee by the
leasing organization which are attributable to services
performed
<PAGE>
for the recipient Employer shall be treated as provided
by the recipient Employer.
A Leased Employee shall not be considered an Employee of the
recipient if: (i) such employee is covered by a money purchase
pension plan providing (a) a nonintegrated employer contribution
rate of at least ten percent (10%) of compensation, as defined
in Section 13.5(b) of the Plan, 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,
(b) immediate participation, and (3) full and immediate vesting;
and (ii) Leased Employees do not constitute more than twenty
percent (20%) of the recipient's non-Highly Compensated Employee
workforce.
2.19 "Military Service" shall mean a leave of absence
granted by Employer for service in the armed forces of the
United States of America which shall be counted in determining
Hours of Service under the Plan, provided such Employee returns
to employment with the Employer within ninety (90) days of his
release from active Military Service or any longer period during
which his right to reemployment is protected by law.
2.20 "Named Fiduciary" means the Plan Administrator and any
other person who is specifically so designated by the Employer.
2.21 "Net Profits" means current and accumulated earnings
of the Employer before federal and state taxes and contributions
to this Plan and any other qualified plan, as determined in
accordance with generally accepted accounting principles.
2.22 "Normal Retirement Age" means the attainment of age
sixty-five (65) or such other date as specified in the
Application/Adoption Agreement. For Plan Years beginning before
January 1, 1988, the "Normal Retirement Age" shall not be later
than the later of age 65 or the 10th anniversary of the date the
Participant commenced participation in the Plan. For Plan Years
beginning after December 31, 1987, and with respect to all
Participants, including Participants who commenced participation
in Plan Years beginning before January 1, 1988, the "Normal
Retirement Age" shall not be later than the later of age 65 or
the fifth (5th) anniversary of the date the Participant
commenced participation in the Plan. If the Employer enforces a
mandatory retirement age, the Normal Retirement Age is the
lesser of that mandatory age or the age specified in the
Application/Adoption Agreement.
2.23 "Owner-Employee" means an individual who is a sole
proprietor, or who is a partner owning more than ten percent
(10%) of either the capital or profits interests of a
partnership.
<PAGE>
2.24 "Participant" means a person who has met the
eligibility requirements set forth in the Application/Adoption
Agreement and whose account hereunder has been neither
completely forfeited nor completely distributed.
2.25 "Plan" means the paired prototype defined contribution
profit sharing plan no. 001 and money purchase pension plan no.
002 provided under this basic plan document no. 01. References
to the Plan shall refer to the profit sharing provisions, the
money purchase pension provisions, or both, as the context may
require.
2.26 "Plan Administrator" means the Employer or such other
party or parties designated by the Employer, who shall also be
the Named Fiduciary for the administration of the Plan.
2.27 "Plan Year" means the fiscal year of the Employer for
Federal Income Tax purposes unless another 12-consecutive month
period is indicated in the Application/Adoption Agreement.
2.28 "Self-Employed Individual" means an individual who has
Earned Income for the taxable year from the trade or business
for which the Plan is established, or an individual who would
have had Earned Income for the taxable year but for the fact
that the trade or business had no net profits for the taxable
year.
2.29 "Sponsor" means the sponsoring organization with
respect to the Plan, Philadelphia Fund, Inc.
2.30 "Total and Permanent Disability" means the inability
of a Participant to engage in any substantial gainful activity
because of any medically determinable physical or mental
impairment which 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 or degree of such
impairment shall be supported by medical evidence.
2.31 "Year of Service" for vesting purposes means a Plan
Year during which an Employee completed for the Employer the
minimum number of Hours of Service (not more than one thousand
(1,000)) indicated in the Application/Adoption Agreement. For
the purposes of determining an Employee's eligibility to
participate, a Year of Service shall mean completion of such
minimum number of Hours of Service (not more than one thousand
(1,000)) indicated in the Adoption Agreement during the twelve
(12) month period commencing with the first Hour of Service
performed by the Employee, and during each Plan Year beginning
after such Hour of Service. If an Employee earns a Year of
Service credit during the first twelve (12) month period
commencing with his first Hour of Service and if such Employee
earns an additional Year of Service credit during the Plan Year
commencing during such twelve (12) month period, then he shall
be credited with two (2) Years of Service for purposes of
eligibility to participate.
<PAGE>
ARTICLE III. ADMINISTRATION
3.1 Named Fiduciary and Plan Administrator
(a) The Plan Administrator is charged with the complete
control and management of the operation, administration and
interpretation of the Plan. The Plan Administrator shall be
appointed by the Employer in the Profit-Sharing or Money
Purchase Pension Application/Adoption Agreement or Agreements,
but if no Plan Administrator is appointed, the Employer shall be
the Plan Administrator. The Plan Administrator may employ such
agents as is deemed desirable or necessary to assist in the
performance of the duties hereunder. To the extent such persons
are performing duties as a fiduciary under ERISA, such
employment shall constitute a delegation of fiduciary
responsibility under Section 405(c) of ERISA.
(b) The Administrator or any other fiduciary may serve in
more than one fiduciary capacity with respect to the Plan.
3.2 The Plan Administrator may adopt such rules as it deems
necessary, desirable, or appropriate for the administration of
the Plan. All rules and decisions of the Plan Administrator
shall be applied uniformly and consistently to all Participants
in similar circumstances. When making a determination or
calculation, the Plan Administrator shall be entitled to rely
upon information furnished by a Participant or Beneficiary, the
Employer, the legal counsel of the Employer, or the Custodian.
3.3 The Employer shall take all action and prepare and file
all documents and reports necessary or appropriate under ERISA
and any other applicable Federal law.
3.4 Any Participant or Beneficiary under the Plan may file a
written claim for Plan benefits with the Plan Administrator or
with a person named by the Plan Administrator to receive claims
under the Plan.
3.5 In the event of a denial of any benefit or payment due to
or requested by any Participant or Beneficiary under the Plan
("claimant"), claimant shall be given a written notification
containing specific reasons for the denial. The written
notification shall contain specific references to the pertinent
Plan provisions on which the denial of his benefit is based. In
addition, it shall contain a description of any other material
or information necessary for the claimant to perfect a claim,
and an explanation of why such material or information is
necessary. The notification shall further provide appropriate
information as to the steps to be taken if the claimant wishes
to submit his claim for review. This written notification shall
be given to a claimant within ninety (90) days after receipt of
his claim by the Plan Administrator unless special circumstances
require an extension of time for processing the claim.
<PAGE>
In the event of a denial of a claim for benefits, the claimant
or his duly authorized representative shall be permitted to
review pertinent documents and to submit to the Plan
Administrator issues and comments in writing. In addition, the
claimant or his duly authorized representative may make a
written request for a full and fair review of his claim and its
denial by the Plan Administrator; provided, however, that such
written request must be received by the Plan Administrator (or
its delegate to receive such requests) within sixty (60) days
after receipt by the claimant of written notification of the
denial of the claim. The sixty (60) day requirement may be
waived by the Plan Administrator in appropriate cases.
3.6 A decision on review of a claim for benefits shall be
rendered by the Plan Administrator within sixty (60) days after
the receipt of the request for review, provided that where
special circumstances require an extension of time for
processing the decision, it may be postponed on written notice
to the claimant (prior to the expiration of the initial sixty
(60) day period) for an additional sixty (60) days, but in no
event shall the decision be rendered more than one hundred
twenty (120) days after the receipt of such request for review.
Any decision by the Plan Administrator shall be furnished to the
claimant in writing and shall set forth the specific reasons for
the decision and the specific plan provisions on which the
decision is based.
ARTICLE IV. ELIGIBILITY
4.1 Each Employee of the Employer shall become a Participant
in the Plan as of the first Entry Date following the date the
Employee satisfies the minimum age and service requirements
selected by the Employer in the Application/Adoption Agreement.
If no age and service requirements are selected by the Employer,
an Employee will become a Participant on the date he first
performs an Hour of Service for the Employer. An Employee will
become a Participant no later than the earlier of (a) the first
day of the Plan Year beginning after the date on which the
Employee has met the minimum age and service requirements or (b)
six (6) months after the date the requirements are met.
4.2 All Years of Service with the Employer are counted towards
eligibility except that in the case of a former Participant who
does not have any nonforfeitable right to the account balance
derived from Employer contributions, Years of Service before a
period of consecutive One Year Breaks in Service will not be
taken into account in computing eligibility service if the
number of consecutive One Year Breaks in Service equals or
exceeds the greater of five (5) or the aggregate number of Years
of Service before such Breaks in Service. Such aggregate number
of Years of Service will not include any Years of Service
disregarded under the preceding sentence by reason of a prior
Break in Service. If such former Participant's Years of Service
<PAGE>
before termination from service may not be disregarded pursuant
to the preceding sentence, such former Participant shall
participate immediately upon returning to the employ of the
Employer.
4.3 A former Participant will become a Participant immediately
upon returning to the employ of the Employer if such former
Participant had a nonforfeitable right to all or a portion of
the account balance derived from Employer contributions at the
time of termination from service.
4.4 Employees covered by a collective bargaining agreement
between the Employer and Employee representatives under which
retirement benefits were the subject of good faith bargaining
are not eligible to participate in this Plan if two percent or
less of the Employees of the Employer who are covered pursuant
to that agreement are professionals as defined in Section
1.410(b)-9(g) of the proposed regulations. For this purpose
"employee representative" does not include any organization more
than one-half of whose members are Employees who are owners,
officers, or executives of the Employer. In the event a
Participant is no longer a member of an eligible class of
Employees and becomes ineligible to participate but has not
incurred a Break in Service, such Employee will participate
immediately upon returning to an eligible class of Employees.
If such Participant incurs a Break in Service, eligibility will
be determined under the Break in Service rules of the Plan. In
the event an Employee who is not a member of an eligible class
of Employees becomes a member of an eligible class, such
Employee will participate immediately if such Employee has
satisfied the minimum age and service requirements and would
have otherwise previously become a Participant.
ARTICLE V. CONTRIBUTIONS
5.1 By the Employer.
(a) Money Purchase Pension Contributions. For each Plan
Year, the Employer shall contribute to the Custodial Account an
amount equal to such uniform percentage of Compensation of each
eligible Participant as determined by the Employer in accordance
with the money purchase pension contribution formula selected in
the Application/Adoption Agreement.
(b) Profit-Sharing Contributions. For each Plan Year, the
Employer shall contribute to the Custodial Account an amount as
may be determined by the Employer in accordance with the profit
sharing formula set forth in the Application/Adoption Agreement.
(c) Contribution Limitation. In no event shall any Employer
contributions exceed the maximum amount deductible from the
Employer's income under Section 404 of the Code, or cause the
amount allocated to any Participant's account to exceed the
<PAGE>
maximum limitations under Section 415 of the Code provided in
Article XIII.
5.2 By Participants.
(a) If selected by the Employer in the Application/Adoption
Agreement, each Participant may contribute on behalf of himself
an additional non-deductible amount of money. Any such
contribution by a Participant shall be voluntary on his part and
shall not be a condition to the allocation of any part of the
contribution of the Employer to the Participant, nor shall the
Employer or the Custodian be responsible for determining the
amount of the contribution by the Employee. Such contributions
may be made by payroll deductions or such other means as the
Employer may determine, to the extent permitted by applicable
law.
(b) All contributions by a Participant shall be credited
solely to his account and held for the purposes of the Plan as
hereinafter provided. Such Employee contributions shall be used
only for the purpose of providing benefits to the individual
contributor in addition to the benefits provided by the
Employer's contributions.
(c) The Employer shall furnish to each Employee who makes
contributions to the Plan on his own behalf a current prospectus
of the Investment Company or Companies in which such
contribution is to be invested.
(d) Notwithstanding the foregoing provisions of this Section
5.2, this Plan will not accept nondeductible Employee
contributions for Plan Years beginning after the Plan Year in
which this Plan is adopted by the Employer. Employee
contributions for Plan Years beginning after December 31, 1986,
will be limited so as to meet the nondiscrimination test of
Section 401(m).
5.3 Transfer of Assets or Rollovers from Other Plans.
(a) Subject to the approval of the Plan Administrator, the
Custodian, in its discretion, may accept a direct transfer of
assets from the trustee or custodian of any other qualified plan
described in Section 401(a) of the Code or from a qualified
annuity plan described in Section 403(a) of the Code to be held
for the benefit of any Participant to the full extent permitted
by the Code.
(b) Subject to the approval of the Plan Administrator, the
Custodian, in its discretion, may accept rollover amounts within
the meaning of Section 402(a)(5) of the Code.
(c) Before approving such a transfer of assets or a rollover,
the Custodian may request from the Plan Administrator or
<PAGE>
the Participant any documents or opinions of counsel which the
Custodian, in its discretion, deems necessary.
(d) Any transfer of assets or rollover to the Custodial
Account shall be credited to the Participant's transfer account
or rollover account, as the case may be, established under
Section 6.1 and separately accounted for. Such assets shall be
liquidated promptly and the proceeds shall be invested in
Investment Company shares. The Plan Administrator shall ensure
that the transfer account preserves all optional forms of
benefits of the transferor plan protected by Section 41(d)(6) of
the Code and the regulations thereunder.
5.4 Administration of Contributions.
Contributions made under Section 5.2 shall be remitted by
contributing Participants to the Custodian through the Employer
and not by the Participants directly. The Employer may
commingle contributions made under Sections 5.1 and 5.2, but
shall instruct the Custodian to credit the amount of each
Section 5.1 and each Section 5.2 contribution to separate
accounts for each Participant. The Employer shall keep records
of the amounts of each Section 5.1 and each Section 5.2
contribution, respectively, to be credited to each Participant's
account and the dates he remits them to the Custodian.
ARTICLE VI. ALLOCATION OF CONTRIBUTIONS
6.1 Individual Accounts. The Plan Administrator shall
establish and maintain a separate account or accounts in the
name of each Participant. The following accounts, where
applicable, shall be established in the name of the Participant:
(a) A profit-sharing contribution account shall credit each
such Participant's share of Employer contributions, forfeitures
and earnings on such amounts, which shall be allocated in the
manner selected in the Application/Adoption Agreement.
(b) A money purchase pension contribution account shall
credit each such Participant's share of Employer contributions,
forfeitures (if allocated among Participants) and earnings on
such amounts, which shall be allocated in the manner selected in
the Application/Adoption Agreement.
(c) A voluntary contribution account shall credit voluntary
contributions, if any, made by the Participant under Section
5.2, and earnings on such amounts.
(d) A transfer of assets account shall credit contributions
to the Custodial Account accepted under Section 5.3, and
earnings on such amounts.
<PAGE>
6.2 Minimum Allocation.
(a) If the Employer does not maintain any qualified defined
benefit pension plan in addition to this Plan, except as
provided in (b) and (c) below, the Employer contributions and
forfeitures allocated on behalf of any Participant who is not a
Key Employee shall not be less than the lesser of three percent
(3%) of such Participant's compensation (as defined in Section
13.5(b)) or the largest percentage of Employer contributions and
forfeitures, as a percentage of the first $200,000 of the Key
Employee's compensation (as defined in Section 13.5(b))
allocated on behalf of any Key Employee for that year.
(b) In the event the Employer maintains any qualified defined
benefit pension plan in addition to this Plan, the Employer will
provide a minimum allocation at least equal to five percent (5%)
of compensation (as defined in Section 13.5(b)) to each
Participant who is not a Key Employee and who is also a
participant in the defined benefit plan.
(c) The provisions in (a) and (b) above shall not apply to
any Participant who is not employed by the Employer on the last
day of the Plan Year.
(d) If the Employer enters into both the money purchase
pension Application/Adoption Agreement and the profit sharing
Application/Adoption Agreement under this Plan, to avoid a
duplication of the minimum allocation under this Section 6.2,
contributions that are sufficient to satisfy the minimum
allocation requirements of this Section 6.2 shall be made to the
money purchase pension plan to the extent sufficient allocations
are not otherwise provided under the profit sharing plan;
provided, however, that for Plan Years beginning after December
31, 1991, if the eligibility requirements for participation and
for allocation of Employer contributions under the money
purchase pension and profit sharing plans, as set forth in their
respective Application/Adoption Agreements, are not identical,
the minimum allocation required under Section 6.2 shall be made
under both Plans.
(e) The minimum allocation required under this Section 6.2
(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 411(a)(3)(D) of the Code.
6.3 Allocation of Employer Contributions.
(a) All profit-sharing contributions will be allocated to the
account of each Participant in the ratio that such Participant's
Compensation bears to the total Compensation of all Participants.
<PAGE>
(b) All money purchase pension contributions for a given Plan
Year shall be allocated to the account of the Participant for
whom such contribution was made.
(c) Eligible Participants. All Participants who are employed
on the last day of a Plan Year shall be entitled to share in the
allocation of Employer contributions for such Plan Year. For
Plan Years beginning after December 31, 1989, all Participants
who complete at least 501 Hours of Service during a Plan Year
shall be entitled to share in the allocation of Employer
contributions for such Plan Year, whether or not they are
employed on the last day of the Plan Year. The Employer may
elect in the Application/Adoption Agreement to allocate Employer
contributions to Participants who would not otherwise be
entitled to share in Employer contributions pursuant to this
Section 6.3(c).
6.4 Allocation of Forfeitures.
(a) Any forfeiture from a Participant's profit sharing
contribution account arising under the Plan for a given Plan
Year shall be allocated among Participants in the same manner as
Employer Contributions are allocated.
(b) Any forfeiture from a Participant's money purchase
pension contribution account arising under the Plan for a given
Plan Year shall either be applied to reduce the Employer
contribution for that Plan Year under Section 6.1(a), or in
succeeding Plan Years if necessary, or, for Plan Years beginning
after December 31, 1985, allocated among Participants in the
ratio that each Participant's Compensation bears to the total
Compensation of all Participants, as selected by the Employer in
the Application/Adoption Agreement.
6.5 Withdrawals and Distributions. Any distribution to a
Participant or his Beneficiary or any withdrawal by a
Participant shall be charged to the appropriate account(s) of
the Participant as of the date of the distribution or the
withdrawal.
ARTICLE VII. VESTING
7.1 All contributions made by the Employer to the
Participant's money purchase pension contribution account and
profit-sharing contribution account shall be fully vested and
nonforfeitable upon the Participant's death while in the employ
of the Employer, Total and Permanent Disability, or the
attainment of Normal Retirement Age while in the employ of the
Employer.
7.2 All voluntary contributions made by the Participant and
all investments made with such contributions, and the earnings
thereon, shall immediately become and at all times remain fully
vested and nonforfeitable.
<PAGE>
7.3 A Participant's interest in contributions made on his
behalf by the Employer shall be vested prior to the occurrence
of any event described in Section 7.1 to the extent and in the
manner set forth on the Application/Adoption Agreement.
7.4 Within thirty (30) days after receipt of the Custodian's
report with respect to each Plan Year, the Employer will furnish
each Participant a statement of the amounts credited to his
account or accounts during and at the end of such year.
7.5 In the case of any Participant who has incurred a One Year
Break in Service, Years of Service before such Break will not be
taken into account for purposes of determining the Participant's
vested interest until the Participant has completed a Year of
Service after such Break in Service.
7.6 In the case of a Participant who has five (5) or more
consecutive One Year Breaks in Service, the Participant's
pre-Break service will count for vesting purposes only if either:
(a) such Participant has any nonforfeitable interest in his
account balance attributable to Employer contributions at the
time of separation from service, or
(b) upon returning to service the number of consecutive One
Year Breaks in Service is less than the number of Years of
Service.
7.7 In the case of a Participant who has five (5) or more
consecutive One Year Breaks in Service, all service after such
Breaks in Service will be disregarded for the purpose of vesting
in the Employer-derived account balance that accrued before such
Breaks in Service. Separate accounts will be maintained for the
Participant's pre-Break and post-Break Employer-derived account
balance. Both accounts will share in the earning and losses of
the Plan.
7.8 (a) If a Participant terminates service with the
Employer, (and the value of the Participant's vested account
balance derived from Employer and employee contributions is not
greater than $3,500), the Participant will receive, as soon as
practicable following his termination of service, a lump sum
distribution of the value of the entire vested portion of such
account balance. Upon such distribution, the nonvested portion
will be treated as a forfeiture. For purposes of this Section
7.8(a), if the value of a Participant's vested account balance
is zero, the employee shall be deemed to have received a
distribution of such vested account balance. A Participant's
vested account balance shall not include accumulated deductible
employee contributions within the meaning of Section 72(o)(5)(B)
of the Code for Plan Years beginning prior to January 1, 1989.
<PAGE>
(b) If a Participant terminates service with the Employer
(and the value of the Participant's vested account balance
derived from Employer and employee contributions is greater than
$3,500), the Participant will receive, as soon as practicable
following his termination of service, a lump sum distribution of
the value of the entire vested portion of such account balance,
provided the Participant elects in accordance with the
requirements of Section 9.8, to receive the distribution. Upon
such distribution, the nonvested portion will be treated as a
forfeiture.
(c) If a Participant receives a distribution pursuant to this
Section 7.8 which is less than the value of the Participant's
account balance derived from Employer contributions, and resumes
employment covered under this Plan, the Participant's account
will be restored by the Employer to the amount on the date of
the distribution if the Participant repays to the Plan the full
amount of the distribution attributable to Employer
Contributions before the earlier of five (5) years after the
first date on which the Participant is subsequently reemployed
by the Employer, or the date the Participant incurs five (5)
consecutive One-Year Breaks in Service following the date of
distribution. If a Participant is deemed to receive a
distribution pursuant to Section 7.8(a), and the Participant
resumes employment covered under this Plan before the date the
Participant incurs five (5) consecutive One-Year Breaks in
Service, upon the reemployment of such Participant, the
Employer-derived account balance of the Participant will be
restored to the amount on the date of such deemed distribution.
7.9 No amendment to the vesting schedule shall deprive a
Participant of his nonforfeitable rights to benefits accrued to
the date of the amendment. Further, if the vesting schedule of
the Plan is amended, or if the Plan is amended in any way that
directly or indirectly affects the computation of a
Participant's nonforfeitable percentage, each Participant with
at least three (3) Years of Service with the Employer may elect,
within a reasonable period after the adoption of the amendment,
to have his nonforfeitable percentage computed under the Plan
without regard to such amendment. For Participants who do not
have at least one (1) Hour of Service in any Plan Year beginning
after December 31, 1988, the preceding sentence shall be applied
by substituting "five (5) Years of Service" for "three (3) Years
of Service" where such language appears. The period during
which the election may be made shall commence with the date the
amendment is adopted and shall end on the later of:
(i) Sixty (60) days after the amendment is adopted;
(ii) Sixty (60) days after the amendment becomes
effective; or
<PAGE>
(iii) Sixty (60) days after the Participant is issued
written notice of the amendment by the Employer or Plan
Administrator.
7.10 All of an Employee's Years of Service with the
Employer shall be counted to determine the nonforfeitable
percentage of his account balance derived from Employer
contributions, except as provided in Sections 7.5, 7.6 and 7.7
above.
7.11 No amendment to the Plan shall be effective to the
extent that it has the effect of decreasing a Participant's
accrued benefit. Notwithstanding the preceding sentence, a
Participant's account balance may be reduced to the extent
permitted under Section 412(c)(8) of the Code. For purposes of
this Section 7.11, a Plan amendment which has the effect of
decreasing a Participant's account balance or eliminating an
optional form of benefit, with respect to benefits attributable
to service before the amendment, shall be treated as reducing an
accrued benefit. Furthermore, if the vesting schedule of the
Plan is amended, in the case of an Employee who is a Participant
as of the later of the date such amendment is adopted or the
date it becomes effective, the nonforfeitable percentage
(determined as of such date) of such Employee's right to his
Employer-derived accrued benefit will not be less than his
percentage computed under the Plan without regard to such
amendment.
ARTICLE VIII. PAYMENT OF BENEFITS
8.1 When a Participant ceases to be in the service of the
Employer, whether by reason of death or otherwise, the Employer
shall have his vested interest determined.
8.2 In the event that a Participant's service is terminated
for reasons other than those of death, Total and Permanent
Disability or retirement, any distribution to the Participant
shall be made in accordance with Section 7.8 and in a manner
provided by Section 8.4. If the value of the Participant's
vested account balance derived from Employer and Employee
contributions exceeds $3,500 and such Participant does not elect
to receive a distribution upon termination of service, the
Participant's vested benefits will be paid to him upon
attainment of Normal Retirement Age in accordance with Section
8.4, or to his Beneficiary upon his death, whichever comes
first, except as otherwise provided in Section 9.2 hereof.
8.3 Any Participant who has made contributions on behalf of
himself may, upon thirty (30) days written notice filed with the
Employer, withdraw all or any portion of the lesser of the
amounts specified in clauses (a) and (b) below:
(a) The aggregate amount of such contributions (but not
including any earnings thereon), or
<PAGE>
(b) The fair market value of the Investment Company shares
purchased with the aggregate amount of such contributions.
No forfeitures will occur solely as a result of a Participant's
withdrawal of Employee contributions.
8.4 Except as otherwise provided in Article IX, Joint and
Survivor Annuity Requirements, if the Participant's employment
terminates because of retirement at age sixty five (65), or such
other age as is designated in the Application/Adoption
Agreement, the Participant's benefits shall be distributed in
accordance with one of the following forms:
(a) A lump-sum payment either in cash or in kind.
(b) Installment payments over a period not longer than the
joint life and last survivor expectancy of the Participant and
the Participant's designated Beneficiary.
The Participant shall select the method of distribution.
8.5 If a Participant becomes Totally and Permanently Disabled,
the amount credited to his account may be distributed to him
commencing at any time within six (6) months after the date of
such disability in accordance with Section 8.4.
8.6 Unless the Participant elects otherwise, distribution of
benefits will begin no later than the sixtieth (60th) day after
the latest of the close of the Plan Year in which:
(a) the Participant attains sixty five (65) (or Normal
Retirement Age, if earlier);
(b) occurs the tenth (10th) anniversary of the year in which
the Participant commenced participation in the Plan; or
(c) the Participant terminates service with the Employer.
Notwithstanding the foregoing, the failure of a Participant
and spouse to consent to a distribution while a benefit is
immediately distributable, within the meaning of Section 9.8(a)
of the Plan, shall be deemed to be an election to defer
commencement of payment of any benefit sufficient to satisfy
this Section 8.6.
8.7 If the Participant dies before all of his vested account
balance has been distributed, the remaining portion shall be
paid to his Beneficiary. The Beneficiary may elect to receive
the remaining portion in either a single sum or in installments
over a period certain, except as otherwise provided in Article
IX hereof.
<PAGE>
8.8 In the event that any benefits under this Plan are to be
paid by means of the distribution of a paid-up annuity contract,
such contract must be nontransferable, and the terms of such
contract shall comply with the requirements of this Plan.
ARTICLE IX. JOINT AND SURVIVOR ANNUITY REQUIREMENTS
9.1 The provisions of this Article IX shall apply to any
Participant who is credited with at least one (1) Hour of
Service with the Employer on or after August 23, 1984, and such
other Participants as provided in Section 9.7.
9.2 Qualified Joint and Survivor Annuity. Unless an optional
form of benefit is selected pursuant to a qualified election
within the ninety (90) day period ending on the annuity starting
date, a married Participant's vested account balance will be
paid in the form of a qualified joint and survivor annuity and
an unmarried Participant's vested account balance will be paid
in the form of a life annuity. The Participant may elect to
have such annuity distributed upon attainment of the earliest
retirement age under the Plan.
9.3 Qualified Preretirement Survivor Annuity. Unless an
optional form of benefit has been selected within the election
period pursuant to a qualified election, if a Participant dies
before the annuity starting date then the Participant's vested
account balance shall be applied toward the purchase of an
annuity for the life of the surviving spouse. The surviving
spouse may elect to have such annuity distributed within a
reasonable period after the Participant's death.
9.4 Definitions.
(a) Election period: The period which begins on the first
day of the Plan Year in which the Participant attains age thirty
five (35) and ends on the date of the Participant's death. If a
Participant separates from service prior to the first day of the
Plan Year in which age thirty five (35) is attained, with
respect to the account balance as of the date of separation, the
election period shall begin on the date of separation.
A Participant who will not yet attain age thirty five (35) as
of the end of any current Plan Year may make a special qualified
election to waive the qualified preretirement survivor annuity
for the period beginning on the date of such election and ending
on the first day of the Plan Year in which the Participant will
attain age thirty five (35). Such election shall not be valid
unless the Participant receives a written explanation of the
qualified preretirement survivor annuity in such terms as are
comparable to the explanation required under Section 9.5(a).
Qualified preretirement survivor annuity coverage will be
automatically reinstated as of the first day of the Plan Year in
<PAGE>
which the Participant attains age thirty five (35). Any new
waiver on or after such date shall be subject to the full
requirements of this Article.
(b) Earliest retirement age: The earliest date on which,
under the Plan, the Participant could elect to receive
retirement benefits.
(c) Qualified election: A waiver of a qualified joint and
survivor annuity or a qualified preretirement survivor annuity.
Any waiver of a qualified joint and survivor annuity or a
qualified preretirement survivor annuity shall not be effective
unless: (a) the Participant's spouse consents in writing to the
election; (b) the election designates a specific beneficiary,
including any class of beneficiaries or any contingent
beneficiaries, which may not be changed without spousal consent
(or the spouse expressly permits designation by the Participant
without any further spousal consent); (c) the spouse's consent
acknowledges the effect of the election; and (d) the spouse's
consent is witnessed by a Plan representative or notary public.
Additionally, a Participant's waiver of the qualified joint and
survivor annuity shall not be effective unless the election
designates a form of benefit payment which may not be changed
without spousal consent (or the spouse expressly permits
designations by the Participant without any further spousal
consent). If it is established to the satisfaction of a Plan
representative that there is no spouse or that the spouse cannot
be located, a waiver will be deemed a qualified election.
Any consent by a spouse obtained under this provision (or
establishment that the consent of a spouse may not be obtained)
shall be effective only with respect to such spouse. A consent
that permits designations by the Participant without any
requirement of further consent by such spouse must acknowledge
that the spouse has the right to limit consent to a specific
beneficiary, and a specific form of benefit where applicable,
and that the spouse voluntarily elects to relinquish either or
both of such rights. A revocation of a prior waiver may be made
by a Participant without the consent of the spouse at any time
before the commencement of benefits. The number of revocations
shall not be limited. No consent obtained under this provision
shall be valid unless the Participant has received notice as
provided in Section 9.5 below.
(d) Qualified joint and survivor annuity: An immediate
annuity for the life of the Participant with a survivor annuity
for the life of the spouse which is not less than fifty percent
(50%) and not more than one hundred percent (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
which can be purchased with the Participant's vested account
balance.
<PAGE>
(e) Spouse (surviving spouse): The spouse or surviving
spouse of the Participant, provided that a former spouse will be
treated as the spouse or surviving spouse and a current spouse
will not be treated as the spouse or surviving spouse to the
extent provided under a qualified domestic relations order as
described in Section 414(p) of the Code.
(f) Annuity starting date: The first day of the first period
for which an amount is paid as an annuity or any other form.
(g) Vested account balance: The aggregate value of the
Participant's vested account balances derived from Employer and
Employee contributions (including rollovers), whether vested
before or upon death, including the proceeds of insurance
contracts, if any, on the Participant's life. The provisions of
this Article shall apply to a Participant who is vested in
amounts attributable to Employer Contributions, Employee
Contributions (or both) at the time of death or distribution.
9.5 Notice Requirements.
(a) In the case of a qualified joint and survivor annuity,
the Plan Administrator shall, no less than thirty (30) days and
no more than ninety (90) days prior to the annuity starting
date, provide each Participant a written explanation of: (i)
the terms and conditions of a qualified joint and survivor
annuity; (ii) the Participant's right to make and the effect of
an election to waive the qualified joint and survivor annuity
form of benefit; (iii) the rights of a Participant's spouse; and
(iv) the right to make, and the effect of, a revocation of a
previous election to waive the qualified joint and survivor
annuity.
(b) In the case of a qualified preretirement survivor annuity
as described in Section 9.3 of this Article, the Plan
Administrator shall provide each Participant within the
applicable period for such Participant a written explanation of
the qualified preretirement survivor annuity in such terms and
in such manner as would be comparable to the explanation
provided for meeting the requirements of Section 9.5(a)
applicable to a qualified joint and survivor annuity.
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 thirty five (35); (ii)
a reasonable period ending after the individual becomes a
Participant; (iii) a reasonable period ending after Section
9.5(c) ceases to apply to the Participant; or (iv) a reasonable
period ending after this Article first applies to the
Participant. Notwithstanding the foregoing, notice must be
provided within a reasonable period ending after separation from
service in the case
<PAGE>
of a Participant who separates from service before attaining age
thirty five (35).
For purposes of applying the preceding paragraph, a reasonable
period ending after the enumerated events described in (ii),
(iii) and (iv) is the end of the two (2) year period beginning
one (1) year prior to the date the applicable event occurs, and
ending one (1) year after that date. In the case of a
Participant who separates from service before the Plan Year in
which age thirty five (35) is attained, notice shall be provided
within the two (2) year period beginning one (1) year prior to
separation and ending one (1) year after separation. If such a
Participant thereafter returns to employment with the Employer,
the applicable period for such Participant shall be redetermined.
(c) Notwithstanding the other requirements of this Section
9.5, the respective notices prescribed by this Section need not
be given to a Participant if (1) the Plan "fully subsidizes" the
costs of a qualified joint and survivor annuity or qualified
preretirement survivor annuity, and (2) the Plan does not allow
the Participant to waive the qualified joint and survivor
annuity or qualified preretirement survivor annuity and does not
allow a married Participant to designate a nonspouse
beneficiary. For purposes of this Section 9.5(c), a plan fully
subsidizes the costs of a benefit if no increase in cost, or
decrease in benefits to the Participant, may result from the
Participant's failure to elect another benefit.
9.6 Safe harbor rules.
(a) This Section shall apply to a Participant in a
profit-sharing plan, and to any distribution, made on or after
the first day of the first Plan year beginning after December
31, 1988, from or under a separate account attributable solely
to accumulated deductible employee contributions, as defined in
Section 72(o)(5)(B) of the Code, and maintained on behalf of a
Participant in a money purchase pension plan, (including a
target benefit plan) if the following conditions are satisfied:
(1) the Participant does not or cannot elect payments in the
form of a life annuity; and (2) on the death of the Participant,
the Participant's vested account balance will be paid to the
Participant's surviving spouse, but if there is no surviving
spouse, or if the surviving spouse has consented in a manner
conforming to a qualified election, then to the Participant's
designated Beneficiary. The surviving spouse may elect to have
distribution of the vested account balance commence within the
ninety (90) day period following the date of the Participant's
death. The account balance shall be adjusted for gains or
losses occurring after the Participant's death in accordance
with the provisions of the Plan governing the adjustment of
account balances for other types of distributions. This Section
9.6 shall not be operative with respect to a Participant in a
profit-sharing plan if the plan is a direct or indirect
transferee of a defined
<PAGE>
benefit plan, money purchase plan, a target benefit plan, stock
bonus, or profit-sharing plan which is subject to the survivor
annuity requirements of Section 401(a)(11) and Section 417 of the
Code. If this Section 9.6 is operative, then the provisions of
this Article, other than Section 9.7, shall be inoperative.
(b) The Participant may waive the spousal death benefit
described in this Section at any time provided that no such
waiver shall be effective unless it satisfies the conditions of
Section 9.4(c) (other than the notification requirement referred
to therein) that would apply to the Participant's waiver of the
qualified preretirement survivor annuity.
(c) For purposes of this Section 9.6, vested account balance
shall mean, in the case of a money purchase pension plan or a
target benefit plan, the Participant's separate account balance
attributable solely to accumulated deductible Employee
Contributions within the meaning of Section 72(o)(5)(B) of the
Code. In the case of a profit-sharing plan, vested account
balance shall have the same meaning as provided in Section
9.4(g).
9.7 Transitional Rules.
(a) Any living Participant not receiving benefits on August
23, 1984, who would otherwise not receive the benefits
prescribed by the previous Sections of this Article must be
given the opportunity to elect to have the prior Sections of
this Article apply if such Participant is credited with at least
one (1) Hour of Service under this Plan or a predecessor plan in
a Plan Year beginning on or after January 1, 1976, and such
Participant had at least ten (10) years of vesting service when
he or she separated from service.
(b) Any living Participant not receiving benefits on August
23, 1984, who was credited with at least one (1) Hour of Service
under this Plan or a predecessor plan on or after September 2,
1974, and who is not otherwise credited with any service in a
Plan Year beginning on or after January 1, 1976, must be given
the opportunity to have his or her benefits paid in accordance
with Section 9.7(d) of this Article.
(c) The respective opportunities to elect (as described in
Section 9.7(a) and 9.7(b) above) must be afforded to the
appropriate Participants during the period commencing on August
23, 1984, and ending on the date benefits would otherwise
commence to said Participants.
(d) Any Participant who has elected pursuant to Section
9.7(b) of this Article and any Participant who does not elect
under Section 9.7(a) or who meets the requirements of Section
9.7(a) except that such Participant does not have at least ten
(10) years of vesting service when he or she separates from
service, shall have his or her benefits distributed in
accordance
<PAGE>
with all of the following requirements if benefits would have
been payable in the form of a life annuity:
(i) Automatic joint and survivor annuity. If benefits in
the form of a life annuity become payable to a married
Participant who:
(1) begins to receive payments under the Plan on or after
Normal Retirement Age; or
(2) dies on or after Normal Retirement Age while still
working for the Employer; or
(3) begins to receive payments on or after the qualified
early retirement age; or
(4) separates from service on or after attaining Normal
Retirement Age (or the qualified early retirement age) and after
satisfying the eligibility requirements for the payment of
benefits under the Plan and thereafter dies before beginning to
receive such benefits; then such benefits will be received under
this Plan in the form of a qualified joint and survivor annuity,
unless the Participant has elected otherwise during the election
period. The election period must begin at least six (6) months
before the Participant attains qualified early retirement age and
not more than ninety (90) days before the commencement of
benefits. Any election hereunder will be in writing and may be
changed by the Participant at any time.
(ii) Election of early survivor annuity. A Participant
who is employed after attaining the qualified early retirement
age will be given the opportunity to elect, during the election
period, to have a survivor annuity payable on death. If the
Participant elects the survivor annuity, payments under such
annuity must not be less than the payments which would have been
made to the spouse under the qualified joint and survivor
annuity if the Participant had retired on the day before his or
her death. Any election under this provision will be in writing
and may be changed by the Participant at any time. The election
period begins on the later of (1) the ninetieth (90th) day
before the Participant attains the qualified early retirement
age, or (2) the date on which participation begins, and ends on
the date the Participant terminates employment.
(iii) For purposes of this Section 9.7(d):
(1) Qualified early retirement age is the latest of:
(i) the earliest date, under the Plan, on which the
Participant may elect to receive retirement benefits,
<PAGE>
(ii) the first day of the one hundred and twentieth
(120th) month beginning before the Participant reaches Normal
Retirement Age, or
(iii) the date the Participant begins participation.
(2) Qualified joint and survivor annuity is an annuity
for the life of the Participant with a survivor annuity for the
life of the spouse as described in Section 9.4(d) of this
Article.
9.8 Restrictions on Immediate Distributions.
(a) If the value of a Participant's vested account balance
derived from Employer and Employee contributions exceeds (or at
the time of any prior distribution exceeded) $3,500, and the
account balance is immediately distributable, the Participant
and the Participant's spouse (or where either the Participant or
the spouse has died, the survivor) must consent to any
distribution of such account balance. The consent of the
Participant and the Participant's spouse shall be obtained in
writing within the ninety (90) day period ending on the annuity
starting date. The annuity starting date is the first day of
the first period for which an amount is paid as an annuity or
any other form. The Plan Administrator shall notify the
Participant and the Participant's spouse of the right to defer
any distribution until the Participant's account balance is no
longer immediately distributable. Such notification shall
include a general description of the material features of the
optional forms of benefit available under the Plan, and an
explanation of the relative values thereof, in a manner that
would satisfy the notice requirements of Section 417(a)(3) of
the Code, and shall be provided no less than thirty (30) days
and no more than ninety (90) days prior to the annuity starting
date.
Notwithstanding the foregoing, only the Participant need
consent to the commencement of a distribution in the form of a
qualified joint and survivor annuity while the account balance
is immediately distributable. (Furthermore, if payment in the
form of a qualified joint and survivor annuity is not required
with respect to the Participant pursuant to Section 9.6 of the
Plan, only the Participant need consent to the distribution of
an account balance that is immediately distributable.) Neither
the consent of the Participant nor the Participant's spouse
shall be required to the extent that a distribution is required
to satisfy Section 401(a)(9) or Section 415 of the Code. In
addition, upon termination of this Plan if the Plan does not
offer an annuity option (purchased from a commercial provider)
and if the Employer or any entity within the same controlled
group as the Employer does not maintain another defined
contribution plan (other than an employee stock ownership plan
as defined in Section 4975(e)(7) of the Code), the Participant's
account balance will, without the
<PAGE>
Participant's consent, be distributed to the Participant.
However, if any entity within the same controlled group as the
Employer maintains another defined contribution plan (other than
an employee stock ownership plan as defined in Section 4975(e)(7)
of the Code), then the Participant's account balance will be
transferred, without the Participant's consent, to the other plan
if the Participant does not consent to the immediate
distribution.
An account balance is immediately distributable if any part
of the account balance could be distributed to the Participant
(or surviving spouse) before the Participant attains (or would
have attained if not deceased) the later of Normal Retirement
Age or age sixty two (62).
(b) 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.
ARTICLE X. DISTRIBUTION REQUIREMENTS
10.1 General Rules.
(a) Subject to Article IX, Joint and Survivor Annuity
Requirements, the requirements of this Article shall apply to
any distribution of a Participant's interest and will take
precedence over any inconsistent provisions of this Plan.
Unless otherwise specified, the provisions of this Article apply
to calendar years beginning after December 31, 1984.
(b) All distributions required under this Article shall be
determined and made in accordance with the proposed regulations
under Section 401(a)(9) of the Code, including the minimum
distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the proposed regulations.
10.2 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.
10.3 Limits on Distribution Periods. As of the first
distribution calendar year, distributions, if not made in a
single-sum, may only be made over one of the following periods
(or a combination thereof):
(a) the life of the Participant,
(b) the life of the Participant and a designated Beneficiary,
<PAGE>
(c) a period certain not extending beyond the life expectancy
of the Participant, or
(d) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated
Beneficiary.
10.4 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:
(a) Individual account.
(i) If a Participant's benefit is to be distributed over (1)
a period not extending beyond the life expectancy of the
Participant or the joint life and last survivor expectancy of
the Participant and the Participant's designated Beneficiary or
(2) a period not extending beyond the life expectancy of the
designated Beneficiary, the amount required to be distributed
for each calendar year, beginning with distributions for the
first distribution calendar year, must at least equal the
quotient obtained by dividing the Participant's benefit by the
applicable life expectancy.
(ii) For calendar years beginning before January 1, 1989,
if the Participant's spouse is not the designated Beneficiary,
the method of distribution selected must assure that at least
fifty percent (50%) of the present value of the amount available
for distribution is paid within the life expectancy of the
Participant.
(iii) For calendar years beginning after December 31,
1988, the amount to be distributed each year, beginning with
distributions for the first distribution calendar year, shall
not be less than the quotient obtained by dividing the
Participant's benefit by the lesser of (1) the applicable life
expectancy or (2) if the Participant's spouse is not the
designated Beneficiary, the applicable divisor determined from
the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of the
proposed regulations. Distributions after the death of the
Participant shall be distributed using the applicable life
expectancy in Section 10.4(a)(i) above as the relevant divisor
without regard to proposed regulations Section 1.401(a)(9)-2.
(iv) The minimum distribution required for the
Participant's first distribution calendar year must be made on
or before the Participant's required beginning date. The
minimum distribution for other calendar years, including the
minimum distribution for the distribution calendar year in which
the Participant's required beginning date occurs, must be made
on or before December 31 of that distribution calendar year.
<PAGE>
(b) Other forms. If the Participant's benefit is distributed
in the form of an annuity purchased from an insurance company,
distributions thereunder shall be made in accordance with the
requirements of Section 401(a)(9) of the Code and the proposed
regulations thereunder.
10.5 Death Distribution Provisions.
(a) Distribution beginning before death. If the Participant
dies after distribution of his or her interest has begun, the
remaining portion of such interest will continue to be
distributed at least as rapidly as under the method of
distribution being used prior to the Participant's death.
(b) Distribution beginning after death. If the Participant
dies before distribution of his or her interest begins,
distribution of the Participant's entire interest shall be
completed by December 31 of the calendar year containing the
fifth (5th) anniversary of the Participant's death except to the
extent that an election is made to receive distributions in
accordance with (i) or (ii) below:
(i) if any portion of the Participant's interest is payable
to a designated Beneficiary, distributions may be made over the
life or over a period certain not greater than the life
expectancy of the designated Beneficiary commencing on or before
December 31 of the calendar year immediately following the
calendar year in which the Participant died;
(ii) if the designated Beneficiary is the Participant's
surviving spouse, the date distributions are required to begin
in accordance with (i) above shall not be earlier than the later
of (1) December 31 of the calendar year immediately following
the calendar year in which the Participant died and (2) December
31 of the calendar year in which the Participant would have
attained age seventy and one-half (70 1/2).
If the Participant has not made an election pursuant to this
Section 10.5(b) by the time of his or her death, the
Participant's designated Beneficiary must elect the method of
distribution no later than the earlier of (1) December 31 of the
calendar year in which distributions would be required to begin
under this Section, or (2) December 31 of the calendar year
which contains the fifth (5th) 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 (5th) anniversary of the Participant's
death.
(c) For purposes of Section 10.5(b) above, if the surviving
spouse dies after the Participant, but before payments to such
spouse begin, the provisions of Section 10.5(b), with the
<PAGE>
exception of paragraph (ii) therein, shall be applied as if the
surviving spouse were the Participant.
(d) For purposes of this Section 10.5, any amount paid to a
child of the Participant will be treated as if it had been paid
to the surviving spouse if the amount becomes payable to the
surviving spouse when the child reaches the age of majority.
(e) For the purposes of this Section 10.5, distribution of a
Participant's interest is considered to begin on the
Participant's required beginning date (or, if Section 10.5(c)
above is applicable, the date distribution is required to begin
to the surviving spouse pursuant to Section 10.5(b) above). If
distribution in the form of an annuity irrevocably commences to
the Participant before the required beginning date, the date
distribution is considered to begin is the date distribution
actually commences.
10.6 Definitions.
(a) Applicable life expectancy. The life expectancy (or
joint and last survivor expectancy) calculated using the
attained age of the Participant (or Designated Beneficiary) as
of the Participant's (or Designated Beneficiary's) birthday in
the applicable calendar year reduced by one 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.
(b) Designated Beneficiary. The individual who is designated
as the Beneficiary under the Plan in accordance with Section
401(a)(9) and the proposed regulations thereunder.
(c) Distribution calendar year. A calendar year for which a
minimum distribution is required. For distributions beginning
before the Participant's death, the first distribution calendar
year is the calendar year immediately preceding the calendar
year which contains the Participant's required beginning date.
For distributions beginning after the Participant's death, the
first distribution calendar year is the calendar year in which
distributions are required to begin pursuant to Section 10.5
above.
(d) Life expectancy. 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 spouse, in
the case of distributions described in Section
<PAGE>
10.5(b)(ii) above) by the time distributions are required to
begin, life expectancies shall be recalculated annually. Such
election shall be irrevocable as to the Participant (or spouse)
and shall apply to all subsequent years. The life expectancy for
a nonspouse Beneficiary may not be recalculated.
(e) Participant's benefit.
(i) The account balance as of the last valuation date in the
calendar year immediately preceding the distribution calendar
year (valuation calendar year) increased by the amount of any
contributions or forfeitures allocated to the account balance as
of dates in the valuation calendar year after the valuation date
and decreased by distributions made in the valuation calendar
year after the valuation date.
(ii) Exception for second distribution calendar year.
For purposes of paragraph (i) above, if any portion of the
minimum distribution for the first distribution calendar year is
made in the second distribution calendar year on or before the
required beginning date, the amount of the minimum distribution
made in the second distribution calendar year shall be treated
as if it had been made in the immediately preceding distribution
calendar year.
(f) Required beginning date.
(i) General rule. The required beginning date of a
Participant is the first day of April of the calendar year
following the calendar year in which the Participant attains age
seventy and one-half (70 1/2).
(ii) Transitional rules. The required beginning date of
a Participant who attains age seventy and one-half (70 1/2)
before January 1, 1988, shall be determined in accordance with
(1) or (2) below:
(1) Non-five (5) percent owners. The required beginning
date of a Participant who is not a five (5) percent owner is the
first day of April of the calendar year following the calendar
year in which the later of retirement or attainment of age
seventy and one-half (70 1/2) occurs.
(2) Five (5) percent owners. The required beginning date
of a Participant who is a five (5) percent owner during any year
beginning after December 31, 1979, is the first day of April
following the later of:
(A) the calendar year in which the Participant attains
age seventy and one-half (70 1/2), or
(B) the earlier of the calendar year with or within
which ends the Plan Year in which the Participant
<PAGE>
becomes a five (5) percent owner, or the calendar year in which
the Participant retires.
The required beginning date of a Participant who is not a five
(5) percent owner who attains age seventy and one-half (70 1/2)
during 1988 and who has not retired as of January 1, 1989, is
April 1, 1990.
(iii) Five (5) percent owner. A Participant is treated as
a five (5) percent owner for purposes of this section if such
Participant is a five (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 any time
during the Plan Year ending with or within the calendar year in
which such owner attains age sixty six and one-half (66 1/2) or
any subsequent Plan Year.
(iv) Once distributions have begun to a five (5) percent
owner under this section, they must continue to be distributed,
even if the Participant ceases to be a (5) percent owner in a
subsequent year.
10.7 Transitional Rule.
(a) Notwithstanding the other requirements of this Article
and subject to the requirements of Article IX, Joint and
Survivor Annuity Requirements, distribution on behalf of any
Participant, including a five (5) percent owner, may be made in
accordance with all of the following requirements (regardless of
when such distribution commences):
(i) The distribution by the trust (or custodial account) is
one which would not have disqualified such trust (or custodial
account) under Section 401(a)(9) of the Internal Revenue Code as
in effect prior to amendment by the Deficit Reduction Act of
1984.
(ii) The distribution is in accordance with a method of
distribution designated by the Participant whose interest in the
trust (or custodial account) is being distributed or, if the
Participant is deceased, by a Beneficiary of such Participant.
(iii) Such designation was in writing, was signed by the
Participant or the Beneficiary, and was made before January 1,
1984.
(iv) The Participant had accrued a benefit under the plan
as of December 31, 1983.
(v) The method of distribution designated by the Participant
or the Beneficiary specifies the time at which distribution will
commence, the period over which distributions
<PAGE>
will be made, and in the case of any distribution upon the
Participant's death, the Beneficiaries of the Participant listed
in order of priority.
(b) A distribution upon death will not be covered by this
transitional rule unless the information in the designation
contains the required information described above with respect
to the distributions to be made upon the death of the
Participant.
(c) For any distribution which commences before January 1,
1984, but continues after December 31, 1983, the Participant, or
the Beneficiary, to whom such distribution is being made, will
be presumed to have designated the method of distribution under
which the distribution is being made if the method of
distribution was specified in writing and the distribution
satisfies the requirements in subsections (a)(i) and (v).
(d) If a designation is revoked, any subsequent distribution
must satisfy the requirements of Section 401(a)(9) of the Code
and the proposed regulations thereunder. If a designation is
revoked subsequent to the date distributions are required to
begin, the trust (or custodial account) 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 proposed regulations
thereunder, but for the Section 242(b)(2) election. For
calendar years beginning after December 31, 1988, such
distributions must meet the minimum distribution incidental
benefit requirements in Section 1.401(a)(9)-2 of the proposed
regulations. Any changes in the designation will be considered
to be a revocation of the designation. However, the mere
substitution or addition of another Beneficiary (one not named
in the designation) under the designation will not be considered
to be a revocation of the designation, so long as such
substitution or addition does not alter the period over which
distributions are to be made under the designation, directly or
indirectly (for example, by altering the relevant measuring
life). In the case in which an amount is transferred or rolled
over from one plan to another plan, the rules in Q&A J-2 and Q&A
J-3 of Section 1.401(a)(9)-1 of the proposed regulations shall
apply.
ARTICLE XI. CUSTODIAL ACCOUNT
11.1 All contributions under the Plan shall be paid over to
the Custodial Account to be maintained by the Employer with the
Custodian. The Custodial Agreement pursuant to which such
Custodial Account is maintained shall provide:
<PAGE>
(a) That the investment of all funds in such Custodial
Account (including all earnings) shall be made solely in
Investment Company shares;
(b) That the shareholder of record of all such stock shall be
the Custodian or its nominee; and
(c) That the assets of the Account will be valued annually at
fair market value as of the last day of the Plan Year.
11.2 The Participants shall be the beneficial owners of all
such stock held in the Custodial Account.
11.3 Based upon information supplied to the Custodian by
the Plan Administrator, separate accounts shall be kept for
Employer contributions for Participants, voluntary contributions
by Participants and transfer of asset contributions by
Participants. If selected in the Application/Adoption
Agreement, the Custodian shall invest all funds in a
Participant's account according to the directions of the
Participant provided, however, that all such directions shall be
given by the Participant to the Plan Administrator who will in
turn transmit them to the Custodian. A Participant may, at any
time, by written notice to the Plan Administrator who will
transmit the same to the Custodian, change the investment of
assets in his account. If the Employer determines the
investment of funds in the Custodial Account, the Employer shall
purchase investments ratably on behalf of all Participants. The
Custodian is not responsible for ratably applying any single
purchase made by the Employer, but will be responsible only for
applying each separate contribution to the Participant's account
as designated by the Employer.
ARTICLE XII. AMENDMENT AND TERMINATION
12.1 Each Employer who adopts this Plan delegates to the
Sponsor the power to amend the Plan. The Sponsor shall submit a
copy of the amendment to each Employer and, if applicable, to
the Internal Revenue Service. Each Employer shall be deemed to
have consented to any such amendment.
12.2 The Sponsor shall not have the power to amend the Plan
in such manner as would cause or permit any part of the assets
in the Custodial Account to be diverted to purposes other than
for 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.
12.3 The Sponsor shall not have the right to modify or
amend the Plan retroactively in such manner as to deprive any
Participant, or his Beneficiary, of any benefit to which he was
entitled under the Plan by reason of contributions made by the
<PAGE>
Employer prior to the modification or amendment, unless such
modification or amendment is necessary to conform the Plan to,
or satisfy the conditions of, any law, governmental regulation
or ruling, and to permit the Plan and the Custodial Account to
meet the requirements of Sections 401 and 501(a) of the Code or
any similar statute enacted in lieu thereof.
12.4 If the Employer amends the Plan other than to adopt
(i) elective provisions in the Application/Adoption Agreement,
(ii) amendments stated in the Application/Adoption Agreement
which allow the Plan to satisfy Section 415 of the Code and/or
to avoid duplication of minimums under Section 416 of the Code
because of the required aggregation of multiple plans, or (iii)
certain model amendments published by the Internal Revenue
Service which specifically provide that their adoption will not
cause the Plan to be treated as individually designed, such
Employer shall no longer participate in the Plan, but will be
considered to have an individually designed plan.
12.5 The Plan shall terminate:
(a) If the Employer is dissolved or adjudicated bankrupt or
insolvent in appropriate proceedings, or if a general assignment
is made by the Employer for the benefit of creditors; or
(b) If the Employer should lose its identity by merger,
consolidation or reorganization into one or more corporations or
organizations, unless within 60 days after such merger,
consolidation or reorganization such corporations or
organizations elect by an instrument in writing delivered to the
Custodian to continue the Plan and such continuation is approved
by the Custodian.
12.6 In the event of termination, partial termination or
(if the Plan is a profit sharing plan) complete discontinuance
of contributions hereunder, the account balance of each
Participant shall be fully vested and nonforfeitable. Upon the
termination of the Plan, any and all assets remaining in the
Custodial Account, together with any earnings produced by such
assets following such termination, shall be distributed by the
Custodian to the Participants in accordance with amounts
credited to their accounts. Such distribution shall be in cash
or kind as directed by the Employer. Upon the completion of
such distribution, the Custodian shall be relieved from all
further liability with respect to all amounts so paid.
12.7 In the event of any merger or consolidation with, or
transfer of assets or liabilities to any other plan, each
Participant shall be entitled to a benefit after the merger,
consolidation or transfer (if the Plan had then terminated)
which is equal to or greater than the benefits he would have
been
<PAGE>
entitled to receive immediately before the merger, consolidation
or transfer (if the Plan had then terminated).
12.8 The Employer may not amend the Plan in a fashion that
has the effect of eliminating an optional form of benefit,
within the meaning of Section 411(d)(6) of the Code and the
regulations thereunder, with respect to benefits accrued prior
to the later of the effective date of the amendment or the date
of its adoption. If the Employer's plan was maintained pursuant
to documents other than this Plan and was subsequently amended
by the Employer's adoption of this Plan, any optional forms of
benefit available under the Employer's plan which are not
expressly made available under this Plan shall be preserved with
respect to benefits accrued prior to the later of the effective
date of the adoption of this Plan or the date of adoption of
this Plan.
ARTICLE XIII. LIMITATIONS ON ALLOCATIONS
13.1 Employers Who Do Not Maintain Other Qualified Plans.
(a) If the Participant does not participate in, and has never
participated in another qualified plan or a welfare benefit
fund, as defined in Section 419(e) of the Code, maintained by
the employer, or an individual medical account, as defined in
Section 415(l)(2) of the Code, maintained by the employer, which
provides an annual addition as defined in Section 13.5(a), the
amount of annual additions which may be credited to the
Participant's account for any limitation year will not exceed
the lesser of the maximum permissible amount or any other
limitation contained in this Plan. If the employer
contributions that would otherwise be contributed or allocated
to the Participant's account would cause the annual additions
for the limitation year to exceed the maximum permissible
amount, the amount contributed or allocated will be reduced so
that the annual additions for the limitation year will equal the
maximum permissible amount.
(b) Prior to determining the Participant's actual
compensation for the limitation year, the employer may determine
the maximum permissible amount for a Participant on the basis of
a reasonable estimation of the Participant's compensation for
the limitation year, uniformly determined for all Participants
similarly situated.
(c) As soon as is administratively feasible after the end of
the limitation year, the maximum permissible amount for the
limitation year will be determined on the basis of the
Participant's actual compensation for the limitation year.
(d) If, pursuant to Section 13.1(c) or as a result of the
allocation of forfeitures, there is an excess amount the excess
will be disposed of as follows:
<PAGE>
(i) Any nondeductible voluntary contributions, to the extent
they would reduce the excess amount, will be returned to the
Participant;
(ii) If after the application of paragraph (i) an excess
amount still exists, and the Participant is covered by the Plan
at the end of the limitation year, the excess amount in the
Participant's account will be used to reduce employer
contributions (including any allocation of forfeitures) for such
Participant in the next limitation year, and each succeeding
limitation year if necessary;
(iii) If after the application of paragraph (i) an excess
amount still exists, and the Participant is not covered by the
Plan at the end of 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;
(iv) If a suspense account is in existence at any time
during a limitation year pursuant to this Section, it will not
participate in the allocation of 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 employee contributions may be made to the
Plan for the limitation year. Excess amounts may not be
distributed to Participants or former Participants.
13.2 Employers Who Maintain Other Qualified Master or Prototype
Defined Contribution Plans.
(a) This Section applies if, in addition to this Plan, the
Participant is covered under another qualified master or
prototype defined contribution plan or a welfare benefit fund,
as defined in Section 419(e) of the Code, maintained by the
employer, or an individual medical account, as defined in
Section 415(l)(2) of the Code, maintained by the employer, which
provides an annual addition, as defined in Section 13.5(a),
during any limitation year. The annual additions which may be
credited to a Participant's account under this Plan for any such
limitation year will not exceed the maximum permissible amount
reduced by the annual additions credited to a Participant's
account under the other plans and welfare benefit funds for the
same limitation year. If the annual additions with respect to
the Participant under other defined contribution plans and
welfare benefit funds maintained by the employer are less than
the maximum permissible amount and the employer contributions
that would otherwise be contributed or allocated to the
Participant's account under this Plan would cause the annual
additions for the limitation year to exceed this limitation, the
amount contributed or allocated will
<PAGE>
be reduced so that the annual additions under all such plans and
funds for the limitation year will equal the maximum permissible
amount. If the annual additions with respect to the Participant
under such other defined contribution plans and welfare benefit
funds in the aggregate are equal to or greater than the maximum
permissible amount, no amount will be contributed or allocated
to the Participant's account under this Plan for the limitation
year.
(b) Prior to determining the Participant's actual
compensation for the limitation year, the Employer may determine
the maximum permissible amount for a Participant in the manner
described in Section 13.1(b).
(c) As soon as is administratively feasible after the end of
the limitation year, the maximum permissible amount for the
limitation year will be determined on the basis of the
Participant's actual compensation for the limitation year.
(d) If, pursuant to Section 13.2(c), above, or as a result of
the allocation of forfeitures, a Participant's annual additions
under this Plan and such other plans would result in an excess
amount for a limitation year, the excess amount will be deemed
to consist of the annual additions last allocated, except that
annual additions attributable to a welfare benefit fund or
individual medical account will be deemed to have been allocated
first regardless of the actual allocation date.
(e) If an excess amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation
date of another plan, the excess amount attributed to this Plan
will be the product of,
(i) the total excess amount allocated as of such date, times
(ii) the ratio of (1) the annual additions allocated to
the Participant for the limitation year as of such date under
this Plan to (2) the total annual additions allocated to the
Participant for the limitation year as of such date under this
and all the other qualified master or prototype defined
contribution plans.
(f) Any excess amount attributed to this Plan will be
disposed in the manner described in Section 13.1(d).
13.3 Employers Who, In Addition to this Plan, Maintain
Other Qualified Plans Which Are Defined Contribution Plans Other
than Master or Prototype Plans. If the Participant is covered
under another qualified defined contribution plan maintained by
the employer which is not a master or prototype plan, annual
additions which may be credited to the Participant's account
under this Plan for any limitation year will be limited in
accordance with Section 13.2 as though the other plan were a
master or prototype plan
<PAGE>
unless the employer provides other limitations in the
Application/Adoption Agreement.
13.4 Employers Who, In Addition To This Plan, Maintain a
Qualified Defined Benefit Plan. If the employer maintains, or
at any time maintained, a qualified defined benefit plan
covering any Participant in this Plan, the sum of the
Participant's defined benefit plan fraction and defined
contribution plan fraction will not exceed one (1.0) in any
limitation year. The annual additions which may be credited to
the Participant's account under this Plan for any limitation
year will be limited in accordance with the Application/Adoption
Agreement.
13.5 Definitions. For purposes of this Article XIII only,
the following definitions and rules of interpretation shall
apply:
(a) "annual additions" -- The sum of the following amounts
credited to a Participant's account for the limitation year:
(i) employer contributions;
(ii) forfeitures;
(iii) employee contributions;
(iv) amounts allocated after March 31, 1984, to an
individual medical account, as defined in Section 415(1)(1) of
the Code, which is part of a pension or annuity plan maintained
by the employer; and
(v) amounts derived from contributions paid or accrued
after December 31, 1985, in taxable years ending after such
date, which are attributable to post-retirement medical benefits
allocated to the separate account of a Key Employee, as defined
in Section 419A(d)(3) of the Code, under a welfare benefit fund,
as defined in Section 419(e) of the Code, maintained by the
employer.
(vi) excess amounts applied, under Sections 13.1(d) or
13.2(f) in the limitation year to reduce employer contributions.
(b) "compensation" -- Wages, salaries, and fees for
professional services and other amounts received (without regard
to whether or not an amount is paid in cash) for personal
services actually rendered in the course of employment with the
employer maintaining the Plan to the extent that the amounts are
includible in gross income (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, reimbursements, and
expense allowances), and excluding the following:
<PAGE>
(i) Employer contributions to a plan of deferred
compensation which are not includible in the employee's gross
income for the taxable year in which contributed, or employer
contributions under a simplified employee pension to the extent
such contributions are deductible by the employee, or any
distributions from a plan of deferred compensation;
(ii) Amounts realized from the exercise of a nonqualified
stock option, or when restricted stock (or property) held by the
employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(iii) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
(iv) Other amounts which received special tax benefits,
or contributions made by the employer (whether or not under a
salary reduction agreement) towards the purchase of an annuity
described in Section 403(b) of the Code (whether or not the
amounts are actually excludable from the gross income of the
employee).
For any Self-Employed Individual, compensation will mean
Earned Income.
For limitation years beginning after December 31, 1991, in
applying the limitations of this Article XIII, compensation for
a limitation year is the compensation actually paid or
includible in gross income during such limitation year.
Notwithstanding the preceding sentence, compensation for a
Participant who is permanently and totally disabled (as defined
in Section 22(e)(3) of the Code) is the compensation such
Participant would have received for the limitation year if the
Participant had been paid at the rate of compensation paid
immediately before becoming permanently and totally disabled;
such imputed compensation for the disabled Participant may be
taken into account only if the Participant is not a Highly
Compensated Employee, and contributions made on behalf of such
Participant are nonforfeitable when made.
(c) "defined benefit fraction" -- A fraction, the numerator
of which is the sum of the Participant's projected annual
benefits under all the defined benefit plans (whether or not
terminated) maintained by the employer, and the denominator of
which is the lesser of one hundred percent (100%) of the dollar
limitation in effect for the limitation year under Section
415(b)(1)(A) and 415(d) of the Code or one hundred and forty
percent (140%) of highest average compensation, including any
adjustments under Section 415(b) of the Code.
<PAGE>
Notwithstanding the above, if the Participant was a
Participant, as of the first day of the first limitation year
beginning after December 31, 1986, in one or more defined
benefit plans maintained by the employer which were in existence
on May 6, 1986, the denominator of this fraction will not be
less than 100% of the sum of the annual benefits under such
plans which the Participant had accrued as of the close of the
last limitation year beginning before January 1, 1987,
disregarding any changes in the terms and conditions of the plan
after May 5, 1986. The preceding sentence applies only if the
defined benefit plans individually and in the aggregate
satisfied the requirements of Section 415 of the Code for all
limitation years beginning before January 1, 1987.
(d) "defined contribution dollar limitation" -- $30,000 or,
if greater, one-fourth (1/4th) of the defined benefit dollar
limitation set forth in Section 415(b)(1) of the Code as in
effect for the limitation year.
(e) "defined contribution fraction" -- A fraction, the
numerator of which is the sum of the annual additions to the
Participant's account under all the defined contribution plans
(whether or not terminated) maintained by the employer for the
current and all prior limitation years (including the annual
additions attributable to the Participant's nondeductible
voluntary contributions to all defined benefit plans, whether
terminated, maintained by the employer and the annual additions
attributable to all welfare benefit funds, as defined in Section
419(e) of the Code, and individual medical accounts, as defined
in Section 415(l)(2) of the Code, maintained by the employer),
and the denominator of which is the sum of the maximum aggregate
amounts for the current and all prior limitation years of
service with the employer (regardless of whether a defined
contribution plan was maintained by the employer). The maximum
aggregate amount in any limitation year is the lesser of one
hundred percent (100%) of the dollar limitation in effect under
Section 415(c)(1)(A) of the Code or 35% of the Participant's
compensation for such year.
If the Participant was a participant, as of the end of the
first day of the first limitation year beginning after December
31, 1986, in one or more defined contribution plans maintained
by the employer which were in existence on May 6, 1986, the
numerator of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would otherwise exceed
one (1) under the terms of this Plan. Under the adjustment, an
amount equal to the product of (1) the excess of the sum of the
fractions over one (1) times (2) the denominator of this
fraction, will be permanently subtracted from the numerator of
this fraction. The adjustment is calculated using the fractions
as they would be computed as of the end of the last limitation
year beginning before January 1, 1987, and disregarding any
changes in the terms of the plans made after May 5, 1986, but
making the
<PAGE>
Section 415 limitation applicable to the first limitation year
beginning on or after January 1, 1987. The annual addition for
any limitation year beginning before January 1, 1987, shall not
be recomputed to treat all employee contributions as annual
additions.
(f) "employer" -- The Employer that adopts this Plan, and all
members of a controlled group of corporations (as defined in
Section 414(b) of the Code as modified by Section 415(h) of the
Code), all commonly controlled trades or businesses (as defined
in Section 414(c) of the Code as modified by Section 415(h) of
the Code), or affiliated service groups (as defined in Section
414(m) of the Code) of which the adopting Employer is a part,
and any other entity required to be aggregated with the Employer
pursuant to regulations under Section 414(o) of the Code.
(g) "excess amount" -- The excess of the Participant's annual
addition for the limitation year over the maximum permissible
amount.
(h) "highest average compensation" -- The average
compensation for the three (3) consecutive years of service with
the employer that produces the highest average. A year of
service with the employer is the Plan Year.
(i) "limitation year" -- A Plan Year, or the twelve (12)
consecutive month period elected by the employer in the
Application/Adoption Agreement. All qualified plans maintained
by the employer must use the same limitation year. If the
limitation year is amended to a different twelve (12)
consecutive month period, the new limitation year must begin on
a date within the limitation year in which the amendment is made.
(j) "master or prototype plan" -- A plan the form of which is
the subject of a favorable opinion letter from the Internal
Revenue Service.
(k) "maximum permissible amount" -- The lesser of the defined
contribution dollar limitation or twenty-five (25%) of the
Participant's compensation for the limitation year. The
compensation limitation referred to in the previous sentence
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 419A(d)(2) of the Code. If a short limitation year
is created because of an amendment changing the limitation year
to a different twelve (12) consecutive month period, the maximum
permissible amount will not exceed the defined contribution
dollar limitation multiplied by the following fraction:
<PAGE>
Number of months in the short limitation year
-------------------------------------------------
twelve (12)
(l) "projected annual benefit" -- The annual retirement
benefit (adjusted to an actuarially equivalent straight life
annuity if such benefit is expressed in a form other than a
straight life annuity or qualified joint and survivor annuity)
to which the Participant would be entitled under the terms of
the plan assuming:
(i) the Participant will continue employment until normal
retirement age under the plan (or current age, if later), and
(ii) the Participant's compensation for the current
limitation year and all other relevant factors used to determine
benefits under the plan will remain constant for all future
limitation years.
ARTICLE XIV. MISCELLANEOUS
14.1 Status of Participants. The Employer hopes and
expects to continue the Plan and the payment of contributions
hereunder indefinitely, but such continuance is not assigned as
a contractual obligation except as required by ERISA. Neither
the establishment of the Plan and the Custodial Agreement nor
any modification thereof, nor the creation of any fund or
account, nor the payment of any benefits, shall be construed as
giving to any Participant or other person any legal or equitable
right against the Employer, or the Custodian, except as provided
herein or in said Custodial Agreement or as required by ERISA,
nor as modifying or affecting in any way whatsoever the terms of
employment of any Participant.
14.2 Administration of the Plan. The Plan Administrator
shall have all the responsibility for administration set forth
in this Plan and all the responsibility set forth for Plan
Administrators in ERISA.
14.3 Allocation of Charges. Any income taxes or other
taxes of any kind whatsoever that may be levied or assessed upon
or in respect of the assets of the Plan, or the income arising
therefrom, any transfer taxes incurred in connection with the
investment and reinvestment of such assets, all other
administrative expenses incurred by the Custodian in the
performance of its duties, including fees for legal services
rendered to the Custodian and the Custodian's compensation,
shall be paid and charged as provided in the Custodial Agreement.
<PAGE>
14.4 Condition of Plan and Custodial Agreement. It is a
condition of this Plan and Custodial Agreement and each Employee
by participating herein expressly agrees that he shall look
solely to the assets of the Custodial Account for the payment of
any benefit to which he is entitled under the Plan. As provided
in ERISA, no prohibited transaction with a disqualified person
or party in interest shall be permitted, except to the extent
allowed therein.
14.5 Inalienability of Benefits. The benefits provided
hereunder shall not be subject to alienation, assignment,
garnishment, attachment, execution or levy, and any attempt to
cause such benefits to be so subjected shall not be recognized
except to such extent as may be required by law. The preceding
sentence shall also apply to the creation, assignment, or
recognition of a right to any benefit payable with respect to a
Participant pursuant to a domestic relations order, unless such
order is determined to be a qualified domestic relations order,
as defined in Section 414(p) of the Code, or any domestic
relations order entered before January 1, 1985.
14.6 Necessity of Qualification. The Plan and Custodial
Agreement are established with the intent that they shall
qualify under Section 401 and Section 501(a) of the Internal
Revenue Code, as amended. If the Employer's plan fails to
attain or retain qualification, such plan will no longer
participate in this prototype Plan and will be considered an
individually designed plan. If the Employer's plan fails to
attain or retain qualification, the funds of such plan will be
removed from the Custodial Account as soon as administratively
feasible.
14.7 Predecessor Employers. If the Employer maintains the
plan of a predecessor employer, service with such predecessor
employer will be treated as service for the Employer to the
extent required by Section 414(a) of the Code.
14.8 Aggregation Rules.
(a) If this Plan provides contributions or benefits for one
or more Owner-Employees who control both the business for which
this Plan is established and one or more other trades or
businesses, this Plan and the plan established for other trades
or businesses must, when looked at as a single plan, satisfy
Sections 401(a) and (d) of the Code for the Employees of this
and all other trades or businesses.
(b) If the Plan provides contributions or benefits for one or
more Owner-Employees who control one or more other trades or
businesses, the employees of the other trades or businesses must
be included in a plan which satisfies Sections 401(a) and (d) of
the Code and which provides contributions and benefits not less
favorable than provided for Owner-Employees under this Plan.
<PAGE>
(c) If an individual is covered as an Owner-Employee under
the plans of two (2) or more trades or businesses which are not
controlled and the individual controls a trade or business, then
the contributions or benefits of the employees under the plan of
the trades or businesses which are controlled must be as
favorable as those provided for him under the most favorable
plan of the trade or business which is not controlled.
(d) For purposes of paragraphs (a), (b) and (c), an
Owner-Employee, or two or more Owner-Employees, will be
considered to control a trade or business if the Owner-Employee,
or two (2) or more Owner-Employees together:
(i) own the entire interest in an unincorporated trade or
business, or
(ii) in the case of a partnership, own more than fifty
percent (50%) of either the capital interest or the profits
interest in the partnership.
For purposes of the preceding sentence, an Owner-Employee, or
two (2) or more Owner-Employees shall be treated as owning an
interest in a partnership which is owned, directly or
indirectly, by a partnership which such Owner-Employee, or such
two (2) or more Owner-Employees, are considered to control
within the meaning of the preceding sentence.
14.9 At no time shall contributions to this Plan, and
earnings thereon, be used for, or diverted to, purposes other
than for the exclusive benefit of Participants and
Beneficiaries. Notwithstanding the preceding sentence, however:
(a) Any contribution made by the Employer because of a
mistake of fact shall be returned to the Employer within one
year of the contribution; and
(b) In the event that the Commissioner of Internal Revenue
determines that the Employer's Plan is not initially qualified
under the Code, any Employer contribution made incident to that
initial qualification by the Employer shall be returned to the
Employer within one year after the date the initial
qualification is denied, but only if the application for the
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; and
(c) In the event that any Federal Income Tax deduction
claimed by the Employer with respect to a contribution to this
Plan is disallowed by the Commissioner of Internal Revenue, such
contribution (to the extent disallowed) must be returned to the
Employer within one year of such disallowance.
<PAGE>
14.10 Governing Law. This Plan, other than the Custodial
Agreement, shall be construed, administered and enforced
according to the laws of the State wherein the principal place
of business of the Employer is located, except as superseded by
Federal law.
<PAGE>
AMENDMENT
TO THE
EAGLE GROWTH SHARES, INC./PHILADELPHIA FUND, INC.
PROFIT SHARING/ MONEY PURCHASE PENSION RETIREMENT PLAN
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Philadelphia Fund, Inc. (the "Fund") is the sponsor of a
prototype retirement plan known as the "Eagle Growth Shares, Inc./Philadelphia
Fund, Inc. Profit Sharing/Money Purchase Pension Retirement Plan (the "Plan");
and
WHEREAS, the Plan is the subject of two favorable opinion letters issued
by the Internal Revenue Service and dated April 3, 1991; and
WHEREAS, pursuant to Internal Revenue Service Rev. Proc. 93-12 and Rev.
Proc. 94-13, the Plan must be amended on or before December 31, 1994 to
comply with the Unemployment Compensation Amendments of 1992 and the Omnibus
Budget Reconciliation Act of 1993, respectfully; and
WHEREAS, the aforementioned Rev. Proc. provide "model" amendment language
for such purpose which, if adopted by the Fund as an amendment to the Plan,
will have no effect on an employer's ability to rely on the Internal Revenue
Service opinion letters dated April 3, 1991.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Section 2.5 of the Plan's Basic Plan Document No. 01 is revised by
adding the following at the end thereof:
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of this Plan to the contrary, for Plan
Years beginning 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 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
<PAGE>
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 determination period is taken into account in
determining an employee's benefits accruing in the current Plan Year, the
compensation for that prior determination period is subject to the OBRA
'93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the
first day of the first Plan Year beginning on or after January 1, 1994,
the OBRA '93 annual compensation limit is $150,000.
2. Article VIII of the Plan's Basic Plan Document No. 01 is revised by
adding the following new Section 8.9 thereto:
8.9 Direct Rollovers.
(a) This Section 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.
(b) Definitions.
(i) 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
<PAGE>
lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period often
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).
(ii) 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.
(iii) Distributee: A distributee includes an Employee
or former Employee. In addition, the Employee's or former Employee's
surviving spouse or former spouse who is the alternative 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.
(iv) Direct rollover: A direct rollover is a payment
by the Plan to the eligible retirement plan specified by the
distributee.
IN WITNESS WHEREOF, the Fund has caused this amendment to be executed
by its duly authorized officers this 21st day of October, 1994.
ATTEST: PHILADELPHIA FUND, INC.
/s/Ronald F. Rohe By:/s/Donald H. Baxter
- ------------------------------ --------------------------
<PAGE>
CUSTODIAL AGREEMENT
EAGLE GROWTH SHARES, INC./PHILADELPHIA FUND, INC.
PROFIT SHARING/MONEY PURCHASE PENSION
RETIREMENT PLAN
By signing the Application/Adoption Agreement or Agreements for
the Eagle Growth Shares, Inc./Philadelphia Fund, Inc. Profit
Sharing/Money Purchase Pension Retirement Plan ("Plan"), the
Employer named therein ("the Employer") hereby establishes a
Custodial Account (herein referred to as "Custodial Account")
and Star Bank, N.A. (herein referred to as "the Custodian") by
counter-signing such Application/Adoption Agreement or
Agreements hereby accepts the custodianship thereof upon the
following conditions:
ESTABLISHMENT OF CUSTODIAN AND PARTICIPANTS' ACCOUNTS
1. The Custodial Agreement is established solely for the
purpose of:
(a) The investment of all contributions made by the Employer
or any other qualified contributor in shares of Philadelphia
Fund, Inc., Eagle Growth Shares, Inc. or such other regulated
investment companies sponsored, underwritten or distributed by
Baxter Financial Corporation, or for which Baxter Financial
Corporation serves as investment advisor, and which the
Custodian has agreed to hold hereunder. Such investment
companies are hereinafter referred to as a "Fund" or "Funds" and
the shares thereof are hereinafter referred to as "Fund Shares."
(b) The holding of such Fund Shares in the Custodial Account
until distributed in accordance with the provisions of Section 9.
RECEIPT OF CONTRIBUTIONS
2. All contributions made to the Custodial Account shall be
in accordance with the provisions of the Plan but the Custodian
shall have no obligation to verify the allowability or amount of
such contributions under the Code and may rely solely on the
representations of the Employer with respect thereto. All
contributions shall be accompanied by written instructions from
the Plan Administrator specifying the Participant's account to
which contributions are to be credited (including the type of
<PAGE>
contribution being made) and the investments to be acquired
therewith.
3. The Custodian shall hold and treat the contributions made
by or on behalf of each person as a separate account under this
Agreement.
4. Contributions under the Plan shall be accepted by the
Custodian only when made through the Plan Administrator.
5. The Custodian shall, upon written instructions from the
Plan Administrator, reallocate amounts in the Participants'
accounts, which the Employer has certified to have been
forfeited. The Custodian shall comply with such instructions
and shall be under no obligation to verify the propriety of any
such re-allocation or the amount thereof.
6. The Custodian, in its discretion, may accept cash and/or
Fund Shares transferred to it from any other plan described in
Section 401(a) or 403(a) of the Code which is maintained by the
Employer for the benefit of any of the Participants. Before
approving such a transfer of assets, the Custodian may request
from the Plan Administrator any documents or information it
deems necessary and may require an opinion of counsel that such
other plan satisfies the applicable requirements of Section
40l(a) or 403(a) of the Code. It shall hold the Fund Shares, if
any, and shall invest such cash in accordance with provisions of
Section 11 hereof, and shall, in accordance with the written
instructions of the Plan Administrator make appropriate credits
to the accounts of the Participants for whose benefit a
contribution has been made. Any amounts so credited as
contributions previously made by the Employer or by such
Participants under such other plan, as specified by the Plan
Administrator, shall be treated as contributions previously made
under the Plan by the Employer or by such Participants, as the
case may be.
7. The Custodian, in its discretion, may accept a direct
transfer of assets from the trustee or custodian of any other
plan described in Section 401(a) or 403(a) of the Code, to be
held for the benefit of any Participant to the full extent
permitted by the Code. Before approving such a transfer of
assets, the Custodian may request from the Plan Administrator or
the Participant any documents or information it deems necessary
and may require an opinion of counsel that such other plan
satisfies the applicable requirements of Section 401(a) or
403(a) of the Code. In the event that the transferred amounts
includes assets other than cash and/or Fund Shares, the
Custodian shall dispose of said other assets promptly and invest
the proceeds in accordance with Section 11 hereof.
<PAGE>
8. The Custodian, in its discretion, may accept a
contribution of rollover amounts within the meaning of Section
402(a)(5) of the Code. Before accepting any such contribution,
the Custodian may request from the Plan Administrator or the
Participant any documents or information it deems necessary and
may require an opinion of counsel that such contribution
qualifies as a rollover within the meaning of Section 402(a)(5)
of the Code. Any such rollover contribution shall be separately
accounted for and invested in accordance with Section II hereof.
In the event that the rollover contribution includes assets
other than cash and/or Fund shares, the custodian shall dispose
of such other assets promptly and invest the proceeds in
accordance with Section 11 hereof.
DISTRIBUTIONS FROM THE CUSTODIAL ACCOUNT
9. The Custodian shall make such distributions as the Plan
Administrator shall direct in writing. At no time shall it be
possible for any part of the assets of the Custodial Account to
be used for or diverted to purposes other than for the exclusive
benefit of Participants and their beneficiaries. In connection
with the making of any distributions, the Custodian may rely
solely on the accuracy of all facts supplied at any time by the
Plan Administrator, including any written designation of
beneficiary. By directing a distribution, the Plan
Administrator shall be deemed to represent that such
distribution complies with the provisions of the Plan,
including, but not limited to, those provisions relating to the
distribution of a qualified joint and survivor annuity or a
pre-retirement survivor annuity. In connection with the making
of any distributions, the Custodian shall have the right to
demand from the Plan Administrator whatever documents or
evidence it may reasonably require from time to time. If a
joint and survivor annuity or pre-retirement survivor annuity is
to be purchased, the Plan Administrator will give the Custodian
appropriate instructions with respect to the payment of the
premium for such annuity policy which shall be purchased from an
insurer. Upon making such payment, the Custodian shall have no
further liability or responsibility with respect thereto. Prior
to making any distributions on the death of a Participant, the
Custodian shall have the right to have its accounts settled by
the legal representative of the estate of the Participant, his
spouse or such other parties as appear appropriate. The
Custodian shall also have the right prior to making such
distributions to receive such documents as it may reasonably
require with respect to any estate or inheritance taxes which
may be imposed on the Participant's estate. All distributions
hereunder shall be made either in cash or in kind as directed by
the Plan Administrator.
<PAGE>
DESIGNATION OF BENEFICIARY
10. Subject to the joint and survivor annuity requirements of
Article IX of the Plan, any person on whose behalf a
contribution is made to the Custodial Account may by notice in
writing delivered to the Plan Administrator, who in turn will
file it with the Custodian, designate a beneficiary (or change a
previous designation) to receive any undistributed interest of
said person in the event of such person's death. To be
effective, any such designation or change thereof must be filed
with the Custodian during such person's life. In the absence of
any such designation so filed, any undistributed interest shall
be paid, as directed by the Plan Administrator, to the person's
surviving spouse, or, if the Plan Administrator certifies that
there is no surviving spouse, to the legal representative of the
person's estate.
INVESTMENT OF ACCOUNT ASSETS
11. In accordance with the Plan Administrator's instructions,
the Custodian shall invest all contributions in Fund Shares and
shall credit such shares to the separate account of each person
on whose behalf the contribution was made. A receipt for each
contribution received and showing the investment thereof and
current status of each separate account shall be prepared by the
Custodian and delivered to the Plan Administrator. All
dividends and any capital gain distributions received on Fund
Shares held by the Custodian in each Participant's Account shall
be reinvested in accordance with the applicable Fund's current
prospectus in such shares and credited to such account. If
elected by the Employer in the Application/Adoption Agreement, a
Participant may, at any time, by written notice to the Plan
Administrator, who will transmit it to the Custodian, change the
investment of assets in his or her account.
CONCERNING THE CUSTODIAN AND ITS DUTIES
12. If any distribution with respect to a Fund may be
received at the election of the shareholder in additional shares
or in cash or in other property, the Custodian shall elect to
receive it in additional shares.
13. All Fund Shares acquired by the Custodian shall be
registered in the name of the Custodian or of its registered
nominees.
<PAGE>
14. The Custodian shall be compensated for its services under
this Agreement in accordance with the fee schedule as amended
from time to time by the Custodian.
15. The Custodian shall keep accurate and detailed records of
all its receipts, investments, disbursements and other
transactions hereunder. Not later than sixty (60) days after
the close of each Plan Year (or after the Custodian's
resignation or removal pursuant to Sections 16 and 17 hereof),
the Custodian shall file with the Plan Administrator a written
report or reports reflecting the receipts, disbursements and
other transactions effected by it during such year (or period
ending with such resignation or removal) and the assets and
liabilities of the Custodial Account at its close. The assets
of the account shall be valued annually at fair market value on
the last day of the Plan Year. Such report or reports shall be
open to inspection by any Participant at the Plan
Administrator's office for a period of sixty (60) days
immediately following the date on which it is sent by the
Custodian to the Plan Administrator. Upon the expiration of
such sixty (60) day period the Custodian shall be forever
released and discharged from all liability and accountability to
anyone with respect to its acts, transactions, duties,
obligations or responsibilities as shown in or reflected by such
report, except with respect to any such acts or transactions as
to which the Plan Administrator shall have filed written
objections with the Custodian within such sixty (60) day period.
The Plan Administrator shall furnish to the Custodian, and the
Custodian shall furnish to the Plan Administrator, such
information relevant to the Plan and Custodial Account as may be
required under the Code and any regulations issued or forms
adopted by the Treasury Department thereunder. The Custodian
shall keep such records, make such identifications, and file
with the Internal Revenue Service such returns and other
information concerning the Custodial Account as may be required
of it by this Agreement and under federal or state law.
TREATMENT OF TAXES
16. Any income taxes or other taxes of any kind whatsoever
that may be levied or assessed upon or in respect of the
Custodial Account shall be paid from the assets of the Custodial
Account and shall, unless allocable to the accounts of specific
Participants, be charged proportionately to their respective
accounts. Any transfer taxes incurred in connection with the
investment and reinvestment of the assets of the Custodial
Account, all other administrative expenses incurred by the
Custodian in the performance of its duties, including fees for
legal services rendered to the Custodian, and the Custodian's
compensation
<PAGE>
pursuant to Section 14, shall to the extent that they are not
allocable to a separate account held for any other person under
this Agreement, be allocated proportionately to all separate
accounts held under this Agreement.
REMOVAL OR RESIGNATION OF CUSTODIAN
17. The Employer shall at any time have the right to remove
the Custodian by delivering to the Custodian a notice in writing
to that effect which notice shall also designate a successor
trustee or a successor Custodian which shall qualify under
Section 401(f) of the Code. Upon receipt by the Custodian of
written acceptance of such appointment by the successor trustee
or custodian, the removal of the Custodian shall be effective
and the Custodian shall transfer and pay over to such successor
the assets of the Custodial Account and all records pertaining
thereto. The Custodian is authorized, however, to reserve such
sum of money or Fund Shares or both as it may deem advisable for
payment of all its fees, compensation, costs and expenses, or
for payment of any other liabilities constituting a charge on or
against the assets of the Custodial Account or on or against the
Custodian, and where necessary may liquidate such reserved
shares. Any balance of such reserve remaining after the payment
of all such items to be paid over to the successor custodian.
18. The Custodian shall at any time have the right to resign
as Custodian under this Agreement by delivering to the Employer
a notice in writing to that effect. Upon receiving such notice
of resignation, the Employer shall forthwith appoint a successor
trustee or custodian and upon receipt by the Custodian of
written acceptance by the successor trustee or custodian of such
appointment, the Custodian is authorized to act in the same
manner as provided for in Section 17. If within thirty (30)
days after the Custodian's resignation or removal the Employer
has not appointed a successor trustee or custodian which has
accepted such appointment, the Custodian may appoint such
successor itself or may terminate this Agreement and Custodial
Account in accordance with paragraph 21.
VOTING AND OTHER ACTION
19. The Custodian shall deliver to the Plan Administrator,
all notices, prospectuses, financial statements, proxies and
proxy soliciting materials relating to such shares. The
Custodian shall not vote any of the Fund Shares held hereunder
except in accordance with the written instructions of the
Employer.
<PAGE>
TERMINATION OF ACCOUNT
20. If the Custodian receives written notice that the
Internal Revenue Service has determined that the Plan fails to
qualify under Section 40l of the Internal Revenue Code, as it
existed at the time the Plan was adopted, by reason of some
inadequacy in the original Plan not removed by a retroactive
amendment pursuant to Section 40l(b) thereof or for any other
reason, the Custodian shall terminate the Custodial Account by
distributing the assets thereof equitably among the Employer and
the Participants as directed by the Plan Administrator,
provided, however, that no return of any contribution to the
Employer shall be made unless it is within one year of the
initial disqualification of the Plan.
21. Upon termination of the Custodial Account, the Custodian
shall be relieved from all further liability with respect to
this Agreement, the Custodial Account and all assets thereof so
distributed and any determinations by the Custodian of the mode
of distributing the assets of the Custodial Account.
MISCELLANEOUS
22. As provided in Section 4975 of ERISA, no prohibited
transaction with a disqualified person or party in interest as
defined in ERISA shall be permitted, except to the extent
allowed by ERISA or any administrative exemption issued
thereunder.
23. The Custodian shall be under no duties whatsoever except
such duties as are specifically set forth as such in this
Custodial Agreement, and no implied covenant or obligation shall
be read into this Custodial Agreement against the Custodian. In
the performance of its duties, the Custodian shall be liable
only for its own negligence or willful misconduct. The Employer
shall have the sole authority and responsibility for the
enforcement or defense of the terms and conditions of the
Custodial Agreement against or on behalf of any person or
persons claiming any interest in the Custodial Account. The
Custodian shall not be required to prosecute, defend or respond
to any action or any judicial proceeding relating to the
Custodial Account unless it has previously received
indemnification satisfactory to it in form and in substance.
24. The Custodian reserves the right to amend all or any part
of the terms of this Custodial Agreement or Plan upon sixty (60)
days' written notice to the Employer in any manner which would
not disqualify the Custodial Agreement from complying with
Sections 401 and 501 of the Code.
<PAGE>
25. The assets of the Custodial Account shall not be subject
to alienation, assignment, trustee process, garnishment,
attachment, execution or levy of any kind except by the
Custodian for its fees and expenses of the Custodial Account and
except on account of a qualified domestic relations order
pursuant to Section 414(p) of the Code, and no attempt to cause
such assets to be so subjected shall be recognized except to
such extent as may be required by law or provided for herein.
26. Anything in this Agreement to the contrary
notwithstanding, at no time shall it be possible for any part of
the assets of the Custodial Account to be used for or diverted
to purposes other than for the exclusive benefit of Participants
and their Beneficiaries, except as specifically provided in this
Agreement.
27. Any notice from the Custodian to the Employer provided
for in this Agreement shall be effective if sent by registered
mail to him at his last address of record.
28. This Agreement shall form a part of the Plan.
29. This Agreement shall be construed in accordance with the
laws of the Commonwealth of Massachusetts, or the laws of the
state wherein the principal place of business of the successor
trustee or custodian is located, if applicable, except as
superseded by ERISA.
<PAGE>
PROFIT SHARING PLAN NO. 001
APPLICATION/ADOPTION AGREEMENT
EAGLE GROWTH SHARES, INC./PHILADELPHIA FUND, INC.
PROFIT SHARING/MONEY PURCHASE PENSION
RETIREMENT PLAN
This is the Application/Adoption Agreement for the prototype
Profit Sharing Plan #001 sponsored by Philadelphia Fund, Inc.
The Profit Sharing Plan is designed to be adopted either singly
or in combination with the prototype Money Purchase Pension Plan
#002 sponsored by Philadelphia Fund, Inc. Failure to properly
complete this Application/Adoption Agreement may result in
disqualification of the Plan.
Inquiries regarding the adoption of the Plan, the sponsor's
intended meaning of any Plan provisions, or the effect of the
opinion letter issued by the Internal Revenue Service for the
Plan may be directed to:
Baxter Financial Corporation
1200 N. Federal Highway, Suite 424
Boca Raton, FL 33432
(800) 749-9933
Philadelphia Fund, Inc. will inform the Employer identified
below of any amendments to the Plan or in the event that it
intends to discontinue or abandon the Plan.
The Employer hereby establishes the above-named Profit Sharing
Retirement Plan and related Custodial Account in accordance with
all the terms of the Profit Sharing Retirement Plan and of the
Custodial Agreement which the Employer has received and read,
and which terms the Employer accepts and specifically
incorporates herein by reference, with the following additional
terms:
I. EMPLOYER DATA (Please print or type)
A. This Plan is to be known as the Profit Sharing Plan of
_________________________________(the "Employer").
Employer's Name
B. _______________________________________________________
Business Address
(Street/City/State/ZIP)
<PAGE>
C. _______________________________________________________
Nature of Business
D. _______________________________________________________
Employer's Federal Tax Identification Number
E. _______________________________________________________
Telephone Number
F. _______________________________________________________
Employer's Taxable Year End
G. The Plan Year is the same as the Employer's Taxable Year
unless another 12-consecutive month period is indicated
below:
_______________________________________________________
Plan Year End
H. The Limitation Year is the same as the Plan Year unless
another 12-consecutive month period is indicated below:
_______________________________________________________
Limitation Year End
I. The Employer is: [ ] a corporation.
[ ] an S corporation.
[ ] a sole proprietorship.
[ ] a partnership.
J. The Effective Date of this Plan is:____________
____________________ (should be first day of a Plan Year).
K. If this is an Amendment of an existing plan, complete the
following:
1. _______________________________________________________
Effective Date of Amendment (should be first
day of a Plan Year)
<PAGE>
2. _______________________________________________________
Effective Date of Prior Plan
L. The Employer shall act as Plan Administrator unless another
party is designated as follows:
_______________________________________________________
(Neither Eagle Growth Shares, Inc., Philadelphia Fund, Inc.
nor Baxter Financial Corporation can serve as Plan
Administrator.)
II. ELIGIBILITY
Note: If the Employer also maintains the prototype Money
Purchase Pension Plan #002 sponsored by Philadelphia Fund,
Inc., then for Plan Years beginning after December 31, 1991
either (i) the Employer must select the same eligibility
requirements in A, B, C and D, below, and in IV.C.2., below,
as in the Money Purchase Pension Plan Application/Adoption
Agreement, or (ii) the minimum contributions required by
Section 6.2 of the Plan must be made under both this Plan and
the Money Purchase Pension Plan.
A. Age Requirements. In order to participate an Employee must
have attained (check 1 or 2 below and complete 1, if
applicable):
[ ] 1. The minimum age of ____ (not more than 21).
[ ] 2. No age requirement.
B. Service Requirements. In order to participate an Employee
must have completed: (check 1 or 2 below and complete 1, if
applicable)
[ ] 1. One Year of Service unless full and immediate vesting
is elected in Section III.B., in which case _____
Years of Service (not more than 3), for Plan Years
beginning prior to January 1, 1989, and ____ Years of
Service (not more than 2), for Plan Years beginning
after December 31, 1988 shall, be required.
[ ] 2. No length of service requirement.
C. Entry Dates. Each Employee who satisfies the Age and
Service requirements selected in A and B above shall become
a Participant in the Plan as of the first Entry Date
selected in 1 or 2 below which
<PAGE>
occurs following the satisfaction of such requirements
(check 1 or 2 below):
[ ] 1. The first day of the Plan Year or the date six months
after the age and service requirements of A and B
above are satisfied, whichever is earlier.
[ ] 2. The date on which the requirements of A and B above
are satisfied.
D. If a Year or more of Service is chosen in B.1. above, a
Year of Service for eligibility to participate shall mean
_______ (not more than 1,000) Hours of Service.
III. VESTING
A. For purposes of vesting, a Year of Service shall be a Plan
Year in which a Participant has ___________ (not more than
1,000) Hours of Service.
B. Employer contributions will become vested if the
Participant terminates employment for any reason other than
by death or by Total and Permanent Disability, pursuant to
the following schedule (choose 1, 2, 3 or 4, and complete 3
or 4, if applicable):
[ ] 1. Years of Service Vested Percentage
---------------- -----------------
1 year 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 or more years 100%
[ ] 2. 100% vesting immediately after satisfaction of the
eligibility requirements.
[ ] 3. Years of Service Vested Percentage
---------------- -----------------
1 year ___%
2 years ___%
3 years 100%
[ ] 4. Years of Service Vested Percentage
---------------- -----------------
1 year ____%
2 years ____% (at least 20%)
3 years ____% (at least 40%)
4 years ____% (at least 60%)
5 years ____% (at least 80%)
6 or more years 100%
<PAGE>
NOTE: If a service requirement greater than one Year of Service
is chosen for eligibility, vesting Schedule 2 must be selected.
IV. CONTRIBUTIONS
A. Employer Contributions (Choose and complete 1 or 2):
[ ] 1. The Employer shall annually determine, by resolution
adopted on or before the date prescribed by law for
filing its Federal Income Tax Return for each taxable
year (including extensions thereof), an amount to be
contributed to the Plan -
[ ] a. Not to exceed Net Profits.
[ ] b. Without regard to the Employer's Net Profits.
Provided, however, that no contribution shall be made
for any year in excess of the amount deductible for
such year under provisions of the Internal Revenue
Code of 1986, as amended, and regulations thereunder
as then in effect.
[ ] 2. The amount to be contributed for each Plan Year shall
be an amount equal to _________% (not to exceed 15%)
of the total of all Participants' Compensation for
such Plan Year -
[ ] a. Not to exceed Net Profits.
[ ] b. Without regard to the Employer's Net Profits.
NOTE: In no event may contributions to the Plan cause the Plan
to exceed the annual additions limitations set forth in Article
XIII of the Plan.
<PAGE>
B. Voluntary Employee Contributions (choose 1 or 2):
[ ] 1. Each Participant may contribute up to _____% of his
Compensation. The minimum voluntary Employee
Contribution, if any, is _____ %. (NOTE: In no
event may Voluntary Employee Contributions be made
to this Plan for Plan Years beginning after the Plan
Year in which this Plan is adopted by the Employer.)
[ ] 2. No Voluntary Employee Contributions are permitted.
C. Termination Year Contribution:
1. Plan Years beginning before January 1, 1990
(choose a or b).
[ ] a. A Participant will share in Employer Contributions
for the Plan Year in which he terminates
employment prior to the end of such Plan Year.
[ ] b. A Participant will not share in Employer
Contributions for the Plan Year in which he
terminates employment prior to the end of such
Plan Year.
2. Plan Years beginning after December 31, 1989
(choose a or b).
[ ] a. A Participant will share in Employer Contributions
for the Plan Year in which he terminates
employment prior to the end of such Plan Year.
[ ] b. A Participant will not share in Employer
Contributions for the Plan Year if he terminates
employment prior to the end of such Plan Year and
fails to complete at least 501 Hours of Service
during such Plan Year.
NOTE: In no event may contributions to the Plan cause the Plan
to exceed the annual additions limitations set forth in Article
XIII of the Plan.
V. NORMAL RETIREMENT AGE
The Normal Retirement Age for all Participants in the Plan, if
other than age 65, is (check and complete 1 or 2 below):
<PAGE>
[ ] 1. ____ Years of age (not more than 64 or less
than 55).
[ ] 2. For Plan Years beginning before January 1, 1988,
the later of age ____ (not more than 65) or the
(not more than 10th) anniversary of the date the
Participant commenced participation in the Plan.
For Plan Years beginning after December 31, 1987,
the later of age ___ (not more than 65) or the
____ (not more than 5th) anniversary of the date
the Participant commenced participation in the
Plan.
VI. COMMENCEMENT OF BENEFITS
If a Participant is entitled to a distribution on account of
retirement, the amounts derived from Employer Contributions, the
Participant's Voluntary Contributions and all earnings thereon
shall be paid in the form provided in the Plan commencing (check
one):
[ ] 1. Not later than 30 days after the end of the Plan
Year in which the Participant retires.
[ ] 2. On the date provided in 1 above, unless the
Participant makes an election in writing prior to
his date of retirement to have his benefits
commence on a date not later than April 1 of the
calendar year following the calendar year in
which the Participant attains age 70 1/2.
VII. INVESTMENT AUTHORITY
Contributions to the Plan shall be invested by the Custodian
in accordance with the instructions of the Plan Administrator
unless 1 and/or 2 is selected below:
[ ] 1. Participants may direct Employer Contributions to
be invested in (choose a. or b. or both):
[ ] a. Philadelphia Fund, Inc.
[ ] b. Eagle Growth Shares, Inc.
If a. and b. are selected, one-half of each payment
will be invested in each fund.
<PAGE>
[ ] 2. Participants may direct all Voluntary Employee
Contributions made by the Participant to be invested
in (choose a. or b. or both):
[ ] a. Philadelphia Fund, Inc.
[ ] b. Eagle Growth Shares, Inc.
If a. and b. are selected, one-half of each payment
will be invested in each fund.
NOTE: While Participants may direct the investment of
contributions, such direction shall be given by Participants to
the Plan Administrator, who will transmit such instructions in
writing to the Custodian in accordance with the Custodial
Agreement. Participants may make or change such directions by
giving written notice to the Plan Administrator. Reasonable
restrictions may be imposed on this privilege by the Plan
Administrator or the Sponsor for purposes of administrative
convenience.
VIII. ALLOCATION LIMITATIONS
If the Employer maintains or has ever maintained another
qualified plan (other than this Plan and the Prototype Money
Purchase Revision Plan #002), in which any Participant in this
Plan is (or was) a participant or could become a participant,
this Section VIII must be completed. The Employer must also
complete this Section VIII if it maintains a welfare benefit
fund, as defined in Section 419(e) of the Code, or an individual
medical account, as defined in Section 415(l)(2) of the Code,
under which amounts are treated as annual additions with respect
to any Participant in this Plan.
IF YOU MAINTAIN SUCH OTHER PLAN(S), FAILURE TO COMPLETE THIS
SECTION VIII MAY ADVERSELY EFFECT THE QUALIFICATION OF THE PLANS
YOU MAINTAIN.
A. If a Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a
master or prototype plan (choose either 1 or 2):
[ ] 1. The provisions of Section 13.2 of the Plan will apply
as if the other plan were a master or prototype plan.
[ ] 2. (On an attachment, provide the method under which the
plans will limit total annual additions to the
maximum
<PAGE>
permissible amount, and will properly reduce
any excess amounts, in a manner that precludes
Employer discretion.)
B. If the Participant is or has ever been a participant in a
defined benefit plan maintained by the Employer, (choose
either 1 or 2):
[ ] 1. In any limitation year, the annual additions credited
to the Participant under this Plan may not cause the
sum of the defined benefit plan fraction and the
defined contribution plan fraction to exceed 1.0 If
the Employer contributions that otherwise would be
allocated to the Participant's Account during such
year would cause the 1.0 limitation to be exceeded,
the allocation will be reduced so that the sum of the
fractions equal 1.0. Any contributions not allocated
because of the preceding sentence will be allocated
to the remaining Participants under the Plan. If the
1.0 limitation is exceeded, such excess amount will
be reduced in accordance with Section 13.1(d) of the
Plan.
[ ] 2. On an attachment, provide the method which the plan
involved will use to satisfy the 1.0 limitation in a
manner that precludes Employer discretion.
IX. INITIAL PAYMENT (only complete if this is the establishment
of a new Plan)
Enclosed is a check payable to "Star Bank, N.A." in the amount
of $________ as the total initial payment to be credited to the
accounts of the Participants which are listed on the schedule
attached to this Application.
NOTE: AN EMPLOYER WHO HAS EVER MAINTAINED OR LATER ADOPTS 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 (OTHER THAN PROTOTYPE MONEY PURCHASE
PENSION PLAN #002) MAY NOT RELY UPON THE OPINION LETTER ISSUED
BY THE NATIONAL OFFICE OF THE INTERNAL REVENUE SERVICE AS
EVIDENCE THAT THIS PLAN IS QUALIFIED UNDER SECTION 401(a) OF THE
INTERNAL REVENUE CODE. IF THE EMPLOYER WHO ADOPTS OR MAINTAINS
MULTIPLE PLANS WISHES TO OBTAIN RELIANCE THAT THE PLANS ARE
QUALIFIED,
<PAGE>
APPLICATION FOR A DETERMINATION LETTER SHOULD BE MADE
TO THE APPROPRIATE KEY DISTRICT DIRECTOR OF INTERNAL REVENUE.
THIS APPLICATION/ADOPTION AGREEMENT MAY BE USED ONLY IN
CONJUNCTION WITH BASIC PLAN DOCUMENT #01.
X. EMPLOYER SIGNATURE
The Undersigned hereby adopts the Plan and appoints as
Custodian, in accordance with the Custodial Agreement, Star
Bank, N.A.
The Employer (a) acknowledges receipt of the current
prospectus of the Investment Company or Companies and represents
that each Participant has received such prospectus; (b)
represents that each new Participant will receive the then
current prospectus; (c) on behalf of the Employer and each
Participant consents to the Plan and Custodial Agreement; (d)
represents that the Employer will file such information with the
Internal Revenue Service and the Department of Labor as such
agencies may require, except to the extent the Custodian is
required to file such information; (e) agrees to vote or
instruct the voting of shares as requested by Participants; and
(f) agrees to respect the wishes of Participants concerning
investment of their accounts within the limits permitted by this
Plan.
____________________________________ ______________________
Name of Employer Plan Number
By:_________________________________
(Authorized Signature) Signed this day of
, 19__.
By signing this application, Star Bank, N.A. agrees to act as
Custodian in accordance with the terms of the Custodial
Agreement.
STAR BANK, N.A.
By:_______________________
<PAGE>
MONEY PURCHASE PENSION PLAN NO. 002
APPLICATION/ADOPTION AGREEMENT
EAGLE GROWTH SHARES, INC./PHILADELPHIA FUND, INC.
PROFIT SHARING/MONEY PURCHASE PENSION
RETIREMENT PLAN
This is the Application/Adoption Agreement for the prototype
Money Purchase Pension Plan #002 sponsored by Philadelphia Fund,
Inc. The Money Purchase Pension Plan is designed to be adopted
either singly or in combination with the prototype Profit
Sharing Plan #001 sponsored by Philadelphia Fund, Inc. Failure
to properly complete this Application/Adoption Agreement may
result in disqualification of the Plan.
Inquiries regarding the adoption of the Plan, the Sponsor's
intended meaning of any Plan provisions, or the effect of the
opinion letter issued by the Internal Revenue Service for the
Plan may be directed to:
Baxter Financial Corporation
1200 N. Federal Highway, Suite 424
Boca Raton, FL 33432
(800) 749-9933
Philadelphia Fund, Inc. will inform the Employer identified
below of any amendments to the Plan or in the event that it
intends to discontinue or abandon the Plan.
The Employer hereby establishes the above-named Money Purchase
Pension Plan and related Custodial Account in accordance with
all the terms of the Money Purchase Pension Plan and of the
Custodial Agreement which the Employer has received and read,
and which terms the Employer accepts and specifically
incorporates herein by reference, with the following additional
terms:
I. EMPLOYER DATA (Please print or type)
A. This Plan is to be known as the Money Purchase Pension
Plan of _______________________ (the "Employer").
Employer's Name
B. ______________________________________________________
Business Address
(Street/City/State/ZIP)
<PAGE>
C. ______________________________________________________
Nature of Business
D. ______________________________________________________
Employer's Federal Tax Identification Number
E. ______________________________________________________
Telephone Number
F. ______________________________________________________
Employer's Taxable Year End
G. The Plan Year is the same as the Employer's Taxable Year
unless another 12-consecutive month period is indicated
below:
______________________________________________________
Plan Year End
H. The Limitation Year is the same as the Plan Year unless
another 12-consecutive month period is indicated below:
______________________________________________________
Limitation Year End
I. The Employer is: [ ] a corporation.
[ ] an S corporation.
[ ] a sole proprietorship.
[ ] a partnership.
J. The Effective Date of this Plan is:_______________ (should
be first day of a Plan Year).
K. If this is an Amendment of an existing plan, complete the
following:
<PAGE>
1. ______________________________________________________
Effective Date of Amendment (should be first day of a
Plan Year)
2. ______________________________________________________
Effective Date of Prior Plan
L. The Employer shall act as Plan Administrator unless
another party is designated as follows:
______________________________________________________
(Neither Eagle Growth Shares, Inc., Philadelphia Fund,
Inc. nor Baxter Financial Corporation can serve as Plan
Administrator)
II. ELIGIBILITY
Note: If the Employer also maintains the prototype Profit
Sharing Plan #001 sponsored by Philadelphia Fund, Inc., then for
Plan Years beginning after December 31, 1991, either (i) the
Employer must select the same eligibility requirements in A, B,
C and D, below, and in IV.C.2., below, as in the Profit Sharing
Plan Application/Adoption Agreement, or (ii) the minimum
contributions required by Section 6.2 of the Plan must be made
under both this Plan and the Profit Sharing Plan.
A. Age Requirements. In order to participate an Employee
must have attained (check l or 2 below and complete l, if
applicable):
[ ] 1. The minimum age of ___ (not more than 21).
[ ] 2. No age requirement.
B. Service Requirements. In order to participate an Employee
must have completed (check l or 2 below and complete l, if
applicable):
[ ] 1. One Year of Service unless full and immediate
vesting is elected in Section III.B., in which case
____ Years of Service (not more than 3), for Plan
Years beginning prior to January 1,1989, and ____
<PAGE>
Years of Service (not more than 2), for Plan Years
beginning after December 31, 1988, shall be
required.
[ ] 2. No length of service requirement.
C. Entry Dates. Each Employee who satisfies the Age and
Service requirements selected in A and B above shall
become a Participant in the Plan, as of the first Entry
Date selected in l or 2 below which occurs following the
satisfaction of such requirements (check 1 or 2 below):
[ ] 1. The first day of the Plan Year or the date six
months after the age and service requirements of A
and B above are satisfied, whichever is earlier.
[ ] 2. The date on which the requirements of A and B above
are satisfied.
D. If a Year of Service (or more) is chosen in B.1 above, a
Year of Service for eligibility to participate shall mean
__________________(not more than 1,000) Hours of Service.
III. VESTING
A. For purposes of vesting, a Year of Service shall be a Plan
Year in which a Participant has _________ (not more than
1,000) Hours of Service.
B. Employer contributions will become vested if the
Participant terminates employment for any reasons other
than by death or by Total and Permanent Disability,
pursuant to the following schedule (choose 1, 2, 3 or 4
and complete 3 or 4, if applicable):
[ ] 1. Years of Service Vested Percentage
---------------- -----------------
1 year 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 or more years 100%
<PAGE>
[ ] 2. 100% vesting immediately after satisfaction of the
eligibility requirements.
[ ] 3. Years of Service Vested Percentage
---------------- -----------------
1 year ___%
2 years ___%
3 years 100%
[ ] 4. Years of Service Vested Percentage
---------------- -----------------
1 year ___%
2 years ___% (at least 20%)
3 years ___% (at least 40%)
4 years ___% (at least 60%)
5 years ___% (at least 80%)
6 or more years 100%
NOTE: If a service requirement greater than one Year of Service
is chosen for eligibility, vesting schedule 2 must be selected.
IV. CONTRIBUTIONS
A. The Employer shall annually contribute ___________% of
each Participant's Compensation (not to exceed 25%).
B. Voluntary Employee Contributions (choose l or 2):
[ ] 1. Each Participant may contribute up to ____% of his
Compensation. The minimum Voluntary Contribution,
if any, is ____%. (NOTE: In no event may
Voluntary Employee Contributions be made to this
Plan for Plan Years beginning after the Plan Year
in which this Plan is adopted by the Employer.)
[ ] 2. No Voluntary Employee Contributions are permitted.
C. Termination Year Contribution:
1. Plan Years beginning before January 1, 1990
(choose a or b).
[ ] a. A Participant will share in Employer
Contributions for the Plan Year in which he
terminates employment prior to the end of such
Plan Year.
<PAGE>
[ ] b. A Participant will not share in Employer
Contributions for the Plan Year in which he
terminates employment prior to the end of such
Plan Year.
2. Plan Years beginning after December 31, 1989
(choose a or b).
[ ] a. A Participant will share in Employer
Contributions for the Plan Year in which he
terminates employment prior to the end of such
Plan Year.
[ ] b. A Participant will not share in Employer
Contributions for the Plan Year if he terminates
employment prior to the end of such Plan Year
and fails to complete at least 501 Hours of
Service during such Plan Year.
NOTE: In no event may contributions to the Plan cause the Plan
to exceed the annual additions limitations set forth in Article
XIII of the Plan.
V. ALLOCATIONS OF FORFEITURES
Any forfeitures from a Participant's account arising under the
Plan for a Plan Year shall be applied as follows (check 1 or 2
below, and complete 2, if applicable):
[ ] 1. Forfeitures shall be applied to reduce the Employer
Contributions.
[ ] 2. Forfeitures shall be applied to reduce the Employer
Contributions for Plan Years beginning prior to
January 1, 19___ (cannot be earlier than 1986).
For subsequent Plan Years, forfeitures shall be
allocated in the ratio that each Participant's
Compensation bears to the total Compensation of
all Participants.
VI. NORMAL RETIREMENT AGE
The Normal Retirement Age for all Participants in the Plan, if
other than age 65, is (check and complete l or 2 below):
<PAGE>
[ ] 1. _____Years of age (not more than 64 or less
than 55).
[ ] 2. For Plan Years beginning before January 1, 1988,
the later of age ____ (not more than 65) or the
____(not more than 10th) anniversary of the date
the Participant commenced participation in the
Plan. For Plan Years beginning after December 31,
1987, the later of age ____ (not more than 65) or
the ____ (not more than 5th) anniversary of the
date the Participant commenced participation in the
Plan.
VII. COMMENCEMENT OF BENEFITS
If a Participant is entitled to a distribution on account of
retirement, the amounts derived from Employer Contributions, the
Participant's Voluntary Employee Contributions and all earnings
thereon shall be paid in the form provided in the Plan
commencing (choose 1 or 2):
[ ] 1. Not later than 30 days after the end of the Plan
Year in which the Participant retires.
[ ] 2. On the date provided in 1 above, unless the
Participant makes an election in writing prior to
his date of retirement to have his benefits
commence on a date not later than April 1 of
the calendar year following the calendar year in
which the Participant attains age 70 1/2.
VIII. INVESTMENT AUTHORITY
Contributions to the Plan shall be invested by the Custodian
in accordance with the instructions of the Plan Administrator
unless 1. and/or 2. is selected below:
[ ] 1. Participants may direct Employer Contributions to
be invested in (choose a. or b. or both):
<PAGE>
[ ] a. Philadelphia Fund, Inc.
[ ] b. Eagle Growth Shares, Inc.
If a. and b. are selected, one-half of each payment
will be invested in each fund.
[ ] 2. Participants may direct all Voluntary Employee
Contributions made by the Participant to be
invested in (choose a. or b. or both):
[ ] a. Philadelphia Fund, Inc.
[ ] b. Eagle Growth Shares, Inc.
If a. and b. are selected, one-half of each payment
will be invested in each fund.
NOTE: While Participants may direct the investment of
contributions, such direction shall be given by Participants to
the Plan Administrator, who will transmit such instructions in
writing to the Custodian in accordance with the Custodial
Agreement. Participants may make or change such directions by
giving written notice to the Plan Administrator. Reasonable
restrictions may be imposed on this privilege by the Plan
Administrator or the Sponsor for purposes of administrative
convenience.
IX. ALLOCATION LIMITATIONS
If the Employer maintains or has ever maintained another
qualified plan (other than this Plan and the Prototype Profit
Sharing Plan #001), in which any Participant in this Plan is (or
was) a participant or could become a participant, this Section
IX must be completed. The Employer must also complete this
Section IX if it maintains a welfare benefit fund, as defined in
Section 419(e) of the Code, or an individual medical account, as
defined in Section 415(l)(2) of the Code, under which amounts
are treated as annual additions with respect to any Participant
in this Plan.
IF YOU MAINTAIN SUCH OTHER PLAN(S), FAILURE TO COMPLETE THIS
SECTION IX MAY ADVERSELY EFFECT THE QUALIFICATION OF THE PLANS
YOU MAINTAIN.
A. If a Participant is covered under another qualified
defined contribution plan maintained by the
<PAGE>
Employer, other than a master or prototype plan
(choose either 1 or 2):
[ ] 1. The provisions of Section 13.2 of the Plan will
apply as if the other plan were a master or
prototype plan.
[ ] 2. (On an attachment, provide the method under which
the plans will limit total annual additions to the
maximum permissible amount, and will properly
reduce any excess amounts, in a manner that
precludes Employer discretion.)
B. If a Participant is or has ever been a participant in a
defined benefit plan maintained by the Employer (choose
either 1 or 2):
[ ] 1. In any limitation year, the annual additions
credited to the Participant under this Plan may not
cause the sum of the defined benefit plan fraction
and the defined contribution plan fraction to
exceed 1.0. If the Employer contributions that
otherwise would be allocated to the Participant's
Account during such year would cause the 1.0
limitation to be exceeded, the allocation will be
reduced so that the sum of the fractions equal 1.0.
Any contributions not allocated because of the
preceding sentence will be allocated to the
remaining Participants under the Plan. If the 1.0
limitation is exceeded, such excess amount will be
reduced in accordance with Section 13.1(d) of the
Plan.
[ ] 2. On an attachment, provide the method under which
the plan involved will satisfy the 1.0 limitation
in a manner that precludes Employer discretion.
X. INITIAL PAYMENT (only complete if this is the establishment
of a new Plan)
Enclosed is a check payable to "Star Bank, N.A." in the amount
of $________ as the total initial payment to be credited to the
accounts of the Participants which are listed on the Schedule
attached to this Application.
<PAGE>
NOTE: AN EMPLOYER WHO HAS EVER MAINTAINED OR LATER ADOPTS ANY
PLAN (INCLUDING, AFTER DECEMBER 31, 1985, A WELFARE BENEFIT
FUND, AS DEFINED IN SECTION 419(e) OF THE CODE, WHICH PROVIDES
POST-RETIREMENT MEDICAL BENEFITS ALLOCATED TO SEPARATE ACCOUNTS
FOR KEY EMPLOYEES, AS DEFINED IN SECTION 419A(d)(3) OF THE CODE,
OR AN INDIVIDUAL MEDICAL ACCOUNT, AS DEFINED IN SECTION
415(l)(2) OF THE CODE) IN ADDITION TO THIS PLAN (OTHER THAN
PROTOTYPE PROFIT SHARING PLAN #001) MAY NOT RELY UPON THE
OPINION LETTER ISSUED BY THE NATIONAL OFFICE OF THE INTERNAL
REVENUE SERVICE AS EVIDENCE THAT THIS PLAN IS QUALIFIED UNDER
SECTION 401(a) OF THE INTERNAL REVENUE CODE. IF THE EMPLOYER
WHO ADOPTS OR MAINTAINS MULTIPLE PLANS WISHES TO OBTAIN RELIANCE
THAT THE PLANS ARE QUALIFIED, APPLICATION FOR A DETERMINATION
LETTER SHOULD BE MADE TO THE APPROPRIATE KEY DISTRICT DIRECTOR
OF INTERNAL REVENUE.
THIS APPLICATION/ADOPTION AGREEMENT MAY BE USED ONLY IN
CONNECTION WITH BASIC PLAN DOCUMENT #01.
XI. EMPLOYER SIGNATURE
The Undersigned hereby adopts the Plan and appoints as
Custodian, in accordance with the Custodial Agreement, Star
Bank, N.A.
The Employer (a) acknowledges receipt of the current
prospectus of the Investment Company or Companies and represents
that each Participant has received such prospectus; (b)
represents that each new Participant will receive the then
current prospectus; (c) on behalf of the Employer and each
Participant consents to the Plan and Custodial Agreement; (d)
represents that the Employer will file such information with the
Internal Revenue Service and the Department of Labor as such
agencies may require, except to the extent the Custodian is
required to file such information; (e) agrees to vote or
instruct the voting of shares as requested by Participants; and
(f) agrees to respect the wishes of Participants concerning
investment of their accounts contributions within the limits
permitted by this Plan.
--------------------------- ------------------------
Name of Employer Plan Number
---------------------------
By: (Authorized Signature) Signed this day of
, 19___.
<PAGE>
By signing this application, Star Bank, N.A. agrees to act as
Custodian in accordance with the terms of the Custodial
Agreement.
STAR BANK, N.A.
By:_____________________________
<PAGE>
EAGLE GROWTH SHARES, INC.
PHILADELPHIA FUND, INC.
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
I. INTRODUCTION
------------
This Disclosure Statement is distributed to you in accordance
with Internal Revenue Service regulations and is intended to
provide a concise explanation of the rules applicable to your
individual retirement account (IRA). WE URGE YOU TO READ THIS
DISCLOSURE STATEMENT CAREFULLY. Due to the unfavorable tax
consequences which may result from the improper establishment of
an IRA, you may wish to confer with your attorney or other
qualified tax adviser if you would like specific advice
regarding your IRA. In addition, further information can be
obtained from any district office of the Internal Revenue
Service.
The Tax Reform Act of 1986 (TRA) enacted many changes to the
rules governing IRAs. This Disclosure Statement contains a
general explanation of the TRA changes, which are generally
effective for tax years beginning after 1986. Because the
Internal Revenue Service has not issued regulations with respect
to the TRA changes or with respect to certain other statutory
provisions, the Custodian of the IRA and Baxter Financial
Corporation reserve the right to amend the IRA governing
instruments and this Disclosure Statement to comply with any
such subsequently issued regulations or applicable laws. The
following is a general discussion of the statutory requirements
and tax rules governing IRAs. Additional information can be
found in I.R.S. Publication 590, "Individual Retirement
Arrangements."
II. REVOCATION PROCEDURE.
---------------------
You may revoke your IRA at any time within seven (7) days
after the later of the date you receive this Disclosure
Statement or the day you established this IRA. For purposes of
revocation, it will be assumed that you received the Disclosure
Statement no later than the date of your check with which you
opened your IRA. If you should choose to revoke, the entire
amount of your contribution will be refunded without adjustment
for administrative expenses or any other amount.
In order to revoke your IRA, you must mail or deliver a
written notice of revocation to: Philadelphia Fund, Inc., c/o
Star Bank, N.A., P.O. Box 0110, Cincinnati, OH 45264-0110 or
Eagle Growth Shares, Inc., c/o Star Bank, N.A., P.O. Box 0115,
Cincinnati, OH 45264-0115. If mailed, the revocation notice
shall be considered mailed on the date of 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
<PAGE>
prepaid, properly addressed. While oral revocations are
not accepted, you may contact Baxter Financial Corporation at
1-800-749-9933 if you have any questions with respect to this
procedure.
III. INDIVIDUAL RETIREMENT ACCOUNT REQUIREMENTS.
-------------------------------------------
An Individual Retirement Account is a trust created or
organized in the United States for the exclusive benefit of an
individual or his or her beneficiaries. The written instrument
creating the trust must satisfy the following requirements:
1. Except in the case of rollover contributions or
contributions to a spousal IRA (explained below), contributions
must be in cash and may not exceed $2,000 on behalf of any
individual for the taxable year;
2. The trustee must be a bank or such other person as approved
by the Secretary of the Treasury;
3. No part of the trust funds may be invested in life
insurance contracts;
4. The interest of an individual in an IRA must be
nonforfeitable;
5. The assets of the trust may not be commingled with other
property except in a common trust fund or common investment
fund; and
6. The entire interest of an individual in an IRA must be
distributed in accordance with certain rules (explained below).
Your Eagle Growth Shares, Inc. -- Philadelphia Fund, Inc. IRA
is a custodial account which is treated as a trust for these
purposes.
IV. ELIGIBILITY
-----------
You are eligible to make annual contributions to an IRA for
any year in which you work and receive compensation for such
work, provided that you have not attained age 70-1/2 in the year
in question. If eligible, both a husband and wife may each have
their own separate IRA. If either spouse is ineligible to
establish an IRA, the other spouse may be permitted to establish
a Spousal IRA on his or her spouse's behalf. Even if you are
not eligible to make annual contributions, you may, if you meet
certain requirements, establish an IRA for the purpose of
transferring assets to it from another individual retirement
account, individual retirement annuity or a qualified retirement
plan maintained by your employer.
<PAGE>
"Compensation" includes wages, salaries, professional fees,
and other amounts received for personal services, including such
items as commissions paid salesmen, compensation for services on
the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses. Compensation also includes earned
income of a self-employed person and any amount includable in an
individual's income as alimony or separate maintenance payments.
Compensation does not include amounts derived from or received
as earnings or profits from property, such as interest,
dividends and rent, or any amount not includable in gross income.
You may have an IRA whether or not you are covered by Social
Security or are a participant in any other retirement plan.
However, if you or your spouse are an active participant in
another retirement plan, the amount of your annual contribution
which is tax deductible may be reduced. Please refer to Section
V for assistance in determining the tax deductible amount of
your annual contribution.
V. ANNUAL CONTRIBUTIONS
--------------------
A. Deductible Contributions
------------------------
You may make an annual contribution to your IRA up to a
maximum of $2,000 (or $2,250 for a Spousal IRA, see Section V.C.
below) or 100% of your compensation, whichever is less. If you
are not an "active participant" in an employer maintained
retirement plan at any time during the year, the entire amount
of your contribution will be tax deductible. If you are an
active participant in an employer maintained retirement plan,
but you have adjusted gross income (AGI) below the "applicable
dollar amount" your entire contribution will be tax deductible.
However, if you are an active participant and your AGI is above
the applicable dollar amount, the amount of your contribution
which is tax deductible may be reduced or eliminated.
In order to be deductible for a taxable year, annual
contributions must be made not later than the due date (without
regard to extensions) of your tax return for the year for which
the deduction is claimed. Annual contributions may be made in
one or more payments, by check or money order payable to Star
Bank, N.A., Custodian. The minimum payment which may be made is
the minimum amount required for investment in the fund shares
which you select for investment of your contributions. The
money earned on your investment will be automatically reinvested
in the fund shares on which the money was earned, and is not
taxable to you until the year in which you actually receive it.
You are an "active participant" for a year if you are covered
by any of the following retirement plans:
1. A qualified plan described in Section 401(a) of the
Internal Revenue Code (hereinafter the "Code");
<PAGE>
2. An annuity plan described in Section 403(a) of the Code;
3. A plan established for its employees by the United States,
by a state or local government or by an agency or
instrumentality thereof (other than an eligible deferred
compensation plan as defined in Section 457(b) of the Code);
4. An annuity contract or custodial account described in
Section 403(b) of the Code;
5. A simplified employee pension (SEP) described in Section
408(k) of the Code;
6. A trust described in Section 501(c)(18) of the Code.
You are covered by a retirement plan for a year if your
employer or union has a retirement plan under which money is
added to your account or you are eligible to earn retirement
credits. You are an active participant for a year even if you
are not yet vested in your retirement benefit. Also, if you
make required contributions or voluntary employee contributions
to a retirement plan, you are an active participant. In certain
plans, you may be an active participant even if you were only
with the employer for part of the year. Starting with the 1987
tax year, your Form W-2 should indicate your active participant
status.
You are not considered an active participant if you are
covered by a plan only because of your service as (1) an Armed
Forces Reservist, for less than 90 days of active service; or
(2) a volunteer fire fighter covered for fire fighting service
by a government plan. Of course, if you are covered in any
other plan, these exceptions do not apply.
If you would like specific advice as to whether you are an
active participant in a retirement plan, you should consult with
your attorney or other qualified tax advisor.
If you are married and file a joint tax return and either you
or your spouse are an active participant, you must calculate
your combined adjusted gross income (AGI) for the year to
determine whether your IRA contribution will be deductible.
Your tax return will show you how to calculate your AGI for this
purpose. If you are at or below a certain AGI level, called the
"Threshold Level," you are treated as if you were not an active
participant and can make a deductible contribution under the
same rules as a person who is not an active participant. The
Threshold Level for married persons filing a joint tax return is
$40,000.
If you are single and you are an active participant, your AGI
Threshold Level is $25,000. If you are married but file a
separate tax return and you or your spouse are an active
participant in a retirement plan, the Threshold Level is
<PAGE>
$0. (However, if you and your spouse file separate tax returns
and live apart at all times during the year, you will be treated
as a single individual for purposes of the "active participation"
rules.)
If your AGI is less than $10,000 above your Threshold Level,
you will still be able to make a deductible contribution, but it
will be limited in amount. The amount by which your AGI exceeds
your Threshold Level (AGI minus Threshold Level) is called your
Excess AGI. The maximum allowable deduction is $2,000 (or
$2,250 for a spousal IRA). You may calculate your deduction
limit by using the following formula:
$10,000 - Excess AGI x Maximum Allowable = Deduction
-------------------- Deduction Limit
$10,000
You must round up the result to the next highest $10 level
(the next highest number which ends in 0). For example, if the
result is $1,525, you must round it up to $1,530. If the final
result is below $200 but above $0, your deduction limit is $200.
Your deduction limit cannot, in any event, exceed 100% of your
compensation.
The following examples illustrate the above formula.
Example One: Bob, a single individual, is an active
participant in his employer's retirement plan and has AGI of
$28,000. Bob has contributed $2,000 to his IRA for the current
year. Bob will calculate the deductible portion of his IRA
contribution as follows:
1. Bob must first determine the amount of his Excess AGI.
Excess AGI is equal to AGI minus Threshold Level. Since Bob is
a single individual his Threshold Level is $25,000. Thus, his
Excess AGI is $3,000 ($28,000 - $25,000).
2. Bob will now determine his deduction limit as follows:
$10,000 - $3,000 x $2,000 = $1,400
----------------
$10,000
Example Two: John and Mary are a married couple who file a
joint income tax return and have a combined AGI of $45,000.
John is not covered by any other retirement plan. Mary is an
active participant in her employer's retirement plan. John and
Mary have each contributed $2,000 to their separate IRAs. John
and Mary will calculate the deductible portion of their IRA
contributions as follows:
<PAGE>
1. John and Mary must first determine the amount of their
Excess AGI. Since they are a married couple filing a joint
return their Threshold Level is $40,000. Thus, their Excess AGI
is $5,000 ($45,000 - $40,000).
2. John and Mary will each determine their individual
deduction limit as follows:
$10,000 - $5,000 x $2,000 = $1,000
----------------
$10,000
B. Non-Deductible Contributions
----------------------------
Even if your deduction limit is less than $2,000 ($2,250 for
a spousal IRA), you may still contribute to an IRA up to the
lesser of 100% of your compensation or $2,000 ($2,250 for a
spousal IRA). The amount of your contribution which is not
deductible will be a treated as a nondeductible contribution to
your IRA. You may also choose to treat a contribution as
nondeductible even if you could have deducted part or all of the
contribution. Interest or other earnings on your IRA
contribution, whether from deductible or nondeductible
contributions, will not be taxed until distributed to you from
the IRA.
You may make your IRA contribution at any time during the
year, without having to designate at such time how much of your
contribution will be deductible. When you complete your tax
return, you must then determine how much of your contribution is
deductible. If you determine that all or a portion of your
contribution is nondeductible, you must report such amount to
the IRS as part of your tax return for the year. If you
overstate the amount of the nondeductible contribution, you may
be liable for a Federal tax penalty of $100 per overstatement.
C. Spousal IRA Contributions
-------------------------
If you are eligible to contribute to an IRA, you and your
spouse file a joint income tax return, and your spouse either
has no compensation for the taxable year or elects to be treated
as having no compensation for the taxable year, then you may
establish an IRA for the benefit of your spouse. Generally, the
rules applicable to non-spousal IRAs also apply to Spousal IRAs.
However, there are several special requirements. If you make
IRA contributions on behalf of yourself and your spouse for a
given tax year, the aggregate amount of the contributions to
both your IRA and your spouse's IRA may not exceed the lesser of
$2,250 or the amount of your compensation for such year. The
contribution does not have to be split equally between the IRAs
belonging to you and your spouse. However, the total
contributions to either of your IRAs may not exceed $2,000.
Contributions in excess of $2,000 are subject to a 6% excise tax
(described in Section D. below).
<PAGE>
Your marital status is determined as of the last day of the
taxable year. A Spousal IRA is not a joint account and there is
no right of survivorship; however, you and your spouse may name
each other as beneficiaries.
If you are unable to make contributions to your IRA because
you have attained age 70-1/2, you may nevertheless continue to
make contributions to your non-working spouse's IRA until the
year in which your spouse reaches 70-1/2. The deductibility of
such contributions is subject to the rules discussed in Sections
A. and B., above.
D. Excess Contributions
--------------------
If you make a contribution to your IRA in excess of the
applicable deductible and nondeductible limits, such amount is
an "excess contribution." A nondeductible excise tax is imposed
upon you equal to 6% of such excess contribution for the year in
which the excess contribution is made, and also for each
following year until it is eliminated. However, the amount of
the tax for any year cannot exceed 6% of the value of your IRA
as of the close of the tax year.
You may avoid the imposition of such 6% tax if you withdraw
any excess contributions from your IRA before the date for
filing your federal tax return for the year for which the excess
contribution is made. The earnings attributable to the excess
contribution must also be withdrawn and must be included in your
gross income in the year for which the excess contribution was
made. A timely withdrawal of the excess contributions will
permit you to avoid not only the 6% excise tax but also the 10%
penalty tax on premature distributions. A withdrawal of an
excess contribution after the tax return filing date will avoid
the 10% penalty tax on premature distributions, provided that
the total contribution for the year did not exceed $2,250 and no
deduction was allowed for the excess contribution.
As an alternative to withdrawing such excess contribution,
you may eliminate such excess by reducing your future annual
contributions below the maximum allowable amount. However, you
will continue to be subject to the 6% excise tax until the
excess contribution is completely eliminated.
E. SEP-IRA Contributions
---------------------
If your IRA is part of a Simplified Employee Pension
(SEP-IRA) established by your employer, then the maximum amount
which may be contributed on your behalf may be greater than
those described previously. Your employer would be permitted to
contribute to your IRA the lesser of 15% of your compensation
for the year or $30,000.00. In addition, your employer may
establish a type of SEP-IRA which would allow you to make
elective
<PAGE>
contributions to your IRA of up to $7,000 in each calendar year
(subject to cost-of-living adjustments for years after 1987),
subject to the same 15% and $30,000 limits.
Note: Starting in 1994, the limit on tax deductible
contributions to an employee's SEP-IRA is $22,500.
Amounts contributed to a SEP-IRA within the above limits are
excluded from your income for Federal income tax purposes.
Amounts distributed to you from the SEP-IRA are taxed in the
same manner as distributions from other IRAs.
If you (or your spouse) are a participant in a SEP-IRA, the
amount of your regular IRA contributions which is tax deductible
may be reduced or eliminated. (See Section V.A., above).
If you are a participant in a SEP-IRA your employer is
required to give you a copy of the SEP-IRA documents and certain
explanatory materials concerning SEP-IRAs, and to inform you
each year of the amounts (if any) contributed on your behalf.
The specific tax rules and limitations governing SEP-IRAs are
described in the Internal Revenue Service Model SEP-IRA
documents: Form 5305-SEP ("Simplified Employee
Pension-Individual Retirement Accounts Contribution Agreement")
(Rev. June, 1991); and Form 5305A-SEP ("Salary Reduction and
Other Elective Simplified Employee Pension-Individual Retirement
Accounts Contribution Agreement") (Rev. June, 1993).
VI. ROLLOVER CONTRIBUTIONS
----------------------
A rollover is a tax-free movement of cash or other assets from
one retirement program to another. There are two types of
rollover contributions to an IRA. The first type involves a
distribution of assets from one IRA followed by a contribution
of those assets to another IRA. For purposes of this Section VI
the term "IRA" includes individual retirement accounts,
individual retirement annuities and individual retirement bonds.
The second type involves the distribution of assets from a
tax-sheltered annuity or custodial account or from a qualified
retirement plan and contribution of those assets to an IRA. For
purposes of this Section VI, a qualified retirement plan is a
qualified pension, profit-sharing, stock bonus, or annuity plan
maintained by your employer.
A rollover contribution is neither includible in your income
nor deductible. Unlike annual contributions, rollover
contributions are not subject to the yearly $2,000 (or $2,250 in
the case of the Spousal IRA) or 100% of compensation limitation.
A rollover contribution will be held in a separate IRA
established on your behalf known as a "Rollover Account."
<PAGE>
A. IRA to IRA Rollover
-------------------
In order to qualify for tax-free treatment you must make a
rollover contribution to a second IRA within 60 days after you
receive the distribution from the first IRA. In addition, if
the assets distributed from your IRA are property other than
cash, the identical property must be contributed to your new IRA
in order to qualify as a rollover contribution. Amounts not
rolled over within the 60 day period do not qualify for tax-free
rollover treatment and must be treated as a taxable
distribution. Amounts not rolled over may also be subject to
the 10% penalty tax on premature distributions.
Only one distribution from an IRA may be rolled over in any
one-year period. The one-year period begins on the date that
you receive the IRA distribution and not on the date it is
rolled over into another IRA. A rollover contribution should
not be confused with a transfer of your IRA assets from one IRA
custodian or trustee to another IRA custodian or trustee. The
direct transfer of assets from one trustee (or custodian) to
another is not considered to be a rollover and, consequently, is
not affected by the limitation of one rollover each year.
In order to qualify for tax-free treatment, it is not
necessary to roll over the entire amount of the distribution
which you receive. It is permissible for you to roll over a
portion of the distribution and to keep the remainder. However,
the amount you retain will be taxed in the year of receipt. In
addition, the amount retained may be subject to the 10% tax on
premature distributions.
B. Retirement Plan to IRA Rollover
-------------------------------
(The following discussion applies to distributions from
employer-sponsored tax-qualified retirement plans and
tax-sheltered annuities and custodial accounts on or after
January 1, 1993.)
You will be eligible for tax-free rollover treatment when you
receive an "Eligible Rollover Distribution" from an
employer-sponsored tax-qualified retirement plan or
tax-sheltered annuity or custodial account. Any distribution
from an employer-sponsored tax-qualified retirement plan or
tax-sheltered annuity or custodial account will qualify as an
Eligible Rollover Distribution unless it is one of the following:
<PAGE>
(i) A distribution which is one of a series of substantially
equal periodic payments (not less frequently than annually) made
for the life (or life expectancy) of the employee or the lives
(or joint life expectancies) of the employee and the employee's
designated beneficiary, or for a specified period of ten years
or more.
(ii) The portion of a distribution representing the
minimum annual distribution required after an employee attains
age 70 1/2 or dies.
(iii) The non-taxable portion of a distribution
representing after-tax contributions to the plan.
(iv) Certain corrective distributions of elective
deferrals, after-tax contributions and matching contributions.
If an Eligible Rollover Distribution is paid to you, it will
be subject to mandatory 20% federal income tax withholding. You
cannot elect to waive this withholding tax, even if you intend
to take advantage of tax-free rollover treatment. If cash is
available from some other source equal to the amount withheld
and you transfer that amount plus the net amount of the
distribution to your IRA within 60 days of the distribution, no
portion of the Eligible Rollover Distribution will be taxable to
you. You may be entitled to a full refund of the 20% withheld,
depending upon your overall tax situation for the year. If you
rollover only the net amount of the distribution, you will be
taxed on the 20% withheld, and may be subject to a 10%
additional tax if you are younger than age 59 1/2 (see Section
VIII.B., below).
However, the 20% withholding can be avoided by making a
"Direct Rollover" to your IRA. A Direct Rollover is a direct
payment by the distributing tax-qualified retirement plan or
tax-sheltered annuity or custodial account to your IRA rather
than to you. If your Eligible Rollover Distribution is at least
$200, you must be given the option to make a Direct Rollover of
your Eligible Rollover Distribution to your IRA.
The rules in this Section B also apply to distributions to a
surviving spouse who is a beneficiary of a deceased participant.
These rules also apply to distributions to a spouse or former
spouse who is an alternate payee with respect to a participant's
benefits under a qualified domestic relations order.
VII. DISTRIBUTIONS
-------------
Your IRA is intended to provide a source of income to you upon
attainment of age 59-1/2 or if you become disabled.
Distributions, other than amounts rolled over into another IRA
or qualified plan or amounts that represent nondeductible
employee
<PAGE>
contributions, are taxed as ordinary income in the year
received by you. With certain exceptions, distributions which
occur prior to age 59-1/2 will be subject to a 10% additional
tax on the amount of the premature distribution. Please refer
to Section VIII for a discussion of the distributions occurring
prior to age 59-1/2 which are not subject to the 10% tax.
While distributions from your IRA may commence without penalty
at any time after you attain age 59-1/2, such distributions must
commence on or before the first day of April of the year
following the year in which you attain age 70-1/2 (your
"Required Beginning Date"). Distributions must be paid to you
in accordance with one of the following methods:
(i) A single lump sum payment; or
(ii) Substantially equal monthly, quarterly or annual
payments over your life (or the lives of you and your
beneficiary) or over a period certain not extending beyond your
life expectancy (or the joint and last survivor life expectancy
of you and your designated beneficiary).
Notwithstanding that distributions may have commenced pursuant
to option (ii) above, you may receive a distribution of the
balance in your IRA at any time. If you elect to have your IRA
distributed in other than a single payment, the amount to be
distributed each year must be at least equal to the amount
determined by dividing the entire amount of your IRA by your
life expectancy or by the joint and last survivor expectancy of
you and your designated beneficiary.
To enforce these requirements, the Code imposes an excise tax
on you of 50% of the amount, if any, by which the amount
distributed to you in a year fails to equal the minimum
distribution necessary under these requirements. If the failure
to make the minimum distribution by the specified deadline is
due to reasonable cause and you are taking action to remedy the
error, the IRS may waive the tax in its discretion.
At the time that you establish your IRA you have the right to
select a beneficiary who will be entitled to receive the balance
in your IRA if you should die prior to the complete distribution
of your IRA. You have the right, prior to the complete
distribution of your IRA, to change your designation of
beneficiary. If you fail to properly designate a beneficiary,
your estate shall be treated as your designated beneficiary. If
your surviving spouse is your designated beneficiary, he or she
may elect to treat the IRA as his or her own for purposes of the
minimum distribution rules described in this Section.
If you should die after your Required Beginning Date, the
remaining portion of your IRA generally must be distributed at
least as rapidly as under the method of distribution being used
<PAGE>
prior to your death. If you should die before your Required
Beginning Date, your entire interest in your IRA generally must
be distributed to your designated beneficiary(ies) within five
(5) years after your death. Similarly, if your surviving spouse
is beneficiary of your IRA and elects to treat the IRA as his or
her own, but dies before receiving the entire amount payable to
him or her from your IRA, the remaining amount generally must be
distributed to your spouse's beneficiaries within five (5) years
after your spouse's death.
To the extent that assets held in your IRA are used to
purchase an endowment contract, you will be treated as having
made a rollover contribution. However, to the extent that the
assets are used to purchase life insurance protection, you will
be treated as having received a distribution and you must
include this amount in your gross income for the year it is
deemed received.
VIII. TAX TREATMENT OF DISTRIBUTION
-----------------------------
A. Income Tax
----------
As a general rule, distributions from your IRA are taxable to
you as ordinary income in the year received by you. However, if
nondeductible contributions have been made to your IRA, the
portion of your IRA distribution consisting of nondeductible
contributions will not be taxed again when received by you. If
you make any nondeductible IRA contributions, each distribution
from your IRA will consist of a nontaxable portion (return of
nondeductible contributions, if any) and a taxable portion
(return of deductible contributions, if any, and all earnings).
Thus, you may not take a distribution which is entirely tax-free.
The following formula is used to determine the nontaxable
portion of your distributions for a tax year:
Nondeductible Non Taxable
Contributions x Total Distributions = Distributions
-------------------- (for the year) (for the year)
Year-end IRA Balance
Your year-end IRA account balance is the fair market value of
all the IRAs that you maintain. This includes all regular IRAs,
as well as simplified employee pensions (SEP) IRAs, and rollover
IRAs. You must also add back the sum of distributions taken
during the year, if any.
The following example illustrates how you will determine the
nontaxable portion of your distributions for a taxable year.
Example: Betty has made the following contributions to her
IRA:
<PAGE>
YEAR DEDUCTIBLE NONDEDUCTIBLE
---- ---------- -------------
1984 $2,000 $0
1985 $2,000 $0
1986 $2,000 $0
1987 $1,000 $1,000
1988 $0 $2,000
------ ------
$7,000 $3,000
During 1989, Betty receives a $1,000 distribution from her
IRA. On December 31, 1989 the total value of Betty's IRA is
$11,000. The nontaxable portion of the distribution she
received during 1989 is determined as follows:
$3,000 x 1,000 = $250
----------------
11,000 + 1,000
A single lump sum distribution from your IRA is not entitled
to ten-year averaging, five-year averaging or capital gains
treatment accorded some lump sum distributions from qualified
employer plans.
B. Early Withdrawal Tax
--------------------
In general, distributions from your IRA which occur prior to
you attaining age 59-1/2 will be subject to adverse tax
consequences. Not only will such distributions be fully taxable
to you as ordinary income, but an additional tax equal to 10% of
the taxable portion of such distributions will also be imposed.
As discussed above, rollover distributions and the return of
excess contributions are exempt from the 10% additional tax. In
addition, distributions on account of your death or disability
will be exempt from that tax. You are considered disabled if
you are unable to engage in any substantial gainful activity
because of a medically determinable physical or mental
impairment which can be expected to result in death or to be of
long, continued, and indefinite duration. Distributions before
age 59-1/2 are also exempt from the 10% tax if made in the form
of substantially equal periodic payments over your life (or life
expectancy) or the joint lives (or joint life expectancies) of
you and your designated beneficiary.
C. Excess Distributions Excise Tax
-------------------------------
A 15% excise tax is imposed on annual distributions from IRAs
and other arrangements (such as tax-qualified pension and profit
sharing plans) to the extent that such distributions in the
aggregate exceed $150,000 (or such higher amount as may be
specified by the Internal Revenue Service) during any calendar
year. There are special rules which may apply if you had
substantial total accrued retirement benefits as of August 1,
1986
<PAGE>
or if you elect to receive a lump sum distribution from a
qualified plan. You should discuss these matters with your tax
advisor.
D. Gift Tax
--------
Your designation of a beneficiary or election of a form of
distribution for your IRA will not result in a "gift" for
Federal Gift Tax purposes.
E. Estate Tax
----------
Any amounts remaining in your IRA after your death will be
included in your gross estate and may be subject to Federal
Estate Tax unless amounts are payable to your surviving spouse.
IX. PROHIBITED TRANSACTIONS
-----------------------
You or your beneficiary may not participate in any transaction
with your IRA which is prohibited by law. Neither you nor your
beneficiary may engage in any of the following "prohibited
transactions" with your IRA:
(i) the sale, exchange, or lending of any property;
(ii) lending of money or other extension of credit;
(iii) furnishing of goods, services or facilities; or
(iv) the transfer or use of income or assets of the IRA by
you or your beneficiary.
If such transactions are engaged in, your IRA will be
disqualified and will lose its tax-exempt status. Under such
circumstances, your IRA will be considered to have been
distributed to you, includable in your gross income, and subject
to the income and additional taxes discussed above. Similarly,
you may not use your IRA as security for a loan. If you do, the
portion pledged as security will be treated as distributed to
you in that year.
X. REPORTING REQUIREMENTS
----------------------
If a transaction has occurred upon which a special penalty tax
is imposed, such as an excess contribution, a premature
distribution, or a failure to make a timely distribution, you
are required to file Form 5329 with your annual income tax
return for such year. Form 5329 need not be filed if the only
activity for the year is the making of contributions or the
distribution of permissible benefits.
<PAGE>
XI. IRS APPROVAL
------------
This IRA is a model IRA Account which follows the IRS approved
document considered by the IRS to meet the applicable
requirements of the Internal Revenue Code. Therefore, the
Internal Revenue Service will not issue a formal determination
as to the tax qualified status of this IRA Account. Further
information can be obtained from any office of the Internal
Revenue Service.
Please be aware that the Internal Revenue Service's deemed
approval of a model IRA is a determination only as to the form
of the IRA and does not represent a determination as to the
merits of this IRA.
XII. IRA BALANCE
-----------
Each of the mutual fund shares held in your IRA has an equal
interest in the assets, net investment income and capital gains
of the mutual fund selected. The value of the shares is
dependent upon the market values of the securities in the mutual
fund's investment portfolio, which are subject to fluctuations;
therefore, growth in the value of your IRA cannot be projected
or guaranteed. Dividends from net investment income and capital
gains distributions paid by the mutual funds selected will be
reinvested in fund shares at the applicable reinvestment price
as of the respective reinvestment dates and such additional
shares will be credited to your IRA.
XIII. FEES, CHARGES AND COMMISSIONS
-----------------------------
A. IRA Custodian Fees
------------------
The IRA plan fees are as follows: annual maintenance fee,
$15.00; incoming transfer from prior custodian, $12.00;
distribution to participant, $15.00; refund of excess
contribution, $15.00; transfer to successor custodian, $15.00;
automatic periodic distributions, $15.00 / year per account.
These fees will be charged directly to the shareholder account
when the specified transactions are generated. These fees are
applicable regardless of the manner in which your IRA is funded.
The Custodian reserves the right to revise its fee schedule
upon written notice to the IRA holder.
B. Mutual Fund Commissions
-----------------------
If you fund your IRA by the direct purchase of mutual fund
shares, a sales commission will be charged against your
investment. Sales commission rates range from a maximum of 8.5%
to 0.125% of the offering price of the fund shares. The rate
applicable to an initial $1,000 contribution is 8.5%. That rate
is applicable to subsequent contributions of $1,000 until the
<PAGE>
value of the fund shares in your IRA or the amount paid
therefore is equal to or greater than $10,000, at which time the
sales commission rate is reduced to 7.75%. Commissions at lower
rates are applicable on larger purchases and on purchases under
the fund's Right of Accumulation Privilege. Effective April 1,
1989 no sales commission will be charged against an investment
in shares of Philadelphia Fund, Inc.
C. Liquidation of Securities
-------------------------
If portfolio securities of Philadelphia Fund or Eagle Growth
Shares must be liquidated to meet any repurchase or redemption,
a reasonable estimate of brokerage and other costs may be
deducted from the net asset value. However, neither Fund has
found it necessary to exercise this privilege.
D. Type of Contribution
--------------------
The charges shown under "IRA Custodian Fees", "Mutual Fund
Commissions" and "Liquidation of Securities" are applicable
regardless of whether your account is established by a direct
contribution or a rollover contribution.
E. Further Details
---------------
Please refer to the prospectus of the fund or funds selected
as your investment for further details.
XIV. FEDERAL TAX WITHHOLDING
-----------------------
Distributions from an IRA to the depositor or to a beneficiary
are subject to Federal income tax withholding unless the
depositor or beneficiary elects to have no withholding apply.
The current withholding rate for IRA distributions (other than
annuity payments) is 10%. Additional information concerning
withholding and election forms will be available when a
distribution is requested.
<PAGE>
EAGLE GROWTH SHARES, INC.
PHILADELPHIA FUND, INC.
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
-----------------------------
APPENDIX "A"
ADDITIONS TO INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
(FORM 5305-A)
ARTICLE VIII
All Contributions to the custodial account made by or on behalf
of the Depositor shall be invested in accordance with proper
instructions received from time to time from the Depositor and
shall be applied to purchase full and fractional shares
(hereinafter referred to as "Fund Shares") of Eagle Growth
Shares, Inc., Philadelphia Fund, Inc. and any other mutual funds
for which Baxter Financial Corporation (the "Sponsor") acts as
the principal distributor or investment advisor and Star Bank,
N.A acts as custodian and American Data Services act as transfer
agent (a "Fund" or "Funds"). Except in the case of rollover
contributions or employer contributions to a simplified employee
pension plan as described in Article I, the Depositor shall not
deposit in any tax year an amount in excess of the lesser of one
hundred percent (100%) of the compensation includable in his/her
gross income or Two Thousand and 00/100 Dollars ($2,000), and
the Depositor shall be fully and solely responsible for all
taxes, interest and penalties which might accrue or be assessed
by reason of any excess deposit, and earnings if any, thereon.
Any contributions made by or on behalf of the Depositor in
respect of a taxable year of the Depositor shall be made by or
on the behalf of the Depositor to the Custodian for deposit in
the custodial account no later than the due date for filing the
Depositor's tax return for such taxable year (excluding
extensions), or by such other date as from time to time provided
by law. If a contribution is intended to be a rollover
contribution referred to in Article I, the Depositor hereby
certifies that the source of the contribution qualifies the
contribution as such, that no portion thereof consists of any
amount considered to have been previously contributed by the
Depositor as an employee (other than "deductible employee
contributions" as defined in Section 72(o)(5) of the Code), that
the contribution is being made to the custodial account no later
than sixty (60) days after receipt by the Depositor of the
distribution giving rise to the rollover contribution, that no
previous rollover contribution has been made by the Depositor to
or from another individual retirement account or annuity within
one (1) year of the date of the rollover contribution and that
the rollover is in all respects permitted by law. It shall be
the sole responsibility of the Depositor to determine the amount
of the contributions made hereunder. The Depositor shall
execute such forms as the Custodian may require in connection
with any contribution hereunder.
<PAGE>
Fund Shares held in the custodial account shall be registered
in the name of the Custodian or its nominee. The Depositor
shall be the beneficial owner of the assets held in the
custodial account. All dividends and capital gains
distributions received on Fund Shares held in the Depositor's
account shall, unless received in additional shares, be
reinvested in shares of the Fund paying such dividends and
distributions, which Fund Shares shall be credited to such
account. If any distributions of the Fund may be received at
the election of the Depositor in additional shares or in cash or
other property, the Custodian shall elect to receive additional
shares.
The Custodian shall forward to the Depositor any Fund notices,
prospectuses, financial statements, proxies and proxy soliciting
materials relating to such shares. The Custodian shall not vote
any of the shares of the Fund held in the account except in
accordance with the written instructions of the Depositor.
ARTICLE IX
The Custodian shall from time to time, subject to the
provisions of Article IV and V, make distributions out of the
custodial account to the Depositor, in such manner and amounts
as may be specified in written instructions of the Depositor.
All such instructions shall be deemed to constitute a
certification by the Depositor that the distribution so directed
is one that the Depositor is permitted to receive.
Notwithstanding the foregoing, upon the Depositor's death the
distribution rules set forth in Article IV will not apply if the
Depositor's spouse is the beneficiary and he or she elects to
treat the account as his or her own IRA. In such case, such
spouse will be deemed to be the Depositor under this Agreement.
Unless the Depositor dies, is disabled (as defined in Section
72(m) of the Code), or reaches age 59 1/2, a declaration of the
Depositor's intention as to the disposition of an amount
distributed from the custodial account shall be in writing and
given to the Custodian. The Custodian shall have no liability
with respect to any contribution to the custodial account, any
investment of assets in the custodial account or any
distribution therefrom pursuant to instructions received from
the Depositor or this Agreement, or for any consequences to the
Depositor arising from such contributions, investments or
distributions including, but not limited to, excise and other
taxes and penalties which might accrue or be assessed by reason
thereof, nor shall the Custodian be under any duty to make any
inquiry or investigation with respect thereto.
ARTICLE X
If the Depositor is disabled (as defined in Section 72(m) of
the Code) all or a portion of the balance in the custodial
account may be distributed to him/her as soon as practicable
after the Custodian receives written notice of the Depositor's
disability
<PAGE>
and a written request for distribution. The Custodian may
require such proof of disability as it deems necessary prior to
the time that amounts are distributed to the Depositor on
account of such disability.
ARTICLE XI
The Depositor may designate and redesignate his/her beneficiary
or beneficiaries on a form satisfactory to the Custodian and
provided by the Fund for such purpose. To be effective, such
designation must be received by the Custodian prior to the death
of the Depositor. Such beneficiary or beneficiaries shall be
entitled to the balance in the custodial account of the
Depositor as provided in Paragraph 4 of Article IV. Unless
otherwise provided in the designation of beneficiary form,
amounts payable by reason of the Depositor's death will be paid
only to the primary beneficiary or beneficiaries who survive the
Depositor in equal shares. If some but not all primary or
contingent beneficiaries, as applicable, do not survive the
Depositor, any amounts that such non-surviving beneficiaries
shall have been entitled to receive hereunder shall be divided
among the surviving primary or contingent beneficiaries, as
applicable, in proportion to the relative interests of the
surviving primary or contingent beneficiaries. If no
designation of beneficiary is in effect at the time of the
Depositor's death or if no designated beneficiary survives the
Depositor, the balance in the Custodial Account of the Depositor
shall be paid to the legal representative of the estate of the
Depositor.
ARTICLE XII
Depositor acknowledges that he or she has read the information
distributed to him or her by the Custodian and agrees to assume
full responsibility for all decisions as to deposits and
withdrawals, and the Depositor indemnifies the Custodian and
saves it free and harmless from any and all claims arising out
of any adverse consequences experienced by the Depositor as a
result of his or her own decision, including but not limited to
excise taxes and penalties. Any taxes which may be imposed upon
the custodial account or the income thereof, but not excise
taxes imposed upon the Depositor, may, in the discretion of the
Custodian, be deducted from and charged against the custodial
account.
ARTICLE XIII
If, within sixty (60) days after the mailing by the Custodian
to the Depositor of a report pursuant to Paragraph 2 of Article
V, the Depositor has not given the Custodian written notice of
any exception or objection thereto, such report shall be deemed
to have been approved in its entirety and in such case, or upon
written approval of the Depositor, the Custodian shall be
released, relieved, and discharged with respect to ail matters
and statements set forth therein as though the report had been
settled by judgment or decree of a court of competent
jurisdiction.
<PAGE>
ARTICLE XIV
The Custodian shall have no duties whatsoever except such
duties as it specifically agrees to in writing, and no implied
covenants or obligations shall be read into this Agreement
against the Custodian. The Custodian shall not be liable under
this Agreement, except for its own bad faith, gross negligence
or willful misconduct. In performing its duties under this
Agreement, the Custodian may hire agents, experts and attorneys
and delegate discretionary powers to, and rely upon information
and advice furnished by such agents, experts and attorneys.
ARTICLE XV
No interest right or claim in or to any part of the custodial
account or any payment therefrom shall be assignable,
transferable, or subject to sale, mortgage, pledge,
hypothecation, commutation, anticipation, garnishment,
attachment, execution, or levy of any kind and the Custodian
shall not recognize any attempt to assign, transfer, sell,
mortgage, pledge, hypothecate, commute, or anticipate the same,
except as required by law.
ARTICLE XVI
The Depositor hereby delegates to the Custodian the power to
amend this agreement from time to time as it deems appropriate,
and hereby consents to all such amendments, provided, however,
that all such amendments are in compliance with the provisions
of the Code and the regulations promulgated thereunder. All
such amendments shall be effective as of the date specified in a
written notice of amendment which will be sent to the Depositor.
ARTICLE XVII
This account and this Agreement may be terminated at any time
by the Depositor by written instrument delivered to the
Custodian. In addition, in the event that either (a) all of the
Funds available for investment hereunder are liquidated or
otherwise terminated or (b) the Sponsor of this individual
retirement account ceases to act as such without a successor
assuming the duties of the Sponsor, the account and this
Agreement shall be terminated and the assets thereof shall be
delivered to the Depositor unless prior to such payment the
Depositor provides written instructions to the Custodian to
transfer such proceeds to the trustee or custodian of another
individual retirement account.
<PAGE>
ARTICLE XVIII
The Custodian may resign without liability, cost or expense of
any kind, upon written notice furnished by the Custodian to the
Depositor, such resignation to be effective the thirtieth (30th)
day following the mailing to the Depositor of such notice. The
Depositor or the Sponsor may remove the Custodian upon thirty
(30) days' written notice to that effect to the Custodian. Upon
such resignation or removal, the Depositor or the Sponsor, as
the case may be, shall appoint a successor custodian. Any
successor custodian shall satisfy the requirements of Section
408(h) of the Code. Upon receipt by the Custodian of written
acceptance of such appointment by the successor custodian, the
Custodian shall deliver the assets of the custodial account to
the successor custodian. In the event that the Depositor or the
Sponsor, as the case may be, fails to appoint a successor
custodian within 30 days of the mailing of the notice of
resignation or removal, the Custodian shall terminate the
account and pay the proceeds to the Depositor. Notwithstanding
the foregoing, the Custodian may reserve such assets of the
custodial account as it may deem necessary for the payment of
all of its fees, compensation, costs and expenses and for the
payment of all other liabilities which are a charge on or
against the assets of the custodial account or on or against the
Custodian and where necessary may liquidate reserved Fund
Shares. Any balance of such reserve remaining after the payment
of all such items shall be paid over by the Custodian to a
successor custodian or, if the Depositor or the Sponsor, as the
case may be, has failed to appoint a successor custodian, to the
Depositor.
ARTICLE XIX
Any notice herein required or permitted to be given to the
Custodian shall not be effective unless it is mailed to and
actually received by the Custodian at the address specified in
the custodial account application or at such other address as
the Custodian shall provide the Depositor from time to time in
writing, stating that such other address shall be used for
purposes of this Agreement. Any notice herein required or
permitted to be given to the Depositor shall be mailed to the
Depositor at the Depositor's residence address specified in the
custodial account application or at such other address as he/she
shall provide the Custodian from time to time in writing stating
that such other address shall be used for purposes of this
Agreement, and any such notice shall be deemed accepted by the
Depositor at the time it is mailed. Depositor and his/her
beneficiaries will be bound by the last address furnished to the
Custodian by the Depositor or his/her beneficiary.
<PAGE>
ARTICLE XX
The Depositor shall be fully and solely responsible for all
taxes and penalties which might accrue or be assessed for having
failed to make the annual minimum withdrawal commencing no later
than April 1st following the calendar year in which he/she
attains the age of seventy and one-half (70-1/2) or for any year
thereafter.
ARTICLE XXI
The Custodian and Depositor hereby waive and agree to waive
right to trial by jury in an action or proceeding instituted in
respect to this custodial account. The Depositor further agrees
that the venue of any litigation between him and the Custodian
with respect to the custodial account shall be in the county in
which the Custodian maintains its principal place of business.
ARTICLE XXII
This Agreement and the custodial account created hereby shall
be subject to the applicable laws, rules and regulations, as the
same may from time to time be amended, of the Federal government
and the state which the custodian maintains its principal place
of business and the agencies and instrumentalities of each
having jurisdiction thereof, and shall be governed by and
construed, administered and enforced according to the law of the
state which the custodian maintains its principal place of
business. All contributions to the custodial account shall be
deemed to take place in the state which the custodian maintains
its principal place of business.
ARTICLE XXIII
Except for any excise taxes required by the Code to be paid by
the Depositor, any income tax or other taxes of any kind
whatsoever that may be levied or assessed upon or in respect to
the custodial account shall be paid from the assets of the
custodial account. Any transfer taxes incurred in connection
with the investment and reinvestment of the assets of the
custodial account, all other administrative expenses incurred by
the Custodian in the performance of its duties, including fees
for legal services rendered to the Custodian, shall be paid from
the assets of the custodial account.
The Custodian shall be entitled to receive and may charge
against the Depositor's custodial account such reasonable
compensation for its services in accordance with its fee
schedule as from time to time in effect, and shall also be
entitled to reimbursement of its expenses as Custodian under
this Agreement. The Custodian will notify the Depositor in
writing of any change in its fee schedule.
<PAGE>
Form 5305-A Individual Retirement Custodial Account DO NOT File with
(Rev.October the Internal
1992) Revenue Service
(Under Section 408(a) of the Internal Revenue Code)
Department of the Treasury
Internal Revenue Service
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Name of Depositor Date of Birth Identifying Number(see instructions)
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Address of depositor Check if Amendment -> [ ]
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Name of custodian Address or principal place of business of custodian
- ------------------------------------------------------------------------------
The Depositor whose name appears above is establishing an individual
retirement account under section 408(a) to provide for his or her retirement
and for the support of his or her beneficiaries after death.
The Custodian named above has given the Depositor the disclosure statement
required under Regulations section 1.408-6.
The Depositor assigned the custodial account___________ dollars ($________) in
cash.
The Depositor and the Custodian make the following agreement:
Article I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in section
408(k).
Article II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
Article III
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other property
except in a common trust fund or common investment fund (within the meaning of
section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section 408(m)(3)
which provides an exception for certain gold and silver coins and coins issued
under the laws of any state.
<PAGE>
Article IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise comply
with section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositor's required beginning date, (April 1
following the calendar year end in which the Depositor reaches age 70 1 2 ).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy of the
Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the Depositor
or, if the Depositor has not so elected, at the election of the beneficiary or
beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the life or
life expectancy of the designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the Depositor's death. If,
however, the beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of the year in which
the Depositor would have turned age 70 1/2 .
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Depositor's
required beginning date, even though payments may actually have been made
before that date.
<PAGE>
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in the
account.
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Cat. No. 11820G Form 5305-A (Rev. 10-92)
Form 5305-A (Rev. 10-92) Page 2
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5. In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment
for each year, divide the Depositor's entire interest in the Custodial account
as of the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy of
the Depositor and the Depositor's designated beneficiary, or the life
expectancy of the designated beneficiary, whichever applies). In the case of
distributions under paragraph 3, determine the initial life expectancy (or
joint life and last survivor expectancy) using the attained ages of the
Depositor and designated beneficiary as of their birthdays in the year the Dep
ositor reaches age 70 1 2 . In the case of a distribution in accordance with
paragraph 4(b)(ii), determine life expectancy using the attained age of the
designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
Article V
1. The Depositor agrees to provide the Custodian with information
necessary for the Custodian to prepare any reports required under section
408(i) and Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor prescribed by the Internal Revenue Service.
Article VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling.
Any additional articles that are not consistent with section 408(a) and the
related regulations will be invalid.
Article VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.
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Note: The following space (Article VIII) may be used for any other provisions
you want to add. If you do not want to add any other provisions, draw a line
through this space. If you do add provisions, they must comply with applicable
requirements of state law and the Internal Revenue Code.
<PAGE>
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Article VIII
ARTICLES VIII THROUGH XXIII ARE SET FORTH IN APPENDIX "A" TO THIS AGREEMENT,
WHICH ARTICLES ARE HEREBY INCORPORATED BY REFERENCE.
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Depositor's signature ____________________________________Date _______________
Custodian's signature ____________________________________Date _______________
Witness ______________________________________________________________________
(Use only if signature of the Depositor or the Custodian is required to be
witnessed.)
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GENERAL INSTRUCTIONS
(Section references are to the Internal Revenue Code unless otherwise noted.)
PURPOSE OF FORM
Form 5305-A is a model custodial account agreement that meets the requirements
of section 408(a) and has been automatically approved by the IRS. An
individual retirement account (IRA) is established after the form is fully
executed by both the individual (Depositor) and the Custodian and must be
completed no later than the due date of the individual's income tax return for
the tax year (without regard to extensions). This account must be created in
the United States for the exclusive benefit of the Depositor or his or her
beneficiaries.
Individuals may rely on regulations for the Tax Reform Act of 1986 to the
extent specified in those regulations.
Do not file Form 5305-A with the IRS. Instead, keep it for your records.
For more information on IRAs, including the required disclosure you can get
from your custodian, get Pub. 590, Individual Retirement Arrangements (IRAs).
DEFINITIONS
Custodian. - The Custodian must be a bank or savings and loan association, as
defined in section 408(n), or any person who has the approval of the IRS to
act as custodian.
Depositor. - The Depositor is the person who establishes the custodial
account.
IDENTIFYING NUMBER
The depositor's social security number will serve as the identification number
of his or her IRA. An employer identification number is required only for an
IRA for which a return is filed to report unrelated business taxable income.
An employer identification number is required for a common fund created for
IRAs.
<PAGE>
IRA FOR NONWORKING SPOUSE
Form 5305-A may be used to establish the IRA custodial account for a
nonworking spouse.
Contributions to an IRA custodial account for a nonworking spouse must be made
to a separate IRA custodial account established by the nonworking spouse.
SPECIFIC INSTRUCTIONS
Article IV. - Distributions made under this article may be made in a single
sum, periodic payment, or a combination of both. The distribution option
should be reviewed in the year the Depositor reaches age 70 1/2 to ensure that
the requirements of section 408(a)(6) have been met.
Article VIII. - Article VIII and any that follow it may incorporate additional
provisions that are agreed to by the depositor and custodian to complete the
agreement. They may include, for example, definitions, investment powers,
voting rights, exculpatory provisions, amendment and termination, removal of
the custodian, custodian's fees, state law requirements, beginning date of
distributions, accepting only cash, treatment of excess contributions,
prohibited transactions with the depositor, etc. Use additional pages if
necessary and attach them to this form.
Note: Form 5305-A may be reproduced and reduced in size for adoption to
passbook purposes.
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<PAGE>
PHILADELPHIA FUND
EAGLE GROWTH SHARES
[LOGO] INDIVIDUAL [LOGO]
RETIREMENT ACCOUNT
ACCOUNT APPLICATION
Philadelphia Fund, Inc. Eagle Growth Shares, Inc.
C/O Star Bank, N.A. or C/O Star Bank, N.A.
P.O. BOX 640110 P.O. Box 640115
Cincinnati, OH 45264-0110 Cincinnati, OH 45264-0115
The undersigned (hereinafter called the "Depositor") hereby establishes a
(check one) ___ EAGLE GROWTH SHARES, INC. ___ PHILADELPHIA FUND, INC.
Individual Retirement Custodial Account (hereinafter called the "Account") in
accordance with the terms of the Individual Retirement Custodial Account on
Form 5305-A (Rev. October 1992) including Articles VIII through XXIII which
are incorporated herein by reference, and certifies the accuracy of the
following information in each case effective upon acceptance by Star Bank,
N.A. as Custodian of the Account.
Name of Depositor ___________________________ Telephone #_________________
Address ___________________________________________________________________
City ________________________________________ State ________ Zip__________
Social Security Number: _____________________ Birthdate: _________________
1. INVESTMENT
Check appropriate type of account and fill in dollar amount of initial
contribution.
( ) IRA $__________________ for _________________ tax year (if split between
two years, indicate specific amount for each year). _____ Check here if
Payroll deduction. Maximum $2,000 per tax year.
( ) Spousal IRA $__________________ for _________________ tax year (if split
between two years, indicate specific amount for each year). Maximum
$2,250 divided between two accounts with no more than $2,000 for any tax
year in either account. Spouse must complete separate application and
5305-A.
( ) IRA ROLLOVER $___________________(all or a portion of an eligible
rollover distribution within 60 days of receipt.)
Check One: This rollover is from a qualified plan ____ (now or
previously); a deductible /nondeductible IRA ____ ; a SEP-IRA ____.
( ) SEP-IRA Employer $____________________(Employer contribution up to the
lesser of 15% of the employee's compensation or $30,000.)
Employer Name _________________________________________________________
<PAGE>
Personal $______________ for _______________ tax year (if split between
two years, indicate specific amount for each year). Maximum $2,000 per
tax year. Do not file IRS Form 5305-SEP or 5305A-SEP with the IRS or
Star Bank, N.A. These forms are completed and retained by employer.
( ) TRANSFER from existing retirement account $_________________ (Include
copy of transfer instructions to Current Custodian or insurance company.
Star Bank, N.A. will issue an acceptance letter to the addressee of your
transfer instructions).
Check One: This transfer is from an IRA which houses a preexisting
qualified plan distribution ____; a deductible / nondeductible IRA
____; a SEP-IRA ____.
Please complete both sides of this form
2. DESIGNATION OF BENEFICIARY
Primary Beneficiary: [ ]Multiple or [ ]Contingent
Beneficiary (check one):
Name: Name:
Social Security No. ____________________ Social Security No. _______________
Date of Birth __________________________ Date of Birth _____________________
Address:________________________________ Address:___________________________
Relationship ___________________________ Relationship ______________________
Allocation Percentage:__________________ Allocation Percentage:_____________
Complete the allocation percentage amount only if designating multiple primary
beneficiaries.
3. I hereby acknowledge receipt of the current Prospectus(es) of the fund(s)
and of the Disclosure Statement and Custodial Agreement provided to me with
this application which sets forth the Custodian's current fees. I understand
that the Individual Custodial Account Agreement Application will not become
effective until accepted by the Custodian.
Dated: _______________ 19___ ___________________________________
(Signature)
Accepted: Star Bank , N.A.
By:_________________________ Date: ___________________________________
4. INVESTMENT DEALER/ADVISOR (if any)
Name and Number of Dealer ___________________________________________________
Name and Number of Advisor___________________________________________________
Address______________________________________________________________________
Authorized Signature of Dealer ______________________________________________
<PAGE>
5. GENERAL INSTRUCTIONS
Mail the following to Star Bank, N.A. at the appropriate above stated
address:
- Signed application and
- Initial contribution check payable to Philadelphia Fund, Inc. or Eagle
Growth Share, Inc. and/or Transfer Direction.
Complete and sign the 5305-A form and keep for your records. Do not file the
5305-A with the IRS or Star Bank, N.A.
Retain all other documentation for your records.
6. CUSTODIAL FEE SCHEDULE
$15.00 Annual Maintenance Fee Per Account
(Complete detail of all IRA plan fees are located under Section XIII. A. of
the Disclosure Statement.)
Annual maintenance fees and disbursement fees may not be paid in advance.
They are deducted from the account assets when appropriate.
This application will be maintained on file by Star Bank, N.A. You may wish
to make a photocopy for your records.
<PAGE>
EAGLE GROWTH SHARES
10 YEAR PERFORMANCE FIGURES 8.50% LOAD
FOR THE PERIOD ENDING 11/30/95
<TABLE>
<CAPTION>
TOTAL COST VALUE SHARE
DIV+CAP DOLLARS DOLLARS SHARES NAV PERFORMANCE
<S> <C> <C> <C> <C> <C> <C>
BALANCE 11/30/85 1,000.00 915.00 119.30 7.67
DIVIDEND 12/12/85 $0.360 42.95 42.95 5.75 7.47 -117.18
BALANCE 11/30/86 1,042.95 882.82 125.05 7.06 - 12.81%
DIVIDEND 12/11/86 $0.090 11.25 11.25 1.64 6.87 -165.79
BALANCE 11/30/87 1,054.20 717.03 126.68 5.66 - 18.78%
DIVIDEND 1987 $0.000 0.00 0.00 0.00 0.00 229.30
BALANCE 11/30/88 1,054.20 946.32 126.68 7.47 31.98%
DIVIDEND 1988 $0.000 0.00 0.00 0.00 0.00 634.68
BALANCE 11/30/89 1,054.20 1,581.01 126.68 12.48 67.07%
DIVIDEND 12/12/89 $0.030 3.80 3.80 0.31 12.41 -393.66
BALANCE 11/30/90 1,058.00 1,187.35 126.99 9.35 - 24.90%
DIVIDEND 12/26/90 $0.220 27.94 27.94 2.97 9.41 335.76
BALANCE 11/30/91 1,085.94 1,523.11 129.96 11.72 28.28%
DIVIDEND 12/30/91 $0.015 1.95 1.95 0.16 12.07 221.80
BALANCE 11/30/92 1,087.89 1,744.91 130.12 13.41 14.56%
DIVIDEND 12/28/92 $0.555 72.22 72.22 5.56 13.00 31.08
BALANCE 11/30/93 1,160.10 1,775.99 135.68 13.09 1.78%
DIVIDEND 12/28/93 $0.240 32.56 32.56 2.51 12.95 -265.58
BALANCE 11/30/94 1,192.67 1,510.41 138.19 10.93 - 14.95%
DIVIDEND 12/28/94 $0.048 6.63 6.63 0.60 10.99 264.75
BALANCE 11/30/95 1,199.30 1,775.16 138.79 12.79 17.53%
</TABLE>
- -----------------------------------------------------------------------------
TOTAL 10 YEAR RETURN 75.33%
AVERAGE ANNUAL TOTAL RETURN 5.78%
- -----------------------------------------------------------------------------
<PAGE>
EAGLE GROWTH SHARES
5 YEAR PERFORMANCE FIGURES 8.50% LOAD
FOR THE PERIOD ENDING 11/30/95
<TABLE>
<CAPTION>
TOTAL COST VALUE SHARE
DIV+CAP DOLLARS DOLLARS SHARES NAV PERFORMANCE
<S> <C> <C> <C> <C> <C> <C>
BALANCE 11/30/90 1,000.00 915.00 97.86 9.35
DIVIDEND 12/26/90 $0.220 21.53 21.53 2.29 9.41 173.75
BALANCE 11/30/91 1,021.53 1,173.75 100.15 11.72 18.99%
DIVIDEND 12/30/91 $0.015 1.50 1.50 0.12 12.07 170.92
BALANCE 11/30/92 1,023.03 1,344.67 100.27 13.41 14.56%
DIVIDEND 12/28/92 $0.555 55.65 55.65 4.28 13.00 23.95
BALANCE 11/30/93 1,078.68 1,368.62 104.55 13.09 1.78%
DIVIDEND 12/28/93 $0.240 25.09 25.09 1.94 12.95 - 204.66
BALANCE 11/30/94 1,103.78 1,163.96 106.49 10.93 - 14.95%
DIVIDEND 12/28/94 $0.048 5.11 5.11 0.47 10.99 204.02
BALANCE 11/30/95 1,108.89 1,367.98 106.96 12.79 17.53%
</TABLE>
- -----------------------------------------------------------------------------
TOTAL 5 YEAR RETURN 38.68%
AVERAGE ANNUAL TOTAL RETURN 6.76%
- -----------------------------------------------------------------------------
<PAGE>
EAGLE GROWTH SHARES
1 YEAR PERFORMANCE FIGURE 8.50% LOAD
FOR THE PERIOD ENDING 11/30/95
<TABLE>
<CAPTION>
TOTAL COST VALUE SHARE
DIV+CAP DOLLARS DOLLARS SHARES NAV PERFORMANCE
<S> <C> <C> <C> <C> <C> <C>
INPUT 11/30/94 1,000.00 915.00 83.72 10.93
DIVIDEND 12/28/94 $0.048 4.02 4.02 0.37 10.99 75.39
BALANCE 11/30/95 1,004.02 1,075.39 84.08 12.79 7.54%
</TABLE>
- -----------------------------------------------------------------------------
1 YEAR ANNUAL TOTAL RETURN 7.54%
- -----------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000030912
<NAME> EAGLE GROWTH SHARES, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 2,091,577
<INVESTMENTS-AT-VALUE> 2,780,866
<RECEIVABLES> 1,675
<ASSETS-OTHER> 51,221
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,833,762
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29,405
<TOTAL-LIABILITIES> 29,405
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,921,214
<SHARES-COMMON-STOCK> 219,178
<SHARES-COMMON-PRIOR> 212,273
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 193,854
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 689,289
<NET-ASSETS> 2,804,357
<DIVIDEND-INCOME> 22,677
<INTEREST-INCOME> 33,120
<OTHER-INCOME> 0
<EXPENSES-NET> 87,424
<NET-INVESTMENT-INCOME> (31,627)
<REALIZED-GAINS-CURRENT> 194,043
<APPREC-INCREASE-CURRENT> 250,329
<NET-CHANGE-FROM-OPS> 412,745
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 10,248
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 51,630
<NUMBER-OF-SHARES-REDEEMED> 45,547
<SHARES-REINVESTED> 822
<NET-CHANGE-IN-ASSETS> 483,934
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 10,059
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 19,256
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 114,097
<AVERAGE-NET-ASSETS> 2,553,531
<PER-SHARE-NAV-BEGIN> 10.93
<PER-SHARE-NII> (.14)
<PER-SHARE-GAIN-APPREC> 2.05
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .048
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.79
<EXPENSE-RATIO> 3.44
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
